The Office of Business and Financial Services is hosting an open comment period, beginning February 6th and closing February 20th at 5 p.m. CT, related to changes to Section 13 Accounting of OBFS Policies and Procedures Manual.
In this open comment period, we propose consolidating Identify a Non-Monetary Exchange, Methods of Valuing of Non-Monetary Exchanges and Report a Non-Monetary Exchange into one policy (Non-Monetary Exchanges). This consolidation will simplify the procedures, reduce redundant policy information, and provide clearer examples of non-monetary exchanges and their valuation.
The open comment period allows stakeholders to provide input and ask questions about specific policies that affect University of Illinois System business and their work. To review the changes and submit comments, visit the open comment website. Feedback may also be submitted directly via email at email@example.com.
Contact: For questions contact OBFS Policies at (312) 585-9049 or firstname.lastname@example.org
A non-monetary exchange occurs when the University of Illinois System receives something of value from an external entity in exchange for providing something of value to the external entity in return, rather than paying for it with cash or a cash equivalent.
All non-monetary exchanges must be recorded in Banner at the appropriate fair market value. All non-monetary exchanges must comply with applicable contract requirements.
Reason for the Policy
The system complies with generally accepted accounting principles (GAAP) as established by the Governmental Accounting Standards Board (GASB) for state and local government entities. These principles require the system to record any type of financial or non-financial exchange transaction in its financial statements to accurately represent all financial or non-financial business activity of the system.
Applicability of the Policy
Non-monetary exchanges may occur independently or may occur as a secondary aspect within other types of transactions, such as:
• Reduced cost agreements
• Trade agreements
• No-funds agreements
Examples of transactions that are not non-monetary exchanges include:
• Discounts offered by vendors
• Trade-in of equipment to acquire new equipment
Non-monetary exchange transactions must be properly valued and reported to University Accounting and Financial Reporting (UAFR).
Valuing a non-monetary exchange
Non-monetary exchange transactions are recorded at the estimated fair market value of the goods and/or services provided by the system. However, if that fair market value cannot be determined, then the non-monetary exchange transaction is recorded at the estimated fair market value of the goods/services received by the system.
See below for common examples of non-monetary exchange transactions and how these transactions would be valued for the University’s financial statements:
Example 1: A performance arts center enters into an agreement with a local television station to provide season tickets for the season’s upcoming shows (valued at $2,500) to the local television station in exchange for $2,500 worth of the local television station providing various television advertising spots throughout the year at no charge. In this example, the value of the nonmonetary exchange would be $2,500 (which is the fair market value of the season tickets provided by the performance arts center and the value of the advertising provided). The related accounting entry in Banner would be a $2,500 debit to an advertising services expense account code and a $2,500 credit to a ticket sales revenue account code. A contract is required.
Example 2: A unit enters into an agreement with an external t-shirt vendor to provide advertising services throughout the year to the external t-shirt vendor in exchange for 600 staff t-shirts (valued at $3,000) at no charge. The unit in this example typically does not sell advertising services in this manner, so the value of these advertising services provided by the unit is unknown. So, since the value of what was provided by the unit is unknown, then the non-monetary exchange should be valued at the fair market value of the goods/services received by the unit, which would be $3,000 in this example. The related accounting entry in Banner would be a $3,000 debit to a wearing apparel supplies expense account code and a $3,000 credit to an advertising services revenue account code. A contract is required.
Reporting a Non-Monetary Exchange
Properly valued non-monetary exchange transactions must be reported to UAFR by completing and submitting a Report of Non-Monetary Exchange Transactions form. These non-monetary exchange transactions should be reported to UAFR within the same accounting period (i.e., the same month) in which the transaction occurred, and are typically recorded on an applicable self-supporting fund. UAFR will then review the submitted form and will record the applicable transaction in Banner on your behalf.
Related Policies and Procedures
1.3.2 Initiation, Review, and Approval of University Contracts and Leases
Forms Used in this Procedure
Report of Non-Monetary Exchanges
Avoiding Property Accounting Problems
Non-Monetary Exchange FAQs
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