1117 Revenue Recognition

Revenue should be recognized based on accrual accounting in accordance with GAAP.  Revenue should be recognized when it has been earned, regardless of the timing of cash receipts. Revenue is considered earned when the University has substantially met its obligation to be entitled to the benefits represented by the revenue. Deposits (whether refundable or non-refundable), early payments and progress payments should not be recognized as revenue until the revenue producing event has occurred. 

Deferred income 

Deferred income generally results when cash is received in advance of revenue being earned. Deferred income is a liability on the Consolidated Statements of Financial Position until it is earned. Once earned, the liability is reduced and revenue is recorded in the Consolidated Statements of Activities.  

Accruals and cutoff 

Revenue should be recognized in the period in which it was earned regardless of the timing of billing. At the end of each month, revenue that has been earned but not billed or received should be accrued and recorded as revenue in that month. An asset (accounts receivable) is recognized on the Consolidated Statements of Financial Position for revenue that has been earned, but not yet billed. Revenue that has been billed or is billable, but has not yet been earned is recorded as Deferred income until the revenue is earned. 

Invoicing and cash receipt 

Revenue recognition, invoice processing and cash receipts may or may not occur at the same time. Revenue should be recognized when earned, while invoicing and cash receipt may occur independently of the earning process. For example, cash may be received prior to the performance of a service and/or encumbrance of any expense. When cash is received in advance, cash is recorded and a deferred income liability is recorded. Revenue is not recognized until the performance of the service or sale is complete. Conversely, if a service has been completed, revenue should be recorded whether or not billing has occurred or payment has been received.

Student income includes tuition earned for the graduate and undergraduate programs as well as for continuing education and executive education programs; mandatory student fees; and revenue earned from student board and lodging. Tuition and fees and student room and board are reported as Tuition and fees, net on the Consolidated Statements of Activities. 

Tuition revenue is recognized over the course of the term for which it is earned, regardless of when it is received. Tuition related to the Fall semester is recognized during July through December, Spring semester tuition is recognized during January through June; Summer I semester is recognized during May and June; and Summer II semester is recognized during July and August. Fee revenue, including General fees, Tech fees and Activities fees, relate to services provided by the University over the course of the semester and, similar to tuition, are recognized over the course of the term to which they apply. Certain fees, however, charged for supplies provided to the student are recognized when billed to the student, which approximates when the student receives the supplies and thus when revenue is earned. 

Student board and lodging is recognized during the period in which students reside on campus and make use of campus residences and dining. Board and lodging revenue related to the Fall semester is recognized during September through December, Spring semester board and lodging is recognized during January through April. No board and lodging is recognized during the Summer terms. 

Student income received under the University’s pre-payment plans is reported as Deferred income on the Consolidated Statements of Financial Position until such time that the revenue has been earned. 

Commonwealth appropriations represent funds provided by the Commonwealth of Pennsylvania for the support and maintenance of the University. The amount of funding to be received each year is determined and approved by the State legislature. As the current year appropriation is not linked to current University spending, that is, it is not cost reimbursement nor based on events or milestones, Commonwealth appropriations are recognized monthly on a straight-line basis over the course of the fiscal year. 

Sponsored program revenue includes direct revenue and indirect cost recovery earned under grants, contracts, and other agreements from governmental and private sponsors. Sponsored program agreements may be structured as exchange transactions or as conditional non-exchange transactions. For cost-reimbursement agreements and other agreements in which revenue is earned as allowable costs are incurred, sponsored program revenue is recognized as the related expenses are incurred. Adjustments to expenses under such programs result in corresponding adjustments to revenue.

Payments received in advance from sponsors are reported as Deposits and advances liabilities on the Consolidated Statements of Financial Position until the related revenue has been earned. Revenue is earned when the University has satisfied the applicable terms or conditions of the sponsored agreement, which is generally when allowable costs are incurred or performance obligations are met.

Refer also to Financial Policy section 2100 Sponsored Projects.

Contributions are voluntary, nonreciprocal transfers of cash or other assets to the University, or the settlement or cancellation of University liabilities, from donors acting other than as owners. Other assets may include securities, land, buildings, use of facilities or utilities, materials and supplies, intangible assets, services, and unconditional promises to give those items in the future.

Contributions, including unconditional promises to give, are recognized as revenue in the period received and are classified as net assets with donor restrictions or net assets without donor restrictions based on the existence or absence of donor-imposed restrictions. Unconditional promises to give, or pledges, are recognized at their estimated net realizable value, net of an allowance for uncollectible amounts and, when applicable, at estimated net present value.

Conditional contributions are not recognized as revenue until the conditions on which they depend have been substantially met. For purposes of determining whether a contribution is conditional, an agreement generally must include both a barrier that must be overcome and either a right of return of assets transferred or a right of release from the donor’s obligation to transfer assets.

Contributions and pledges designated for the acquisition or construction of long-lived assets are initially reported as net assets with donor restrictions and released from restrictions to net assets without donor restrictions when the asset is placed in service or in accordance with donor-specified terms.

Refer also to Financial Policy section 2200 Gifts.

Other income includes revenues that are related incidentally to the conduct of instruction, research, and public service and revenues of activities that exist to provide instructional and laboratory experience for students and that incidentally create goods and services that may be sold to students, faculty, staff and the general public, including sales of scientific and literary publications, testing services, and health clinics that are not part of a hospital.  Other income revenue is recognized when earned, that is, at the time goods or services are provided. 

Refer also to Financial Policy section 2000 Sales and Services 

Independent operations revenue is revenue generated by separately organized operations owned or controlled by the University that are unrelated to, or independent of, the University’s mission. 

Independent operations revenue is recognized when earned, that is, at the time goods or services are provided.