When are revenues recognized in governmental funds?

In governmental funds, revenues are recognized when they are both measurable and available to finance current expenditures. This recognition principle is based on the modified accrual basis of accounting, which is commonly applied by government entities.

To be measurable, the amount of revenue can be quantified or determined, and the term "available" indicates that the revenue is collectible within the current period or soon enough thereafter to be used to pay current liabilities. This typically means that the revenue is expected to be received within the current fiscal year, or within a period that would include current expenditures.

This recognition ensures that governments only account for revenues that are expected to be available for spending and can reflect a more accurate financial position regarding available resources for immediate needs. This principle is key in providing a framework to ensure that users of governmental financial statements can assess the liquidity and availability of funds for current operations.