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Presented by Frank Leonard March 29, 2007

Deferred Revenue Account Analysis Schedule S-9. Presented by Frank Leonard March 29, 2007. 1. Deferred Revenue Account Analysis Schedule S-9. Objectives. To provide departments the opportunity to validate the data in deferred revenue accounts prior to external auditor’s review

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Presented by Frank Leonard March 29, 2007

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  1. Deferred Revenue Account Analysis Schedule S-9 Presented by Frank Leonard March 29, 2007 1

  2. Deferred Revenue Account Analysis Schedule S-9 Objectives • To provide departments the opportunity to validate the data in deferred revenue accounts prior to external auditor’s review • To avoid unnecessary audit findings – New Statement on Auditing Standards 112 focusing on internal controls • To ensure proper representation of financial data 2

  3. Deferred Revenue Account Analysis Schedule S-9 Review of Last Year’s S-9 Objectives Met: • Participating departments had deferred revenue accounts cleaned up by year-end. THANK YOU • Year-end adjustments reflected the new 3 month recognition standard. Objectives NOT Met: • Not all departments participated. • More information needed in the Deferred Revenue Source field. • Information in this same format needed for year-end… Introducing the new “S-12”(form will be available at YE) 3

  4. Deferred Revenue Account Analysis Schedule S-9 Deferred Revenue Deferred revenue arises when a potential revenue transaction does not meet both the “measurable” and “available” criteria for recognition in the current period. 4

  5. Deferred Revenue Account Analysis Schedule S-9 Criteria for Revenue Recognition Under Accrual Basis of Accounting(For Proprietary Funds only - Internal Service Funds, Enterprise Funds) : • Revenue must be earned (measurable) before it can be recognized. However, cash does not have to be received (available) before revenue is recognized. 5

  6. Deferred Revenue Account Analysis Schedule S-9 Criteria for Revenue Recognition Under Modified Accrual Basis of Accounting(ForGovernmental Funds only - General Fund, Special Revenue Funds, Capital Project Funds, and Debt Service Funds) : • Revenue must be earned (measurable) and available. This means it must be earned and cash must be received within 3 months or 12 months if expenditure-driven grant. The revenue must also be eligible to recognize revenue. 6

  7. Deferred Revenue Account Analysis Schedule S-9 Criteria for Revenue Recognition Eligible or Eligibility The characteristic that must exist for a given entity to be considered qualified or allowed to take legal ownership of the money received for a particular program. Eligibility requirements: • Allowable cost restrictions (Expenditure-driven / Reimbursements) • Time restrictions (Advances) • Contingencies • Required characteristics of recipient • NOTE: Purpose restrictions cannot be used to establish eligibility. 7

  8. Deferred Revenue Account Analysis Schedule S-9 A. Proceeds Received in Advance of Revenue Entitlement (Unearned) Accounting Treatment 1. To receive cash in advance of revenue recognition: Account DebitCredit Cash (101100) $100Deferred Revenue (230XXX) $100 2. To recognize revenue once the criteria has been met: Account DebitCredit Deferred Revenue (230XXX) $100 Revenue (7XXXXX) $100 8

  9. Deferred Revenue Account Analysis Schedule S-9 Accounting Treatment B. Proceeds Received Subsequent to Revenue Entitlement (Unavailable) • Once revenue has been earned by a governmental fund, a receivable and offsetting deferred revenue should be entered. If these amounts remain at year-end, it is considered “Unavailable.” These amounts should be identified using Schedule S-12. Account DebitCredit Receivable (11XXXX) $100 Deferred Revenue(230XXX) $100 (continued)… 9

  10. Deferred Revenue Account Analysis Schedule S-9 Accounting Treatment B. Proceeds Received Subsequent to Revenue Entitlement (Unavailable) • Once proceeds are received, (available), the entry should be reversed and the revenue should be recognized. Delaying the recognition of revenue until cash is received is a modified accrual concept for use with governmental funds only. • Account DebitCredit • Receivable (11XXXX) $100 • Deferred Revenue(230XXX) $100 • To reverse initial entry • Cash (101100) $100 • Revenue (7XXXXX) $100 • To recognize revenue 10

  11. Deferred Revenue Account Analysis Schedule S-9 Questions??

  12. Deferred Revenue Account Analysis Schedule S-9 ACO Contacts For questions regarding deferred revenue, please contact: Dolores Reyna at micro 5-9380 or Frank Leonard at micro 5-3877 12

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