Government Revenue: Principles

• Revenue refers to the gross inflow of economic benefits or service potential that increases equity, but not from owner contributions.
• It only includes inflows that are received or receivable by the entity on its own account.
• Receipts are actual cash collections.

Fundamental Principles of Revenue

• All revenue must be remitted to the national treasury, specifically the Bureau of Treasury and included in the national government's general fund.
• This is unless another law allows otherwise.
• Money and property received by a public officer in any capacity is accounted for as government funds and property, unless another law states differently.
• Amounts from trust and business-type activities may be separately recorded and disbursed per relevant rules.
• Record receipts as revenue of special, fiduciary, trust funds, or funds other than the general fund only when authorized by law.
• Issue an official receipt (OR) immediately upon collecting payment.
• For mechanical devices like electronic ORs, the COA may approve exemptions from using accountable forms upon request.
• Never use temporary receipts to acknowledge public funds.
• Issue pre-numbered ORs in strict numerical sequence, ensuring duplicate copies are exact copies of the original.
• Collecting officers must accept checks as payment to the government, with proper endorsement and payee identification.
• Government funds cannot be used to encash private checks.
• Acknowledge receipts of government funds in accordance with the law, including the date, source, and account.

Types of Funds

• General Fund: Available for any purpose unless designated to another fund.
• Special Fund: Designated for a specific purpose.
• Trust (Fiduciary) Fund: Held by a government agency or public officer acting as trustee, agent, or administrator to fulfill a condition.
• Revenue Fund: All funds from the income of any government agency, available for appropriation or expenditure according to the law.
• Depository Fund: Funds held in an authorized depository bank, controlled by the agency for lawful purposes.
• Special Account in the General Fund (SAGF): Facilitates funding priority government activities, sourced from specific fees, grants, donations, or other legally identified sources.
  • Income and collections for Special and Fiduciary Funds are remitted to the BTr as SAGF.
  • SAGF is automatically appropriated for authorized purposes, unless the GAA states otherwise.
  • Government agencies can access SAGF subject to Presidential approval.
• Special Purpose Fund: Funds allocated by the President for special programs and projects.
  • These funds are NOT under the accountability of any particular agency.

Exchange Transactions (Reciprocal Transfers)

• One entity receives an asset or service or extinguishes liabilities by giving approximately equal value to another.
• Examples include sales of goods, service income or asset use yielding interest, royalty, or dividends.

Revenue Recognition for:

• Sale of Goods: Transfer of significant ownership risks and rewards to the buyer, without the entity retaining control.
• Service Income/Business Income: Recognize revenue on a straight-line basis UNLESS another method better represents the stage of completion.
• If the revenue outcome cannot be estimated reliably, revenue is only recognized to the extent of expenses recognized.
• Interest Income: Recognized on a time proportion basis using the effective interest rate method.
• Royalties: Recognized based on the agreement's substance.
• Dividends: When the entity's right to receive payment is established (date of declaration).
• Exchanges of Goods or Services: If similar, then revenue is not recognized.
• If dissimilar it is recognized at the fair value of asset received or given up, adjusting for any cash paid or received.

Measurement of Revenue

• Measured at the fair value of the consideration received or receivable, accounting for trade discounts or volume rebates.

Non-Exchange Transactions (Non-Reciprocal Transfers)

• An entity receives value without directly giving approximately equal value in fair exchange.
  • Examples include taxes, fines, penalties, and donations.

Revenue Recognition for:

• Taxes: Recognized at a gross amount, not reduced by any expenses paid through the tax system.
• Fines and Penalties: Recognized in the year they are collected.
• Gifts, Donations, Goods/Services In-kind: If without conditions, recognized immediately as revenue.
• If with conditions, initially recognized as a liability until the condition is satisfied.
• Services in-kind are not recognized as revenue.
• Debt Forgiveness: Carrying amount of debt forgiven is recognized as revenue.
• Bequest: Recognized as revenue measured at fair value, if asset recognition criteria are met.
• Grant with Condition: Initially recognized as liability until the condition is satisfied.
• Pledges: Not recognized as revenue.
• Subsidy from NG and other NGAs: Recognized as revenue from assistance and subsidy.
• Receipts from Excess Cash Advance, Overpayment of Expenses, Performance Bonds and Security Deposits, Collection on Behalf of Other Entities, and Inter or Intra Agency Funds Transfers: Not recognized as revenue.