Question: You are the independent auditor of various governments You have

You are the independent auditor of various governments. You have been asked for your advice on how the following transactions should be accounted for and reported. Characteristic of each transaction is ambiguity as to whether it is an exchange or a non-exchange transaction. For each transaction indicate whether you think it is an exchange or a non-exchange transaction and make a recommendation as to how it should be accounted for (i.e., the amount and timing of revenue recognition). Justify your response.
The GASB has not explicitly distinguished between exchange and non-exchange transactions. Hence, in this problem, you should consider how you think the transaction should be accounted for; you need not be limited by current GASB standards.
1. A government receives from a developer a donation of 1,000 acres of land valued at $4 million. In return, the government grants the developer zoning variances on nearby property.
2. A college of pharmacy receives a grant of $2 million from a drug company to carry out research on a new formulation. The college agrees to submit the results to the company and to publish them only with the company’s approval.
3. A city charges a developer an “impact fee” of $15,000 to compensate, in part, for improvements to the infrastructure in the area in which the developer plans to build residential homes. The city will make the improvements when construction on the new homes gets under way.
4. A city charges restaurants a license fee of $2,500. The license covers a period of two years. The fees must be used for health department inspections.
5. The city issues permits for residents to use city tennis courts. The fee is $100 per year—a small fraction of what it would cost to play on comparable private courts and an amount that covers only a small portion of the cost of constructing, maintaining, and operating the courts.

View Solution:

Sale on SolutionInn
  • CreatedAugust 13, 2014
  • Files Included
Post your question