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TARC Recommended Accounting Treatment for PPRT Update

November 28, 2017 | TARC updates

Background
In late April 2016, local governments received a notice from the Illinois Department of Revenue (IDOR) that a misallocation of Personal Property Replacement Taxes (PPRT) had resulted in an overpayment of an estimated $168 million to local governments. In response to the information available at that time TARC recommended that the recovery sought by the Department of revenue warranted recognition as a liability as defined by GASB Concepts Statement 4.

In September 2017, the Department of Revenue issued a statement that they would no longer be seeking repayment of these overpayments.

Recommended Accounting Treatment
If a government recorded a liability for the overpayment in the past, the correct accounting treatment would now be to reverse the entry that was created previously. If no entry was done previously, then certainly no entry should be done at this time. This forgiveness of the overpayment would not meet the definition of an extraordinary item or a special item and should not be recorded as such.

Governments are always encouraged to discuss the treatment they have elected with their auditors.

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