One of the more important eligibility requirements is the time requirement, where the time period in which a grant is to be spent is specified. For example, if a state government provides formula-based education aid to a local government or a school district and specifies that the aid is for the school year that begins in September and ends in June, that is the period of time for which the grant revenue would be recognized. Few, if any, differences between the modified accrual basis of accounting on
the fund level and the accrual basis of accounting at the government-wide level should arise. However, if no time period is specified (and all other eligibility requirements are met) the total amount of the grant would be recognized as revenue immediately.

For example, assume that a state government with a December 31 year-end provides a grant to a local government in its budget for its fiscal year which begins on January 1, 20X1. The local government has a fiscal year of June 30. If there are no time requirements and all other eligibility criteria are met, the grant appropriation at the state level is available on January 1, 20X1, the first day of the state’s fiscal year. In this case, the local government would recognize the revenue from the whole grant on January 1, 20X1.

This area has caused a somewhat unexpected surprise for some governments in implementing GASBS 33. In the above example, governments prior to adoption of GASBS 33 probably would have recognized half of the grant revenue in this example in the fiscal year ended June 30, 20X1, and half in the fiscal year ended June 30, 20X2. Under GASBS 33, the entire grant would be recognized in the fiscal year ended June 30, 20X1.

Taken From : Governmental Accounting Made Easy

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