a council I work with is lending funds to a joint venture for them to construct housing. The loan will be repaid when the houses are completed, and sold. Funds for the loan to the JV will be raised by borrowings.
Ignoring interest, a simple way to account for the payment to the joint venture would be:
dr: long term loan
and upon repayment
cr: long term loan
However, loans for capital purposes are required to be part of the capital resource equation under the Code. Can anyone confirm the accounting treatment for this please? My thoughts would be:
dr: capital spend memo account
cr: capital spend memo account
dr: transfer to non current assets (or maybe refcus as we don't have an asset? so dr: CAA (via CIES/MIRS)
there'd be no MRP as there's no operational asset being consumed;
the CAA would be debited per above;
the Capital Finance Requirement would increase due to underlying need to borrow (in line with the CAA)
cr: capital receipts (via CIES/MIRS)
then to finance
dr: capital receipts
Any thoughts or views welcome.