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Alternative Treatment Of Contribution In Aid Of Construction: The Impact On Investor-Owned Utility Plant Asset Replacement

Author

Listed:
  • Daniel Acheampong
  • Tanya Benford

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

Suggested Citation

  • Daniel Acheampong & Tanya Benford, 2020. "Alternative Treatment Of Contribution In Aid Of Construction: The Impact On Investor-Owned Utility Plant Asset Replacement," Accounting & Taxation, The Institute for Business and Finance Research, vol. 12(1), pages 81-96.
    • Handle: RePEc:ibf:acttax:v:12:y:2020:i:1:p:81-96
    as

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    References listed on IDEAS

    as
    1. Brazell, David W. & Mackie, James B. III, 2000. "Depreciation Lives and Methods: Current Issues in the U.S. Capital Cost Recovery System," National Tax Journal, National Tax Association, vol. 53(n. 3), pages 531-62, September.
    2. Godfrey, L G & Orme, C D, 1994. "The Sensitivity of Some General Checks to Omitted Variables in the Linear Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 489-506, May.
    3. David Wheeler & Michael Tiefelsdorf, 2005. "Multicollinearity and correlation among local regression coefficients in geographically weighted regression," Journal of Geographical Systems, Springer, vol. 7(2), pages 161-187, June.
    4. Brazell, David W. & Mackie, James B. III, 2000. "Depreciation Lives and Methods: Current Issues in the U.S. Capital Cost Recovery System," National Tax Journal, National Tax Association;National Tax Journal, vol. 53(3), pages 531-562, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Contribution in Aid of Construction; Investor-Owned Utilities; Credit Treatment; Debit Treatment; Aged Plant Assets; Donated Capital;
    All these keywords.

    JEL classification:

    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting

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