3.3 Revenue Recognition
Revenue from non-exchange transactions
Taxes, fees, and fines
The LGU recognizes revenues from taxes and fines when the event occurs and the
asset recognition criteria are met. To the extent that there is a related condition
attached that would give rise to a liability to repay the amount, liability is
recognized instead of revenue. Other non-exchange revenues are recognized when
it is improbable that the future economic benefit or service potential associated with
the asset will flow to the entity and the fair value of the asset can be measured
reliably.
Transfers from other government entities
Revenues from non-exchange transactions with other government entities are
measured at fair value and recognized on obtaining control of the asset (cash, goods,
services and property) if the transfer is free from conditions and it is probable that
the economic benefits or service potential related to the asset will flow to the LGU
and can be measured reliably.
Revenue from exchange transactions
Rendering of services
The LGU recognizes revenue from the rendering of services by reference to the
stage of completion when the outcome of the transaction can be estimated reliably.
The stage of completion is measured by reference to labor hours incurred to date as
a percentage of total estimated labor hours.
Where the contract outcome cannot be measured reliably, revenue is recognized
only to the extent that the expenses incurred.
Sale of goods
Revenue from the sale of goods is recognized when the significant risks and
rewards of ownership have been transferred to the buyer, usually on delivery of the
goods and when the amount of revenue can be measured reliably and it is probable
that the economic benefits or service potential associated with the transaction will
flow to the LGU.
Rental income
Rental income arising from operating leases on investment properties is accounted
for on a straight-line basis over the lease terms and included in revenue.
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