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Glenn Hegar  ·  Texas Comptroller of Public Accounts

Reporting Requirements for Annual Financial Reports of State Agencies and Universities

General Accounting

Governmental Reporting Overview
Contrasts between Modified and Full Accrual

This table summarizes the differences between modified and full accrual bases.

Modified Accrual Full Accrual
Accounts Payable In the absence of an applicable modification, accounts payable are recognized in the fiscal year in which the agency incurs the liability. Recognize a payable in the fiscal year in which the agency incurs the liability.
Prepaid Items

Under GAAP, it is optional to use either the purchases method or the consumption method. (See Modified Accrual Basis of Accounting for definitions of the two methods.) The Comptroller’s office adopted the consumption method and agencies must use the consumption method in the AFR. Recognize an asset when an item is purchased and an expense when the item is used or consumed.

For more information, see Prepaid Items.

Consumption method: Recognize an asset when an item is purchased and an expense when an item is used or consumed.

For more information, see Prepaid Items.

Long-Term Liabilities – Current Portion Recognize the liability as it matures or to the extent the liability is expected to be liquidated with expendable available financial resources. Recognize the liability in the fiscal year in which the agency incurs the liability.
Long-Term Liabilities – Noncurrent The portion that does not meet the criteria for recognition as a current liability is a noncurrent long-term liability. Recognize the liability in the fiscal year in which the agency incurs the liability.
Revenues Governmental funds recognize revenues as cash is received during or soon after the end of the year and when it is earned and both measurable and available (within 60 days). Recognize the revenue in the fiscal year in which the agency earns the revenue and it is measurable. Availability is not a factor.
Expenditures In the absence of an applicable modification, expenditures are recognized in the fiscal year in which they are expended or when they are subject to accrual. Accruals are recorded when they are expected to use expendable financial resources. Fund expenditures are recognized in the fiscal year in which the agency incurs a liability. Adjustments may be needed to ensure the matching principle is followed.
Capital Asset Acquisitions

Recognize the expenditure at the acquisition date.

For more information, see Capital Assets.

Recognize the cost of the asset and depreciate the value over the expected useful life of the asset.

For more information, see Capital Assets.

Inventories

Under GAAP, it is optional to use either the purchases method or the consumption method. (See Modified Accrual Basis of Accounting for definitions of the two methods.) The Comptroller’s office adopted the consumption method and agencies must use the consumption method in the AFR. Recognize an asset when inventory is purchased and an expense when inventory is used or consumed.

For more information, see Inventories.

Consumption method: Recognize an asset when inventory is purchased and an expense when inventory is used or consumed.

For more information, see Inventories.

Compensated Absences

Recognize a liability as payments come due each fiscal year on the occurrence of resignations or retirements.

For more information, see Compensable Leave Liability Methodology.

Recognize the liability and the expense in the fiscal year in which the agency incurs the liability.

For more information, see Compensable Leave Liability Methodology.

Claims & Judgments

Recognize a liability to the extent they are normally expected to be liquidated with expendable available financial resources.

For more information, see Claims & Judgments.

Recognize the liability in the fiscal year in which the agency incurs the liability.

For more information, see Claims & Judgments.

Glenn Hegar
Texas Comptroller of Public Accounts
Questions? Contact statewide.accounting@cpa.texas.gov
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