By Anthony J. Mancuso, CPA

The Governmental Accounting Standards Board recently issued Statement 33, which specifies the accounting and reporting for "nonexchange" transactions involving financial or capital resources, i.e., transactions where the government gives or receives value without directly receiving or giving equal value in exchange. This includes most taxes, grants, and donations.

The timing of financial statement recognition will depend on the nature of the nonexchange transaction as well as the basis of accounting (accrual or modified accrual).

Statement 33 identifies four classes of nonexchange transactions:

* Derived tax revenues, such as sales and income taxes, will be recognized when the underlying exchange occurs on which the government imposes the tax, for example, when a customer buys a washing machine that is subject to a sales tax.

* Imposed nonexchange revenues, such as property taxes and fines, will be recognized as assets when the government has an enforceable legal claim. For example, property taxes receivable generally will be recognized on the lien date even though a lien may not be formally placed on the property at that date. Revenues will be recognized in the period in which the resources are required to be used or use is first permitted, for example, the period for which the property tax is levied.

* Government-mandated nonexchange transactions, such as federal or state programs that are required of state or local governments, will be recognized when all eligibility requirements are met, as specified in Statement 33. For example, when a recipient is required to incur allowable costs before reimbursement, the incurring of allowable costs is an eligibility requirement.

* Voluntary nonexchange transactions, such as most grants, appropriations, donations, and endowments, also will be recognized when the statement's eligibility requirements are met, including contingencies. For example, to qualify for a grant, a recipient must provide matching resources.

For revenue recognition on the modified accrual basis, resources also should be "available," as defined in existing standards.

GASB noted that Statement 33 goes hand-in-hand with the board's upcoming standards on the governmental and the college and university financial reporting models expected to be issued in the middle of 1999. However, GASB indicated that until the new models become effective, Statement 33 should be implemented under the existing models.