The controller of a school district had recorded the entireproperty tax levy, $2

Question

The controller of a school district had recorded the entireproperty tax levy, $20M, as revenues when levied during the firstmonth of the year. At year-end the auditor states that $3M must bereclassified as deferred (unearned) revenues because the propertylevy for that amount will not be collected before the end of thesecond month of the next accounting period. The controller objects,noting that the property tax receivables are as available as cashbecause the school district regularly uses them as the basis forborrowing on tax anticipation notes at local banks. Furthermore,the penalties and interest charged on delinquent taxes exceed theinterest charges on the tax anticipation notes.

Who's right? Why?

Explanation / Answer

The auditor isundoubtedly correct.

Paragraph 103 of GASBsection P70 states

“When a property taxassessment is made, it is to finance the budget of a particularperiod , and the revenue produced from any property tax assessment should be recognized in the period for which it was leviedprovided the available criteria of interpretation 5 aremet as shown below .”

“Available”means collected within the current period or expected to becollected soon thereafter to be used to pay liabilities of thecurrent period. Such time shall not exceed 60 days. If because ofunusual circumstances, the facts justify a period greater than 60days, the Governmental unit should disclose the periodbeing used and the facts to justify it .”

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