Each government’s tax procedures and requirements are different, and different taxes work in different ways, so there is no set of prescribed procedures that can be suggested that will result
in the best method in every case. Nevertheless, there are some general processes and procedures that might prove helpful. (more…)
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In order to report the derived revenues from the taxes described in the previous paragraphs on the accrual basis of accounting and economic resources measurement focus used in the government-wide financial statements, the government needs to consider the taxes that will be collected after the availability period that is used for reporting these revenues on a modified accrualbasis. The government needs to calculate how much revenue it “earns” during its fiscal year from exchange transactions that occurred during that fiscal year. (more…)
While the measurable criterion can usually be met by effective use of accounting estimates, the available criterion is more direct. For reporting on the modified accrual basis of accounting, some governments choose to use the same sixty-day criterion used for property taxes collected after year-end for determining the amount of these revenues that should be considered available. Before adopting this general rule, the government should ensure that the tax relates back to the fiscal year for which the estimate is being made. For example, sales tax returns are often due monthly following (more…)
These taxpayer-assessed revenues are difficult to measure for a number of reasons. First, the reporting period for these revenues is often a calendar year, and the majority of governments have a fiscal year that is other than the calendar year, and accordingly there are overlapping reporting periods. Second, the tax returns or remittance forms taxpayers use to remit these taxes are usually not due until several months after the calendar year-end and are subject to extension requests. Third, (more…)
Income taxes often represent a significant source of revenue to some governments. Sales taxes are another common form of significant revenue provider that is used by governments to fund operations. In addition, other forms of derived taxes, such as cigarette taxes, provide revenues to many state and local governments. (more…)
In recording property taxes, there is a difference as to when a receivable is recorded for property tax revenue and when the related revenue is recognized. A receivable should be recorded on the balance sheet for property tax receivables (net of estimated uncollectible property taxes receivable) on the date that the property taxes are levied. To the extent that property taxes receivable exceed the amount of revenue that may be recognized under the “available” criterion, the difference should be recorded as deferred revenue. (more…)
Property taxes represent a significant source of revenue for many governments, particularly local governments. Property taxes recorded in a governmental fund should be accounted for as an imposed nonexchange revenue using the modified accrual basis. When a property tax assessment is made, it is to finance the budget of a particular period, meaning that the property taxes are intended to provide funds for the expenditures of that particular budget period. The revenue produced from any property tax assessment should be recognized in the fiscal period for which it is levied, provided that (more…)
However, purpose restrictions ordinarily do not affect when a grant is recorded. If the government is entitled to the resources from a grant, when the grant is recorded is not affected by the fact that the use of the grant funds is restricted.
Many of the government-mandated nonexchange transactions are cost-reimbursable-type grants, or expenditure-driven grants as they are sometimes called. A government has to spend money in order to be eligible for reimbursement, so these types of transactions would not be recorded before the money is spent. If the government receives an advance of funds prior to spending the money, the receipt should be recorded as a deferred revenue, rather than as revenue. (more…)
The modified accrual basis of accounting would recognize revenues in the same way as does the accrual basis of accounting except that, again, the availability criteria must be met. For property taxes, the most common type of imposed exchange transaction, the period of time that revenues collected after the fiscal year-end are considered available is defined as sixty days after the fiscal year-end. Property taxes that are receivable at the fiscal year-end but that will not be collected until more than sixty days after the fiscal year-end are recorded at year-end as deferred revenue. (more…)