Nonexchange Transactions Policy

GASB Statement 33

Effective Date:

See Federal and State Compliance for more information about legal compliance.
See Financial 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 (Colleges/Universities)

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 Imposed Nonexchange Government-Mandated Voluntary Nonexchange
Corporate Income Tax Corporate Franchise Tax Federal Mandates on States* Certain Federal Grants
Individual Income Tax Utility Franchise Tax State Mandates on Locals** State Grants
Sales and Use Tax Estate Tax State Appropriations
Highway Use Tax Gift Tax Donations
State Motor Fuels Tax Insurance Premium Tax Pledges
Piped Natural Gas Tax Environmental Fines Other State Shared Revenues
Tobacco Products Tax Library Fines
Alcoholic Beverage Tax Traffic Fines
Scrap Tire Disposal Tax Court Fines and Fees
White Goods Disposal Tax Escheat Property
Dry Cleaning Solvent Tax Property Seizures
Wireless Enhanced 911 Charge Unauthorized Substance Tax
*    Includes entitlement programs.
**   Includes appropriations of shared revenues to local governments for state mandated programs.

Eligibility requirements 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. 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 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 are met.

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 met.

Grants, entitlements, or shared revenues recorded in trust funds should be recognized as revenue on a basis consistent with the funds measurement objective (governmental or proprietary).

Other Definitions

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