7-1200: Revenue Recognition and Accruals

Purpose

This policy establishes the requirements for recognizing and reporting revenue.

Authority

• Government Accounting Standards Board (GASB) Statements No. 33, 34, 36, and 62.

Scope

Government Accounting Standards Board (GASB) Statements No. 33, 34, 36, and 62.​

Policy

Governmental funds (General, Special Revenue, Capital Project, and Debt Service)

All governmental funds are classified in the modified accrual basis, meaning that revenue should be recognized when the revenue is measurable and available to finance expenditures. The County of Sacramento's period of availability is 120 days. If the cash is not received within 120 days of the fiscal year end close, the revenue transaction will be reversed and recorded into the unavailable revenue account. 

The revenue can come from two distinct sources: exchange transactions and non-exchange transactions. In the case of exchange transactions, the revenue should be recognized when the transaction has been completed and the cash is collectable within the period of availability, which in our case is 120 days. While non-exchange transactions fall into four distinct categories which are: derived tax revenues, imposed non-exchange revenues, government-mandated, and voluntary non-exchange transactions. All four of these revenues are recognized when the funds are measurable and available to finance expenditures; however, non­ exchange transactions also have two additional requirements for revenue recognition.

The first requirement for revenue recognition is time, which stipulates that resources are required to be used within a certain time frame or are to remain intact until a specified date. The second requirement is revenue streams are restricted for a specific purpose. This requirement does not affect when revenue is recognized but affects how this income is included in net asset, equity, or fund balance. For non­ exchange transaction not all of these requirements listed above need to be met in order to recognize revenue, but all requirements need to be analyzed to determine proper revenue recognition. 

Proprietary (Internal Service and Enterprise) and Fiduciary Funds (Custodial. Investment Trust, Pension and Employee Benefit Trust, and Private Purpose Trust)

Internal Service, Enterprise, and Fiduciary Funds recognize revenues and receivables using the accrual basis of accounting where revenue is recognized when it's measurable and earned.