FIACCT 07-00_00 Revenues – Overview Revenue Recognition

A.

Revenues are inflows of resources that will be used by the State to perform its functions. Examples include: Taxes, user fees, fines and forfeitures, sales of goods and services, donations, and federal grants

B.

Deferred Inflows are inflows of resources that are applicable to a future fiscal year that will be used by the State to perform its functions. Examples include: An agency provides services, but receipt of payment is not available to cover current year expenditures; grants or donations received before time requirements are met, but after all other eligibility requirements have been met.

C.

Unearned Revenue is recorded when monies or assets are received by the State 1) before goods or services have been provided, or 2) before there is an enforceable legal claim, or 3) before all eligibility
requirements are met. Examples include: Park reservations and deposits received by the State in the current fiscal year for park reservations used in July

D.

Governmental Funds are comprised of the general fund, including general fund restricted accounts, special revenue funds, expendable special revenue funds, capital projects funds, debt service funds, and
permanent funds.

E.

Proprietary and Fiduciary Funds are comprised of enterprise funds, internal service funds, and trust and agency funds.

A.

The following is an overview of transaction types when revenues are recorded in FINET:

1. Exchange Transactions – Each party receives and gives up something of equitable value.
   • Example: Fees, sales of goods and services, (e.g., inspections and sale of publications). Revenue
     is recorded when the exchange transaction occurs
2. Derived Tax Revenue Transactions- Assessments that are imposed on exchange transactions.
   • Example: Taxes on earnings or consumption – sales taxes, individual and corporate income taxes, and motor fuel taxes. Revenue is recorded when the underlying exchange transaction occurs.
3. Imposed Revenue Transactions: Assessments other than those imposed on exchange transactions
   • Example: Property taxes, most fines and forfeitures. Revenue is recorded when an enforceable legal claim has arisen, and time requirements have been met.
4. Government- Mandated Transactions- A government entity at one level provides resources and mandates that a government entity at another level use those resources for a specific purpose.
   • Example: Mandated federal program revenue to state and local governments. Revenue is recorded when all applicable eligibility requirements, including time requirements, are met.
5. Voluntary Transactions- Legislative or contractual agreements other than exchange transactions entered into willingly by two or more parties.
   • Example: Grants, entitlements, or donations. Revenue is recorded when all applicable eligibility requirements, including time requirements, are met.

B.

In addition to the criteria outlined above for governmental funds, revenues must also be “available”. The availability criteria, as established by the Division of Finance is:

1. Non-federal revenues are considered “available” if monies are received or expected to be receive generally within 45 days of fiscal yearend.
2. Federal revenues are considered “available” if monies are received or expected to be received generally within 12 months of fiscal yearend.

If revenues are NOT considered “available”, then the revenue should be recorded as a Deferred Inflow as noted in section C below.

The availability criteria do not apply to proprietary or fiduciary funds.

C.

Deferred Inflows: The following is an overview of when revenues should be recorded as Deferred Inflows in FINET. All criteria 1 through 3 below apply to governmental funds. Only criteria 2 and 3 apply to proprietary and fiduciary funds.

1. Revenue NOT Considered “Available”:
   • Non-federal revenues where monies are NOT received or expected to be received generally within 45 days of fiscal yearend.
   • Federal revenues where monies are NOT received or expected to be received generally within 12 months of fiscal yearend.
2. Certain Imposed Revenue Transactions (i.e., property taxes, fines, forfeitures): Imposed Revenue Transactions with future time requirements that stipulate when revenue is required to be used or when use is first permitted.
3. Certain Government-Mandated or Voluntary Transactions (i.e., federal revenue, donations): Transactions that are received before time requirements are met, but after all other eligibility requirements have been met.

D.

Unearned Revenue: When monies or assets are received by the State before 1) goods or services have been provided, or 2) before there is an enforceable legal claim, or 3) before all eligibility requirements are
met. In other words, if monies or assets have been received, but the criteria for recording revenue have not been met, then the revenue should be recorded as unearned revenue. If the only eligibility requirement that has not been met is a time requirement, see the section Deferred Inflows above.

A.

The timing for the recording revenues, deferred inflows, and unearned revenue in FINET will follow the standards established under Generally Accepted Accounting Principles (GAAP) and in accordance with the standards of the Government Accounting Standards Board (GASB) as outlined in the Background section of this policy.

B.

It is inappropriate to defer revenue to a future period that conflicts with the standards established under GAAP and GASB. To do so will impact the financial reporting of the State and the agency will be out of compliance with the Budgetary Procedures Act as outlined in Utah Code.

C.

Non-federal revenues recorded in FINET in the current fiscal year (for governmental funds) must be collected or expected to be collected generally within 45 days of fiscal yearend. Revenues not collected or
expected to be collected within 45 days are not considered “available” and should be reclassified from revenue and recorded as a Deferred Inflow. Similarly, federal revenues (for governmental funds) not collected or expected to be collected within 12 months of fiscal yearend should be reclassified from revenue and recorded as a Deferred Inflow. Any exceptions must be documented and approved by the Division of Finance. Agencies should use the FINET account coding provided by the Division of Finance.

D.

If Deferred Inflow and Unearned Revenue transactions are recorded during the fiscal year, they must be reversed and recognized as revenue at the time the revenue become available and earned.

E.

In recording revenues in FINET:

1. When the timing of the recording of revenues is at the same time as the receipt of monies, the Cash Receipt (CR) document can be used to record both the revenue and the cash receipt. Recording revenue and cash receipts using a FINET Journal Voucher (JVA) document is only done by the Division of Finance or by departments with written permission from the Division of Finance.
2. Otherwise, State agencies use the RE document to record revenue when earned, unless the agency has received an exemption in writing from the Office of State Debt Collection. Agencies reference the RE on a Cash Receipt (CR) document when the monies are subsequently received.

F.

Agencies that are granted an exemption from using the RE document (FINET receivable system) should record a summary of their receivable activity on FINET at quarter end and are encouraged to record
receivable activity at each month end. See FIACCT 06-02.01 Rec. – Exempt Agencies – Recording Receivables on FINET policy for details. Any exceptions must be approved in writing by the Division of
Finance.

G.

All supporting documentation for RE documents must be filed and maintained for three years per Division of Finance requirements, and otherwise according to department retention schedules as arranged with State Archives. Supporting documentation for revenue recorded in any other manner (e.g., FINET JVA) should be filed and maintained according to agreed upon retention schedules between the Division
of Finance and the department.

H.

At fiscal yearend, agencies follow the yearend detailed closing instructions issued by the Division of Finance in recording Revenue, Deferred Inflow, Unearned Revenue, and Receivable transactions.