Non-Monetary Financial Transactions
A non-monetary financial transaction occurs when the University receives a benefit or incurs an expense without actually receiving or paying the monetary value. Even though no monetary exchange takes place as a result of the transaction, the University is required by Generally Accepted Accounting Principles (GAAP) to record the financial transactions in the general ledger.
Bartering occurs when a good or service trade occurs between an external party and the University. Examples of a bartering transaction that must be recorded in the general ledger:
- The Athletic department gives tickets to a University sporting event to an externally owned golf course in exchange for use of the course’s driving range for members of the golf team.
- The giving of the tickets is considered revenue (sale of the tickets) and the expense is the cost for the use of the driving range. The amount recorded to revenue and expense is the cost of the tickets for the sporting event.
- The University “sells” advertising space on a beverage cup to be used at a University event in exchange for free beverages to be used at the event.
- The “selling” of the available advertising space is considered revenue and the expense is the cost of the beverages for the event.
A donated transaction occurs when a non-monetary donation is given to the University for the University’s benefit or use. An example of donated (non-monetary) items that must be recorded in the general ledger:
- A company donates equipment for use during football games:
- The donated use of the equipment is considered gift revenue. The use of the equipment is considered rental expense. A journal entry must be entered into EFS to record the gift revenue and rental expense. The amount recorded to gift revenue and expense is the cost of the equipment rental if the University had rented the equipment.
Donated capital assets must be recorded as gift revenue and a capital asset. Refer to Administrative Policy: Managing University Capital Equipment for additional information.
Gift card sales are the University’s obligation to deliver goods or services in the future. An unearned revenue liability is recorded when the gift card is sold. Revenue is not recorded until the entire balance or a portion of the gift card balance is redeemed.
Gift card breakage allows for the associated gift card revenue to be recorded when gift cards are never redeemed. There are two methods for calculating breakage:
- Recognition when the probability of redemption is remote or;
- Pro-rated recognition based on the redemption pattern of the gift cards sales.
When departments sell a gift card, they must:
- Record gift card sales to EFS account 220100 – Unearned Revenue-Gen, Current.
- Track the sale and redemption of gift cards and record the revenue when the gift card is redeemed
- Choose from one of two methods described previously to calculate breakage. The method to calculate breakage must include the gift card issuance date and redemption date trends.