GASB Statement 33
and State Compliance for more information about legal compliance.
Reporting for Certain Grants and Other Financial Assistance
for related GAAP issues.
See Memorandum # SAD 01-33
(State agencies and other component units)
See Memorandum # SAD 01-58
In a nonexchange transaction,
a government either gives value (benefit) to another party without directly
receiving equal value in exchange or receives value (benefit) from another
party without directly giving equal value in exchange. GASB Statement
33 groups nonexchange transactions involving financial or capital resources
into four classes, based on their principal characteristics:
Examples of nonexchange transactions
grouped by class are as follows:
Derived tax revenues -
result from assessments imposed by governments on exchange transactions.
Imposed nonexchange revenues
- result from assessments by governments on nongovernmental entities, including
individuals, other than assessments on exchange transactions.
transactions - occur when a government at one level provides resources
to a government at another level and requires that government to use them
for a specific purpose or purposes established in the provider's enabling
Voluntary nonexchange transactions
- result from legislative or contractual agreements, other than exchanges,
entered into willingly by two or more parties.
|Corporate Income Tax
||Corporate Franchise Tax
||Federal Mandates on States*
||Certain Federal Grants
|Individual Income Tax
||Utility Franchise Tax
||State Mandates on Locals**
|Sales and Use Tax
|Highway Use Tax
|State Motor Fuels Tax
||Insurance Premium Tax
|Piped Natural Gas Tax
||Other State Shared Revenues
|Tobacco Products Tax
|Alcoholic Beverage Tax
|Scrap Tire Disposal Tax
||Court Fines and Fees
|White Goods Disposal Tax
|Dry Cleaning Solvent Tax
|Wireless Enhanced 911 Charge
||Unauthorized Substance Tax
appropriations of shared revenues to local governments for state mandated
for government-mandated and voluntary nonexchange transactions comprise
one or more of the following:
The purpose and requirements
of each nonexchange revenue must be carefully analyzed in determining the
proper fund in which to record the resources.
of recipients - The recipient has the characteristics specified by
Time requirements - Those
specified by enabling legislation or the provider have been met.
Reimbursements - The
provider offers resources on a reimbursement basis and the recipient has
incurred allowable costs under the program.
Contingencies - The provider's
offer of resources is contingent upon a specified action of the recipient
and that action has occurred.
When applying GASB Statement
33 to a specific transaction, an agency must first determine whether the
transaction is an exchange or a nonexchange transaction (Note: Statement
33 does not apply to exchange or exchange-like transactions). If
it is a nonexchange transaction, an agency should categorize it into one
of the four categories specified by this statement. For each category
of nonexchange transactions, GASB Statement 33 provides specific recognition
criteria that define when to recognize assets, liabilities, revenues, and
expenditures/expenses in the financial statements. Application of
the provisions of this standard requires analysis of the substance of a
nonexchange transaction, rather than attention only to its label.
Nonexchange transactions must also be measurable and probable of collection
before recognition can occur.
Nonexchange revenues received
for purposes normally financed through the general fund may be accounted
for within that fund unless the applicable legal requirements cannot be
Some nonexchange revenues may
legally mandate the use of a special revenue fund.
Capital grants or shared revenue
restricted for capital acquisition or construction, should be accounted
for in the capital project fund unless associated with proprietary funds.
Grants, entitlements and shared
revenues received for proprietary fund purposes should be accounted for
in proprietary funds.
A trust fund should be used
for those resources that establish a continuing trustee relationship.
An agency fund should be used
for those resources in which the government serves only as a cash conduit.
Nonexchange revenues recorded
in governmental funds should also conform to the modified accrual basis
of accounting by satisfying the availability criterion. Careful review
of the legal and contractual requirements should be taken into consideration
when recognizing revenues. Some resources, usually entitlements and shared
revenues are restricted more in form than substance. Only failure to comply
with regulations would result in a forfeiture of revenue. Therefore, these
resources should be recognized for the full amount of the award when all
applicable eligibility requirements are met. For other such resources,
usually grants, the expenditure is the prime factor for determining eligibility,
and revenue should be recognized when the expenditure is made, provided
that other applicable eligibility requirements are met. Similarly, if cost
sharing or matching requirements exist, revenue recognition depends on
compliance with these requirements. Grants, entitlements, or shared revenues
are recorded as deferred revenue if received before the eligibility requirements
Nonexchange revenues are
recognized in the proprietary fund on the accrual basis. Those resources
in proprietary funds should be recognized as nonoperating revenues in the
accounting period in which they are both measurable and earned and the
recognition requirements of GASB 33 are met. Nonexchange revenues are recorded
as deferred revenue if received before the eligibility requirements are
Grants, entitlements, or
shared revenues recorded in trust funds should be recognized as revenue
on a basis consistent with the funds measurement objective (governmental
Grant - A contribution or gift
of cash or other assets from another government to be used or expended
for a specified purpose, activity or facility.
Capital grant - Contribution
or gift of cash or other assets restricted by the grantor for the acquisition
or construction of fixed (capital) assets.
Operating grant - Grants that
are intended to finance operations or that may be used for either operations
or for capital outlays at the discretion of the grantee.
Entitlement - the amount of
payment to which a state or local government is entitled as determined
by the federal or other government pursuant to an allocation formula contained
in applicable statutes.
Shared revenue - a revenue levied
by one government but shared on a predetermined basis, often in proportion
to the amount collected at the local level, with another government or
class of government.
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