NACUBO

My NacuboWhy Join: Benefits of Membership

E-mail:   Password:   

 Remember Me? | Forgot password? | Need an online account?

Business and Policy Areas
Business and Policy Areas
Loading

Advisory Report 2000-5

September 8, 2000

Accounting and Reporting Scholarship Discounts and Allowances to Tuition and Other Fee Revenues by Public Higher Education

Position Paper Prepared By NACUBO Accounting Principles Council

The position paper that follows was approved in July 2000 by the NACUBO Accounting Principles Council. The paper represents preferred industry practice, and in the absence of any guidance from the Financial Accounting Standards Board, the Governmental Accounting Standards Board, or the American Institute of Certified Public Accountants, this document should be followed by all higher education institutions.

Purpose: This document defines discounts and scholarship allowances for purposes of accounting for and reporting revenues net of discounts as required by paragraph 100 of Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, as amended by GASB Statement No. 35, Basic Financial Statements—and Management’s Discussion and Analysis—for Public Colleges and Universities. "The operating statement for proprietary funds is the Statement of Revenues, Expenses, and Changes in Fund Net Assets. Revenues should be reported by major source41 and should identify revenues used as security for revenue bonds." Footnote 41 further states: "Revenues should be reported net of discounts and allowances with the discount or allowance amount parenthetically disclosed on the face of the statement or in a note to the financial statements. Alternatively, revenues may be reported gross with the related discounts and allowances reported directly beneath the revenue amount." The GASB treatment of scholarship discounts and allowances is similar to that required by paragraph 12.05 of the June 1996 American Institute of Certified Public Accountants’ (AICPA) audit and accounting guide, Not-for-Profit Organizations. The guide states, "Revenues from exchange transactions should generally be reported gross of any related expenses. If the organization regularly provides discounts (such as financial aid for students that is not reported as an expense, reduced fee for services, or free services) to certain recipients of its goods or services, revenues should be reported net of those discounts." In paragraph 13.07, the guide continues, "Some not-for-profit organizations provide reductions in amounts charged for goods or services, such as financial aid provided by colleges and universities. Reductions in amounts charged for goods or services provided by a not-for-profit organization should be reported as expenses if such reductions are given in exchange for goods or services provided to the organization, such as part of a compensation package. Amounts reported as expenses for such reductions should be reported in the same functional classification in which the cost of the goods or services provided to the organization are reported. If such reductions in amounts charged for goods or services provided by a not-for-profit organization are given other than in an exchange for services provided to the organization, such amounts should be reported as follows:

  • as expenses to the extent that the organization incurs incremental expense in providing such goods or services
  • as discounts if the organization incurs no incremental expense in providing such goods or services."

By virtue of this document’s approval by the Accounting Principles Council (APC) of NACUBO, it represents preferred industry practice and, in the absence of any future applicable guidance on scholarship discounts and allowances from the Financial Accounting Standards Board (FASB), the GASB, or the AICPA, this document should be followed by all public schools, colleges, and universities. Although the requirement in paragraph 12.05 of the guide is not applicable to public colleges and universities that follow GASB standards, GASB’s inclusion of footnote 41 to paragraph 100 of GASB Statement No. 34 requires that revenues be reported net of discounts and allowances or be reported gross with the related discounts and allowances reported directly beneath the revenue.

Applicability: This position paper applies to all public not-for-profit schools, colleges, and universities reporting under GASB Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, as amended by GASB Statement No. 35, Basic Financial Statements—and Management’s Discussion and Analysis—for Public Colleges and Universities.

Scope: The criteria for classification as a scholarship allowance applies to tuition and fees, housing, and meal plans, as well as to provision of educationally related supplies acquired from an institutional bookstore. Revenues from all exchange transactions should be reported net of discounts. Since amounts paid by students for institutional services are exchange transactions, they are subject to the same criteria as other exchange transactions for determining a discount.

Significance: Reporting tuition and fee revenues net of scholarship discounts and allowances is expected to have a very significant impact on the financial statements of many public institutions. The principal effect of classifying scholarship discounts and allowances as a contra-revenue is to reduce both student financial aid expenses and tuition and fee revenues.

Effective Date: The effective date of this document for public higher education institutions will coincide with the institution’s implementation date under GASB Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, as amended by GASB Statement No. 35, Basic Financial Statements—and Management’s Discussion and Analysis—for Public Colleges and Universities.

Summary

Due to the length of this document (27 printed pages), it is being distributed in the Adobe Acrobat format.

Click HereTo Download!