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A Props

MR A Props

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I am trying to account for the sale of an SPV for the first time. I need help any advice on the correct treatment of the below please.

As a very high level overview the business works as follows:

  • a property is identified to buy and develop into a care home
  • a long term lease is agreed with a housing association
  • the property is placed into an SPV and as a package with the lease and a guarantee to renovate it to the required standards for the care home to an investment fund.

The agreement with all parties (the conmpany, property seller, housing association and investment fund) will be signed on the same day. The company then has a commitment to develop the property to the required standard (but does not own the property).

The structure of the deal is as follows. The property is purchased into an SPV (effectively a £1 company set up as a subsidiary to the company) and the investment fund will purchase the shares (for say £1m) in the SPV and thus owns the property. 

The question: It seems like the company has made a a gain on investment here of £999,999 as a result of the share sale. However, it would preferable to treat this as revenue for commercial reasons, on the basis that the company will be completing several of these transactions each period and that the shares are merely set up as a vehicle for the property. 

Is this a possible correct way to account for this?

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