Primarily GASB Statement No. 33

Transcription

1 Primarily GASB Statement No. 33 A little confusing because rules apply to both government-wide and funds-based statements and you have to remember which you are trying to determine! 1

2 Earning revenues the government way! Revenues are EARNED if the government has a legal claim to the resources and the resources raised were intended to finance expenditures during the current or prior periods Examples: Levying a tax establishes a government s claim to taxes it assesses (e.g., property taxes) A business making a taxable sale establishes a taxing government s legal claim to sales taxes Taxpayers earning taxable income establishes a taxing government s legal claim to income taxes 2

3 GASB 33: Four Categories of Nonexchange Transactions 1. Imposed nonexchange transactions 2. Derived tax revenues 3. Government-mandated nonexchange transactions 4. Voluntary nonexchange transactions 3

4 Two Types of Limitations Purpose restrictions. These specify the purpose for which the resources must be used (e.g. dedicated taxes; restricted grants). These limitations do NOT affect timing of revenue recognition May require use of a special revenue fund Eligibility Requirements. Includes time requirements which do affect TIMING of revenue recognition The other categories (next slide) apply primarily to government-mandated and voluntary nonexchange transactions 4

5 Four types of Eligibility Requirements Time requirements Applies to imposed and derived tax revenues as well as other nonexchange transactions Reimbursements of allowable costs (must incur costs before revenue is recognized) Required characteristics of recipients (to be used for services to low-income residents) Contingencies Matching funds not entitled to the matching revenue until other contributions have been received Applies only to voluntary nonexchange transactions. 5

6 The modified accrual layer for funds-based statements For funds: revenues are recognizable ONLY if They are susceptible to accrual, which means BOTH Objectively measurable, and Available to finance current period expenditures An item is available only if it is BOTH Collected in the current period or soon enough thereafter to be used to pay liabilities of the current period, and The money collected is legally available to finance current period expenditures 6

7 The first group - assessments imposed on individuals and business entities. Property taxes Fines 7

8 Recognition Standards Imposed Nonexchange Transactions The asset is recognized when the government has an enforceable legal claim or when the resources are received, whichever comes first Government-wide: The revenue is recognized in the period in which the government has an enforceable legal claim to the resources and the relevant time requirements have been met Funds-based: The revenue must also be available and is recognized in the earliest period in which both available criteria are met 8

9 Recognition Standards - applied Imposed Nonexchange Transactions Property taxes would normally be recognized as an asset when levied and as revenue during the period for which they were levied (government-wide) and available (fundsbased) Parking tickets receivable after protest date has passed. If protested, not enforceable until judge rules on case. 9

10 Do examples on property taxes & fines now - Excel File Property Taxes Example 1 Duke County (separate sheet, similar to Ex4-3) Other Imposed Non-exchange transactions Example 2 parking tickets 10

11 The 2 nd group 11

12 Derived Tax Revenues These are derived (i.e. result) from assessments on exchange transactions carried on by taxpayers. Sales taxes (derived from sales transactions) Income taxes on wages Other taxes on earnings or assets (derived from various commercial transactions) 12

13 Recognition Standards Derived Tax Revenues The asset is recognized in the period of the underlying transaction or when the resources are received, whichever comes first Government-wide: The revenue is recognized in the period when the underlying transaction takes place Funds-based: The revenue must also be available and is recognized in the earliest period in which both available criteria are met There seem to be practical consideration, however, since sales tax collected and income taxes due are not known until returns are filed by taxpayers 13

14 Application Sales taxes can probably be estimated based on experience but the actual amount is not known until the returns are filed (monthly, quarterly) Income taxes are generally collected as you go so the amount withheld is KNOWN and the refunds can be estimated based on experience of prior years Do examples 3 & 4 (sales tax), and Example 5 (income taxes) 14

15 Groups 3 and 4 15

16 3. Government-mandated Nonexchange Transactions These occur when a government at one level (e.g. the federal or a state government) provides resources to a government at another level (e.g. a local government or school district) and requires the recipient to use the resources for a specific purpose. 16

17 4. Voluntary nonexchange transactions These result from legislative or contractual agreements entered into willingly by two or more parties. They include grants given by one government to another and contributions from individuals (e.g. gift to public universities). 17

18 Recognition Standards Government Mandated and Voluntary Nonexchange Transactions Asset is recognized when all eligibility requirements have been met, or when resources are received, whichever comes first Government-wide: The revenue is recognized in the period when all eligibility (and time) requirements have been met Funds-based: The revenue must also be available and is recognized in the earliest period in which both available criteria are met 18

19 Four categories of Duplicate slide repeated for convenience Eligibility Requirements Time requirements (applies to imposed and derived tax revenues as well as other nonexchange transactions) Reimbursements of allowable costs (must incur costs before revenue is recognized) Required characteristics of recipients (to be used for services to low-income residents) Contingencies* Matching funds not entitled to the matching revenue until other contributions have been received Applies only to voluntary nonexchange transactions. 19

20 Eligibility Requirements (examples) Required characteristics of recipients specified by the provider Income level Only for K12 education Time requirements specified by the enabling legislation or the provider requiring use in a particular time period Recipient must incur allowable costs (as defined by provider or legislation) Reimbursement or expenditure-driven program 20

21 Application Applies to both revenues and expenditures. Thus payments from one government to another are expected to be accounted for symmetrically. 21

22 Examples Voluntary nonexchange #6 With time requirement #7 With purpose restriction #8 With eligibility requirement #9 With contingent eligibility requirement #10 Endowment gift #11 Pledges #12 Donation of assets Government mandated #13 On behalf payments #14 Food stamps 22

23 In exchange transactions, a government provides goods or services to the provider in return for resources received. 23

24 Exchange and exchange-like Transactions Fees for licenses and permits, passenger facility charges, certain tap fees and certain developer contributions should be considered exchange rather than nonexchange transactions, even though the party making the payment may receive less in value than it surrendered. 24

25 Other examples #15 Licenses (exchange-like transactions) #17 Sale of fixed assets #16 Interest on investment carried at fair value #18 Gains on investments carried at fair value (when there are purchases and sales) 25

26 Flow Charts An Interpretation See separate file (pasting in messed up all the formatting!