FASAB

1 FASAB ----------------------------------- ------------------------------ACCOUNTING FOR REVENUEANDOTHER FINANCING SOURCESAND CONCEPTS FOR RECONCILING BUDGETARY AND FINANCIAL ACCOUNTINGS tatement of Recommended Accounting Standards Number 7 April 1996 This is the original Standard file; please check for the most recent update in the FASAB Handbook at _____This is the original Standard file; please check for the most recent update in the FASAB Handbook at _____APPLICABILITY, MATERIALITY, AND TERMINOLOGYT hese standards apply to general purpose financial reports Government reporting entities. These standards need not beapplied to immaterial items unless otherwise noted. Statement ofFederal Financial Accounting Concepts No. 2 (SFFAC No. 2),Entity and Display, lists criteria for defining Governmentreporting entities. Paragraph 78 of Entity and Display notesthat some of a reporting entity's components may be required bylaw or policy to issue financial statements in accordance withaccounting standards other than those recommended by the FASABand issued by the OMB and the GAO, , accounting standardsissued by the Financial Accounting Standards Board or by aregulatory agency.

2 Those components should continue to issue therequired reports. The reporting entities of which the componentsare a part, however, need to be sensitive to differences thatmay arise because of different accounting standards. If thesedifferences are material, the standards recommended by the FASABand issued by the OMB and the GAO should be applied. Thecomponents would need to provide any additional disclosures ordifferent recognition and measurement required by the accountingstandards issued by the OMB and the GAO that are not required byother standards."Disclosure" in this document indicates providing information innotes or narrative regarded as an integral part of the basicfinancial statements. "Supplementary" indicates providinginformation that is regarded as "required supplementaryinformation" as that term is used in accounting and auditingstandards. The limited auditing procedures for this informationare defined in auditing standards.

3 "Other accompanyinginformation" refers to unaudited information that accompaniesthe audited financial statements. It is not regarded asessential for "fair presentation." Another kind of supplementaryinformation is "Required Supplementary Stewardship Information."This is a proposed category unique to federal Governmentaccounting and auditing standards. It refers to certaininformation for which FASAB expects OMB and GAO in collaborationto agree upon appropriate auditing procedures. It will beregarded as essential for "fair presentation."This is the original Standard file; please check for the most recent update in the FASAB Handbook at This is the original Standard file; please check for the most recent update in the FASAB Handbook at _____STATEMENT OF federal FINANCIALACCOUNTING STANDARDS NUMBER iEXECUTIVE 1 ACCOUNTING STANDARDS FOR REVENUE AND OTHER FINANCING 1 CLASSIFICATION, RECOGNITION, AND 1 DISCLOSURES, SUPPLEMENTARY INFORMATION, AND 4 CONCEPTS FOR RECONCILING BUDGETARY AND FINANCIAL 4 PART I: ACCOUNTINGFOR REVENUE ANDOTHER FINANCING 6 BACKGROUND.

4 10 EFFECTIVE 10 ACCOUNTING 11 EXCHANGE 11 RECOGNITION AND MEASUREMENT OF EXCHANGE 12 DISCLOSURES AND OTHER ACCOMPANYING 16 NONEXCHANGE 17 RECOGNITION AND MEASUREMENTOF NONEXCHANGE 17 The General 17 Taxes and 17 Fines and 24 Other Nonexchange 24 DISCLOSURES, SUPPLEMENTARY INFORMATION, AND OTHERACCOMPANYING 24 This is the original Standard file; please check for the most recent update in the FASAB Handbook at _____Supplementary 26 Other Accompanying Information .. 27 OTHER FINANCING 28 RECOGNITION AND MEASUREMENT OF OTHER FINANCING 29 Financing Imputed for Cost 29 Transfers of 30 PRIOR PERIOD 30 BUDGETARY INFORMATION .. 31 ACCOUNTABILITY FOR DEDICATED 33 PART II: CONCEPTS FOR RECONCILING BUDGETARY AND 36 AMENDMENTS TO SFFAC No. 2, ENTITY AND 36 RECONCILIATION STATEMENT--BUDGETARY AND 37 STATEMENT OF 37 Entity and Display, Appendix 40 APPENDIX A: BASIS FOR 40 EXCHANGE 42 Special Nature of Government Exchange 42 Recognition: General 43 Recognition: Special 58 NONEXCHANGE 61 Inherent Limitations.

