Chapter 4

Revenues and Other Receipts

Fundamental Principles for Revenue

1. All revenues shall be remitted to the BTr and included in the

General Fund, unless another law specifically allows

otherwise. Recording in other types of funds (e.g., Special

Fund) shall be made only when authorized by law.

2. Receipts shall be properly acknowledged through pre-

numbered ORs. Receipts can be in the form of checks.

Sources of Revenue

Revenues may arise from exchange and non-exchange

transactions.

1. Exchange transaction - examples: sale of goods and rendering of services.
2. Non-exchange transactions - examples: tax revenue, fines and penalties and donations.

Sale of Goods

1. Revenue from the sale of goods shall be recognized when all

of the following conditions are satisfied:

2. Significant risks and rewards of ownership of the goods are

transferred to the buyer;

3. The entity does not retain continuing managerial

involvement or effective control over the goods sold;

4. It is probable that economic benefits will flow to the entity;

5. Revenue can be measured reliably; and

6. Costs relating to the transaction can be measured reliably.

Rendering of Services

- Revenue from rendering of services is recognized on a

straight line basis over the contact term.

- However, revenue is recognized by reference to the stage of

completion if the outcome of the transaction can be

estimated reliably, such as when all of the following

conditions are satisfied:

1. The stage of completion can be measured reliably;

2. It is probable that economic benefits will flow to the entity;

3. Revenue can be measured reliably; and

4. Costs relating to the transaction can be measured reliably.

-When the outcome cannot be estimated reliably, revenue is

recognized only to the extent of recoverable costs.

Interest, Royalties & Dividends

1. Interest is recognized on a time proportion basis that takes into account the effective yield on the asset;
2. Royalties is recognized as they are earned in accordance with the substance of the relevant agreement; and
3. Dividends are recognized when the entity's right to receive payment is established.

Measurement of Revenue from Exchange Transactions

1. Revenue from exchange transactions are measured at the fair value of the consideration received or receivable.
2. Any trade discounts and volume rebates shall be taken into account.
3. When cash flows are deferred, the fair value of the consideration is the present value of the consideration receivable.

Exchanges of Goods or Services

Similar - no revenue is recognized.

Dissimilar - revenue is recognized, measured using the

following order of priority:

1. Fair value of the goods or services received, adjusted by

the amount of any cash transferred.

2. Fair value of the goods or services given up, adjusted by

the amount of any cash transferred.

Non-exchange Transactions

Revenue from non-exchange transactions are derived mostly from

taxes, fines and penalties, gifts, donations and goods in-kind.

Gifts, Donations and Goods In-kind

1. Recognized as revenue measured at fair value when it is probable that future economic benefits will flow to the entity.
2. If without condition, recognized immediately as revenue.
3. If with condition, initially recognized as liability and recognized as revenue only when the condition is satisfied.

Others

• Services in-kind - not recognized as revenue.
• Debt Forgiveness - carrying amount of debt forgiven is recognized as revenue.
• Bequests - (transfers made according to the provisions of a deceased person's will) recognized as revenue measured at fair value, if asset recognition criteria are met.
• Grant with Condition - initially recognized as liability until condition is satisfied.
• Pledges - (unenforceable promises to give) not recognized
• Concessionary Loans - (loans w/ below-market rate) difference b/w fair value and transaction price is recognized as revenue, if non-exchange transaction.

Impairment Losses and Allowance for Impairment Losses

When an amount already recognized as revenue becomes uncollectible, it is recognized as expense (i.e., impairment loss) rather than as an adjustment to the revenue originally recognized.