Revenue Recognition for Governmental Accounting | CPA Exam FAR | Government Accounting Course
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generally accepted practices, governmental funds are accounted for on a modified accrual basis. The measurement focus is on current financial resources. “Current financial resources” has been interpreted to mean “expendable financial resources”—cash and other items that can be expected to be transformed into cash in the normal course of operations (less current liabilities). The “other items” include investments and receivables but not capital assets.
As discussed in Chapter 5, inventories and prepaid items are also reported on the balance sheet, even though they do not fall within the conventional view of a financial resource. A fre- quently cited justification for this apparent inconsistency is that these assets will not ordinarily be transformed into cash (i.e., inventories will be consumed, not sold for cash), but they generally will result in short-term cash savings in that the entity will not have to expend additional cash to acquire them.
The current claims against financial resources include wages and salaries payable, accounts payable, and deferred inflows. They exclude long-term obligations such as the noncurrent por- tions of bonds payable and the liabilities for vacation pay, sick leave pay, and legal judgments. Consistent with conventional relationships between balance sheet and operating statement accounts, revenues and expenditures are accompanied by an increase or decrease in net financial resources (as opposed to increases or decreases in net economic resources, as would be true under the full accrual basis).
RECOGNITION OF REVENUE
Accepting the accrual basis of accounting (even if modified) still leaves unresolved the thorny issue of when revenues should be recognized. What key economic event in the revenue generation process should trigger the recognition of revenue and the corresponding increase in net position? In business accounting, revenues are ordinarily recognized when a firm has exerted a substantial portion of its production and sales effort, and the amount of cash to be eventually collected can reasonably be ensured and estimated. But standard setters as well as individual firms still have to grapple with the problem of when the various types of revenue transactions satisfy these criteria. To enhance consistency of practice, standard setters have established specific guidelines for the recog- nition of such diverse revenues as those from ordinary sales, from sales of real estate, installment sales, interest, loan origination fees, license and royalty fees, and construction contracts.
The revenue-recognition issues facing governments are less tractable than those of businesses. Businesses derive their revenues mainly from exchange transactions—those in which each party gives and receives consideration of equivalent value. Governments (except those that engage primarily in business-type activities) derive their revenues mainly from nonexchange transactions—those in which one party gives or receives value without directly receiving or giving equivalent value in exchange.
GASB Statement No. 33, Accounting and Financial Reporting for Nonexchange Trans- actions (1998), governs the recognition of revenue under both the modified accrual basis (for governmental funds) and the full accrual basis (for proprietary and fiduciary funds and the government-wide statements). The recognition guidelines discussed in the next sections are the same for both bases. However, when accounted for under the modified accrual basis, revenues are subject to an additional, extremely significant, stipulation. They cannot be recognized until they are both measurable and available to finance expenditures of the fiscal period.
Modified accrual accounting, revenue recognition for government entities, revenue recognition for governmental accounting. Revenue recognition, nonexcahnge transaction, derives tax revenue, government mandated non exchange, voluntary nonexchange translations, imposed nonexchange revenues, revenue recognition for fund accounting
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✔LinkedIn: professorfarhat
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Twitter: @farhatlectures
Email: [email protected]
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generally accepted practices, governmental funds are accounted for on a modified accrual basis. The measurement focus is on current financial resources. “Current financial resources” has been interpreted to mean “expendable financial resources”—cash and other items that can be expected to be transformed into cash in the normal course of operations (less current liabilities). The “other items” include investments and receivables but not capital assets.
As discussed in Chapter 5, inventories and prepaid items are also reported on the balance sheet, even though they do not fall within the conventional view of a financial resource. A fre- quently cited justification for this apparent inconsistency is that these assets will not ordinarily be transformed into cash (i.e., inventories will be consumed, not sold for cash), but they generally will result in short-term cash savings in that the entity will not have to expend additional cash to acquire them.
The current claims against financial resources include wages and salaries payable, accounts payable, and deferred inflows. They exclude long-term obligations such as the noncurrent por- tions of bonds payable and the liabilities for vacation pay, sick leave pay, and legal judgments. Consistent with conventional relationships between balance sheet and operating statement accounts, revenues and expenditures are accompanied by an increase or decrease in net financial resources (as opposed to increases or decreases in net economic resources, as would be true under the full accrual basis).
RECOGNITION OF REVENUE
Accepting the accrual basis of accounting (even if modified) still leaves unresolved the thorny issue of when revenues should be recognized. What key economic event in the revenue generation process should trigger the recognition of revenue and the corresponding increase in net position? In business accounting, revenues are ordinarily recognized when a firm has exerted a substantial portion of its production and sales effort, and the amount of cash to be eventually collected can reasonably be ensured and estimated. But standard setters as well as individual firms still have to grapple with the problem of when the various types of revenue transactions satisfy these criteria. To enhance consistency of practice, standard setters have established specific guidelines for the recog- nition of such diverse revenues as those from ordinary sales, from sales of real estate, installment sales, interest, loan origination fees, license and royalty fees, and construction contracts.
The revenue-recognition issues facing governments are less tractable than those of businesses. Businesses derive their revenues mainly from exchange transactions—those in which each party gives and receives consideration of equivalent value. Governments (except those that engage primarily in business-type activities) derive their revenues mainly from nonexchange transactions—those in which one party gives or receives value without directly receiving or giving equivalent value in exchange.
GASB Statement No. 33, Accounting and Financial Reporting for Nonexchange Trans- actions (1998), governs the recognition of revenue under both the modified accrual basis (for governmental funds) and the full accrual basis (for proprietary and fiduciary funds and the government-wide statements). The recognition guidelines discussed in the next sections are the same for both bases. However, when accounted for under the modified accrual basis, revenues are subject to an additional, extremely significant, stipulation. They cannot be recognized until they are both measurable and available to finance expenditures of the fiscal period.
Modified accrual accounting, revenue recognition for government entities, revenue recognition for governmental accounting. Revenue recognition, nonexcahnge transaction, derives tax revenue, government mandated non exchange, voluntary nonexchange translations, imposed nonexchange revenues, revenue recognition for fund accounting
7 سال پیش
در تاریخ 1396/04/03 منتشر شده
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