This Statement identifies four classes of nonexchange transactions based on shared characteristics that affect the timing of recognition: Show
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Time Requirements and Purpose Restrictions This Statement distinguishes between two kinds of stipulations on the use of resources: time requirements and purpose restrictions. Different standards apply for each kind of stipulation.
Recognition Standards The timing of recognition of, respectively, assets, liabilities, and expenses/expenditures resulting from nonexchange transactions should be the same whether the accrual or the modified accrual (current financial resources) basis of accounting is required. However, for revenue recognition to occur on the modified accrual basis, the criteria established in this Statement for accrual-basis recognition should have been met and the revenues should be available. "Available" means that the government has collected the revenues in the current period or expects to collect them soon enough after the end of the period to use them to pay liabilities of the current period. Also, this Statement continues the guidance in NCGA Interpretation 3, Revenue Recognition—Property Taxes, as amended, for recognizing property taxes on the modified accrual basis of accounting. The timing of recognition for each class of nonexchange transactions is outlined below. (The accrual basis of accounting is assumed, except where indicated for revenue recognition.)
Other Provisions and Illustrations This Statement also provides guidance on recognizing promises made by private donors, contraventions of provider stipulations, and nonexchange revenues administered or collected by another government. Appendix C includes a chart summarizing the classes of nonexchange transactions and recognition requirements. Appendix D includes cases to illustrate how nonexchange transactions should be classified and when they should be recognized in accordance with this Statement. When should revenue be recognized under modified accrual basis of accounting?Modified accrual is a combination of cash basis and full accrual basis. Revenues are recognized when they are both measurable and available. Expenditures, however, are recorded on a full accrual basis because they are always measurable when they are incurred. When should accrued revenue be recorded?Accrued revenue is used in accrual accounting where revenue is recorded at the time of sale, even if payment is not yet received. This follows the revenue recognition principle, which requires that revenue be recorded in the period in which it is earned. What is the purpose of modified accrual accounting?Modified accrual accounting is an alternative bookkeeping method that combines accrual basis accounting with cash basis accounting. It recognizes revenues when they become available and measurable and, with a few exceptions, records expenditures when liabilities are incurred. Which funds are accounted for using the modified accrual basis of accounting?The general fund is accounted for on the modified accrual basis. This basis of accounting recognizes revenues in the period in which they are measurable and available. The enterprise fund is a proprietary fund and is accounted for on the accrual basis. When should revenue be recognized under modified accrual basis of accounting?Under the modified accrual basis of accounting, amounts are recognized as revenue when they are both measurable and available.
When using modified accrual accounting revenues should be recognized when measurable and available to finance expenditures of the current period?When using modified accrual accounting, revenues should be recognized when measurable and available to finance expenditures of the current period. Property tax revenue is considered available if it is received no more than 30 days after the fiscal year end.
What is modified accrual accounting?Modified accrual is a combination of cash basis and full accrual basis. Revenues are recognized when they are both measurable and available. Measurable — the cash flow from the revenue can be reasonably estimated. Available — the revenue is available to finance current expenditures to be paid within 60 days.
Which funds are accounted for using the modified accrual basis of accounting?The general fund is accounted for on the modified accrual basis. This basis of accounting recognizes revenues in the period in which they are measurable and available. The enterprise fund is a proprietary fund and is accounted for on the accrual basis.
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