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.

Modified Accrual Basis of Accounting
Revenues are recognized when all eligibility requirements have been met and the resources are considered available. When the program is considered a cost-reimbursable program, the period
of availability in practice may be longer than for other types of revenues. If the government has incurred costs under one of these programs, the revenues from the grant may be considered available to pay these costs, even if the grant revenue is not received until well after year-end. As a practical matter, when a government is relatively sure that it will be reimbursed for a cost incurred, it does not make much sense to recognize the cost in one fiscal year and the revenue in the next because the revenue did not meet an availability criteria.

The following sections describe the accounting for several of the more common types of revenues received by governments.

Taken From : Governmental Accounting Made Easy

This entry was posted on Friday, August 7th, 2009 at 1:37 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.