Receivables
Policy
FIACCT 06-00_01: Recognition of Receivables
Effective: July 1, 1998
Revised: December 1, 2019
Reviewed: December 1, 2019
Purpose
This policy defines the criteria state agencies are to use in determining when to record a Receivable on FINET.
Policy
A. The Division of Finance establishes and determines criteria for recognizing, measuring, and reporting Revenues and Receivables.
B. All departments, agencies, and divisions, regardless of whether they are using FINET or have been
“exempted” must comply with Division of Finance policies for recognizing, measuring, and reporting
Receivables.
Background
Receivables and Revenue
Receivables are recorded when the State has an enforceable legal claim to an asset that has not been received. As a general rule, the recognition of Receivables is tied to the recognition of revenue. The State generally recognizes revenue when it is both measurable and available to finance expenditures of the current fiscal year. If payment is not received when the revenue recognition event occurs (revenue is earned), then a Receivable should be recorded. In some instances, amounts are billed before revenue is earned and should be recorded as Receivables and unearned revenues.
The Receivable (RE) document is used to record Receivables. The RE records the necessary accounting entries on FINET, which normally are:
Debit: Accounts Receivable (balance sheet account)
Credit: Revenue
The debit to accounts receivable is posted to the general ledger automatically using a system defined balance sheet account. The credit side is posted to the general ledger based on the coding block entered on the RE document.
Contact the FINET Helpdesk via the Finance Website (financesupport.utah.gov) or at 801-538-9690 for assistance if a different balance sheet account is needed or if the credit side should be to an account other than revenue.
Receivables Not Related to Revenues
Amounts due for reimbursement of expenditures are also recognized as Receivables.
Transactions Between State Entities
Receivables should not be recognized for transactions between state agencies. The Internal Initiator
Transaction (ITI) and Internal Transaction Agreement (ITA) process must be used for transactions between state agencies which will automatically do the proper accounting.
General Guidelines for Recognizing Receivables
Receivables should be recorded in FINET as soon as the criteria discussed below are met.
Due to the diversity of state government activities, it is impossible to list every situation that could arise.
Please contact the Revenue Accountant at the Division of Finance for specific questions about whether a
Receivable and/or revenue should be recognized. Recognition of specific Receivables will be determined by the Division of Finance in accordance with generally accepted accounting principles as defined by the
Governmental Accounting Standards Board (GASB).
Examples of When to Recognize Revenues and Receivables
Taxes
Licenses, Fees, Permits, Fines, and Donations
Taxes are generally recognized as Revenues and Receivables and are
recorded when the underlying transaction or event has taken place and the State has demanded the taxes from the taxpayer by establishing a due date one month after the period for which the tax is applicable. Taxpayer-assessed taxes with a due date one month after the end of the period should be considered as having been demanded as of the end of the period and are to be recognized as revenue of the prior period.
Revenues and Receivables for licenses, fees, permits, fines, and
donations should be recognized when the underlying event takes place and the State has an enforceable legal claim to the amounts.
Fines
Fines are monetary penalties imposed by governments against those
that commit statutory offenses or violate administrative rules. Fines are recognized and reported as a Receivable when an enforceable
legal claim exists and the State has demanded payment. Examples
include:
a. A fine is automatically imposed because the date by which an
individual may contest the fine has expired.
b. A fine has been authorized by a court or other authorized
administrative body and payment has been demanded.
Fees for licenses and permits
Citizens and others pay fees for licenses and permits for the privilege
of engaging in a regulated activity. Often the fee is intended to cover
a privilege granted for a particular period of time. Because citizens
and others granted the license or permit have no legal right to
exercise the privilege granted by a license or permit until the fee is
paid, a government’s enforceable legal claim arises only when the fee
is paid. Therefore, no Receivables or revenues should be recorded
when renewal notices for licenses and permits are sent out. The
revenue should be recognized only when the payment is received.
Donations
Donations are defined as voluntary contributions of resources to a
state governmental entity by a non-governmental entity. Donations
may be financial resources, such as cash or securities; or capital assets, such as land or buildings. Receivables for financial resources
should be recognized when the governmental entity has an
enforceable legal claim to the donation and it is probable that the
donation will be received. Donation of capital assets should only be
recorded as a Receivable in very select instances and is to be
determined by the Division of Finance on a case by case basis.
Charges for Goods and Services
Interest and Penalties
Cost Reimbursable Grants
Revenues and receivables for goods and services should be recognized when the State has delivered the goods or provided the services.
Interest, penalties, and late charges added to delinquent or past due
Receivables are to be recognized and reported as revenues and
Receivables when the event has occurred and the State has an enforceable legal claim and collection is likely.
Revenues and receivables are recognized after expenditures are incurred and when funds are requested from the grantor.