Identify the four types of nonexchange transactions and discuss the rules for recognition of revenues and expenses/expenditures for each type of transaction.

Question

What will be an ideal response?

Answer 1

The four classes of nonexchange transactions are (1) derived tax revenues, (2) imposed nonexchange revenues, (3) government-mandated nonexchange transactions, and (4) voluntary nonexchange transactions. For derived tax revenues, such as sales and similar taxes, revenues should be recognized when the underlying exchange (e.g., sale of goods or services) has occurred. Revenues for imposed nonexchange revenues should be recognized when resources are required to be used or the first period that use is permitted. For both government-mandated and voluntary transactions, revenues (and expenses or expenditures for the other party) should be recognized in the period when all eligibility requirements, such as meeting matching requirements, have been met, unless received (or paid) in advance of use in a following period. If cash is received in advance of eligibility requirements having been met, the receipt should be reported as a liability. Resources received before time requirements are met, but after all other eligibility requirements have been met, should be reported as a deferred inflows of resources by the recipient.