Meaning of Deferred Revenue Settlement in HOA balance sheet

[Rohit K.]

Hi everyone,

I am in the process of buying a condo and reviewing the HOA docs. The condo complex had some construction defects. The HOA sued the builder and got a settlement. The settlement proceeds of around $3 million are listed in their balance sheet under "Current Assets" -> "Settlement". But I also see an almost similar amount under "Long Term Liabilities" -> "Deferred Revenue Settlement". The two almost cancel each other out leaving very little in equity.

I want to understand what does "Deferred Revenue Settlement" mean? Is this an accounting practice of saying that because there was a construction defect and we are going to use the settlement money to fix those, the money is not going to be used for anything else? Are they trying to balance the sheet without making the settlement money an equity component? Or does this mean there is an actual liability?