How should grantees classify FY2006 grant funds received in FY2005 in the December 31, 2005 financial statements?
LSC management has advised that Section 2-2.1 of the Accounting Guide for LSC Recipients (August 1997) requires that LSC grant and contract support be recognized and classified as temporarily restricted revenue. Temporarily restricted LSC net assets can be reclassified as unrestricted when eligible expenses are incurred. The revenue recognition policy must be disclosed in the notes to financial statements. In addition, the components of LSC support and net assets balances must be disclosed in the notes and/or supplemental schedules to the financial statements. Funds received for future grant periods should not be used in the calculation of excess fund balance under 45 C.F.R Part 1628, Recipient Fund Balances, or in the calculation of the PAI expenditure requirement, or included in the financial information reported on the Summary Report Form.
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