5 61 Practical Limitations .. 62 Modified Cash Basis for Taxes and 63 Cash Basis Information Needed .. 63 Potential Changes .. 63 Entities Responsible for Measuring and RecognizingRevenue .. 64 Possible Over- and Under-funding of Trust Funds .. 64 Conceptual Criteria for Accrual and Limitations onTheir Application .. 65 Limitations on the Scope of Accounting .. 67 Some Benefits of this Standard .. 67 Some Things this Standard Does Not Accomplish .. 68 Accounting Systems Changes .. 69 Disclosures, Supplementary Information, and OtherThis is the original Standard file; please check for the most recent update in the FASAB Handbook at _____Accompanying Information .. 70 Tax Gap .. 73 Tax 75 Directed Flows of 76 OTHER FINANCING SOURCES AND BUDGETARY 78 General 78 Reducing 79 The Budgetary Process and Its Linkage 80 Implications of the term "Net Results ofOperations".

6 85 DEDICATED 86 APPENDIX B: GUIDANCE FOR THE CLASSIFICATION OF 90 TABLE OF TRANSACTIONS.. 93 TRANSACTIONS WITH THE 97 Nonexchange Transactions With The 97 Exchange Transactions With The Public: Transactions With The Public: Gains Financing Sources From The Transactions-- Transactions--Intragovernmental: GainsAnd Transactions--Intragovernmental: Transactions--Intragovernmental: GainsAnd Financing NOT RECOGNIZED AS REVENUES, GAINS, OROTHER FINANCING C: OF OF is the original Standard file; please check for the most recent update in the FASAB Handbook at _____This is the original Standard file; please check for the most recent update in the FASAB Handbook at PREFACEThis document contains two separate parts. The first, on revenueand other financing sources, is composed of the introduction,accounting standards, and appendices.

7 After the standardsrecommended by FASAB are approved by the Secretary of theTreasury, the Director of the Office of Management and Budget,and the Comptroller General and are published, the standardsprovide authoritative guidance to those who prepare and auditgeneral purpose financial reports of Government second part of this document amends Statement of FederalFinancial Accounting Concepts No. 2, Entity and Display, byadding a new concept to satisfy users' needs for information thatreconciles budgetary and financial accounting. This concept ispresented in the section of this document that begins on pageError! Bookmark not Statements of federal FinancialAccounting Concepts articulate the framework within which theBoard considers and recommends accounting standards. Statementsof concepts do not provide authoritative guidance to preparersand is the original Standard file; please check for the most recent update in the FASAB Handbook at This is the original Standard file; please check for the most recent update in the FASAB Handbook at _____EXECUTIVE SUMMARYACCOUNTING STANDARDS FOR REVENUE AND OTHERFINANCING SOURCESSCOPE1.

8 This Statement presents standards toaccount for inflows of resources from revenueand other financing sources. It providesstandards for classifying, recognizing, andmeasuring resource inflows. These financial(proprietary) accounting standards differfrom those used for budgetary accounting onlyto the extent essential to meet theObjectives of federal Financial , RECOGNITION, ANDMEASUREMENT2. Revenue is an inflow of resources that theGovernment demands, earns, or receives bydonation. Revenue comes from two sources:exchange transactions and nonexchangetransactions. Exchange revenues arise when aGovernment entity provides goods and servicesto the public or to another Government entityfor a price. Another term for "exchangerevenue" is "earned revenue." Nonexchangerevenues arise primarily from exercise of theGovernment's power to demand payments fromthe public ( , taxes, duties, fines, andpenalties) but also include donations.

9 Theterm "revenue" does not encompass allfinancing sources of Government reportingentities, such as most of the appropriationsthey receive. These other sources offinancing do, however, provide resourceinflows to Government reporting entities, sothis Statement includes accounting standardsfor These accounting standards recognizeexchange revenue at the time that aGovernment entity provides goods or servicesto the public or to another Governmententity. The revenue is measured at the priceThis is the original Standard file; please check for the most recent update in the FASAB Handbook at 2 SFFAS No. 7--------------------------------------- --------------------------_____likely to be received. Thus, with somedifferences that are explained in thestandard, the accounting for earned revenueis comparable to the private sector's accrualaccounting for earned revenue. Exchangerevenue includes most user charges other thantaxes.

10 Such user charges include regulatoryuser charges, in which the exchange is notwholly voluntary but the revenue isgenerally, but not always, related to thecost of providing service to identifiablegroups. One example is the revenue derivedfrom the Securities and Exchange Commission'sregistration fees. Exchange transactions alsoinclude those intragovernmental transactionswhere the price serves as a full or partialreimbursement for the costs Distinguishing exchange revenue from non-exchange revenue and other financing sourcesenables the entity to report the net cost ofoperations of its programs (and the cost ofthe entity to the taxpayer) and provides theaccounting foundation to report unit cost ofoutput measures for performance that exchange revenue be matchedwith the cost of outputs of goods andservices sold to the public enables theentity to report the cost to the taxpayer ofnot charging the full cost of those goods Nonexchange revenues include income taxes,excise taxes, duties, fines, penalties, andother inflows of resources arising from theGovernment's power to demand payments, aswell as voluntary donations.