ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

Ways to Improve the Accounting Transparency of Construction Contribution of District Heating Companies

  • Heesun Chung Sejong University

Asian Tax Journal Vol. 21 No. 5 (2020), pp. 85-114

Abstract

This study examines how to improve the transparent use of construction contribution collected from customers by district heating companies in a perspective of accounting. The government, which evaluates the appropriateness of its collection and use in a regular basis, points out that construction contribution is not easy to monitor because the number of private district heating companies increases and the use of construction contribution is managed through individual corporate accounting. The survey revealed that most of the individual district heating companies do not disclose separated accounting information for construction contribution, which makes it difficult for the government or customers to monitor the appropriateness of its use. I suggest the followings for the transparent operation of construction contribution. First, the designation for the use of construction contribution, which is intricately regulated in several regulations, needs to be simply and clearly presented in the Heating Supply Rules (i.e. customer terms and conditions) to enhance the understanding of companies and customers in practical affairs. Second, I present the specific ways for accounting separation between district heating business and other businesses. Third, the receipt of construction contribution needs to have separate account from other cash and cash equivalents, and the amount remained in the fiscal－year end needs to be disclosed in the notes to financial statement with the statement that the use is restricted to the designated purposes. Lastly, I suggest disclosing the detailed use of construction contribution and present the specific items to be disclosed. I hope that this study will be helpful for district heating companies to improve the transparent use of construction contribution.

Keywords

  • district heating entrepreneur
  • contributions for construction
  • accounting transparency
  • accounting separation
  • disclosure

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