ACCT303-Accounting for Govt - Revenue and Other Receipts-2 2.pdf

Revenue and Other Receipts Government Accounting Revenue Revenue – is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net assets/equity, other than increases relating to contributions from owners. R...

Revenue and Other Receipts Government Accounting Revenue Revenue – is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net assets/equity, other than increases relating to contributions from owners. Revenue funds – comprise all funds derived from the income of any agency of the government and available for appropriation or expenditure in accordance with law. Fundamental Principles for Revenue General rules [exception – if provided by law] a. deposited/remitted in the National Treasury (NT) or in any duly authorized government depository and shall accrue to the General Fund (GF) b. all moneys and property officially received by a public officer in any capacity or upon any occasion must be accounted for as government funds and government property. Fundamental Principles for Revenue c. Amounts received in trust and from business-type activities of government may be separately recorded and disbursed Fundamental Principles for Revenue d. Receipts shall be recorded as revenue of Special, Fiduciary or Trust Funds or Funds other than the GF, only when authorized by law as implemented by rules and regulations issued by the Permanent Committee. e. Mandatory issuance of Official Receipt Fundamental Principles for Revenue f. Where mechanical devices are used to acknowledge cash receipts, the COA may approve, upon request, exemption from the use of accountable forms. g. At no instance shall temporary receipts be issued h. Pre-numbered ORs shall be issued in strict numerical sequence. Fundamental Principles for Revenue i. An officer charged with the collection of revenue or the receiving of moneys payable to the government shall accept payment for taxes, dues or other indebtedness to the government in the form of checks issued in payment of government obligations, upon proper endorsement and identification of the payee or endorsee. j. Under such rules and regulations as the COA and the Department of Finance (DOF) may prescribe, the Treasurer of the Philippines and all AGDB shall acknowledge receipt of all funds  Accounting Standards for Revenue and Other Receipts Government Accounting PPSAS PPSAS 9-Revenue from Exchange Transactions and PPSAS 23-Revenue from Non-exchange Transactions Exchange transactions – are transactions in which one entity receives assets or services, or has liabilities extinguished, and directly gives approximately equal value to another entity in exchange. (Par. 11, PPSAS 9) Non-exchange transactions – are transactions in which an entity either receives value from another entity without directly giving approximately equal value in exchange, or gives value to another entity without directly receiving approximately equal value in exchange. (Par. 11, PPSAS 9) Apply substance over form for determination. Revenue from Exchange Transactions Service Income Business Income Interest royalties dividends Recognition and Measurement of Revenue from Exchange Transactions Revenue from the sale of goods shall be recognized when all the following conditions have been satisfied: 1. The entity has transferred to the purchaser the significant risks and rewards of ownership of the goods; (Par. 28, PPSAS 9) 2. The entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; 3. The amount of revenue can be measured reliably; 4. It is probable that the economic benefits or service potential associated with the transaction will flow to the entity; and 5. The costs incurred or to be incurred in respect of the transaction can be measured reliably. Revenue from the supply of services Revenue from the supply of services shall be recognized on a straight line basis over the specified period of the services unless an alternative method better represents the stage of completion of the transaction. Dividends, Interests and Royalties i. Interest shall be recognized on a time proportion basis that takes into account the effective yield on the asset; ii. Royalties shall be recognized as they are earned in accordance with the substance of the relevant agreement; and iii. Dividends or similar distributions shall be recognized when the shareholder’s or the entity’s right to receive payment is established. FV - consideration received or receivable Exchanges of Goods or Services for Similar/Dissimilar Good or Services Similar nature and value – not revenue. Dissimilar goods or services - revenue. The revenue is measured at FV of the goods or services received, adjusted by the amount of any cash or cash equivalents transferred. When the fair value of the goods or services received cannot be measured reliably, the revenue is measured at the fair value of the goods given up, adjusted by the amount of any cash or cash equivalents transferred. Impairment Losses and Allowance for Impairment Losses When an uncertainty arises about the collectibility of an amount already included in revenue, the uncollectible amount, or the amount in respect of which recovery has ceased to be probable, is recognized as an expense (impairment losses) Revenue from Non-Exchange Transactions a. Tax Revenue b. Fines and Penalties c. Shares, Grants and Donations d. In respect of an inflow of resources from a non-exchange transaction, the entity satisfies a present obligation recognized as a liability Revenue Recognition from Non-Exchange– Cash Basis and FV on date of Acquisition a. Taxation revenue – at a gross amount b. Gifts and donations, other than services in kind shall be recognized as assets and revenue when it is probable that the future economic benefits or service potential will flow to the entity and shall be measured at fair value. c. Goods in-kind received without conditions shall be recognized as revenue immediately. d. Donation in cash or in kind shall be recognized as revenue. Fines a. Fines are recognized as revenue when the receivable meets the definition of an asset and satisfies the criteria for recognition as an asset. (Par. 89, PPSAS 23) b. Where an entity collects fines in the capacity of an agent, the fine will not be recognized as revenue of the collecting entity. (Par. 89, PPSAS 23) c. Assets arising from fines are measured at the best estimate of the inflow of resources to the entity. (Par. 89, PPSAS 23) Bequests a. Bequests which satisfy the definition of an asset are recognized as assets and revenue when it is probable that the future economic benefits or service potential will flow to the entity and the fair value of the assets can be measured reliably. b. Bequests are measured at the fair value of the resources received or receivable. Gifts, Donations and Goods In-kind a. Gifts and donations (other than services in-kind) are recognized as assets and revenue when it is probable that the future economic benefits or service potential will flow to the entity and the fair value of the assets can be measured reliably. b. Goods in-kind are tangible assets transferred to an entity in a non-exchange transaction, without charge, but may be subject to stipulations. c. Goods in-kind are recognized as assets when the goods are received, or there is a binding arrangement to receive the goods. d. On initial recognition, gifts and donations including goods in- kind are measured at their fair value as at the date of acquisition. Example: Grant with Condition (1 – Grant) a. Receipt of the Grant b. Purchase of construction materials and payment for labor for the construction of a railroad system amounting to P10,000,000 c. Completion of Project Recognition and Measurement of Services In- kind Due to the many uncertainties surrounding services in- kind, including the ability to exercise control over the services, and measuring the fair value of the services, the entity is not required to recognize services in-kind as revenue and as an asset but is encouraged to disclose the nature and type of services in-kind received during the reporting period. (Par.102, PPSAS 23) Recognition and Disclosure of Pledges Pledges do not meet the definition of an asset because the recipient entity is unable to control the access of the transferor to the future economic benefits or service potential embodied in the item pledged. Agencies do not recognize pledged items as assets or revenue. If the pledged item is subsequently transferred to the recipient entity, it is recognized as a gift or donation. Pledges may warrant disclosure as contingent assets. (Par. 104, PPSAS 23) Accounting for Cash Overage/Shortage of Collecting Officer Accounting for Cash Overage/Shortage of Collecting Officer Other Receipts Other Receipts. Other receipts of NGAs shall be composed of, but not limited to, the following: 1. Receipt of Subsidy from the National Government 2. Receipt of Subsidy/Assistance from other NGAs, LGUs, GOCCs and Other Funds. Other Receipts 3. Refund of excess cash advances granted to officers and employees A- Recognition Other Receipts 3. Refund of excess cash advances granted to officers and employees B. Remittance to BTr Performance bond/security deposits Refund of overpayment of expenses Collections made on behalf of another entity Collections made on behalf of another entity Collections made on behalf of another entity Intra-agency and inter-agency fund transfers