ALTERNATIVE TREATMENT OF CONTRIBUTION IN AID OF CONSTRUCTION: THE IMPACT ON INVESTOR-OWNED UTILITY PLANT ASSET REPLACEMENT

Daniel Acheampong and Tanya Benford

Accounting & Taxation, 2020, vol. 12, issue 1, 81-96

Abstract: This paper proposes an alternative treatment of Contribution in Aid of Construction within the InvestorOwned water and wastewater utility industry. This study analyzes the impact of CIAC on funding utility aged assets by comparing the current amortization (credit) treatment to an alternative depreciation (debit) treatment of CIAC. This paper examines how the establishment of a reserve account for the recovery of plant asset usage through depreciation can fund Investor-Owned utility plant asset replacement Recommended viability financial ratios and related CIAC ratios are used to consider the efficacy of funding a reserve account to replace retired assets. The results suggest an inverse correlation between the current credit treatment and aged plant assets and a positive correlation between the proposed debit treatment and financing of donated plant assets

Keywords: Contribution in Aid of Construction; Investor-Owned Utilities; Credit Treatment; Debit Treatment; Aged Plant Assets; Donated Capital (search for similar items in EconPapers)
JEL-codes: M4 (search for similar items in EconPapers)
Date: 2020
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