Exchange and Non-Exchange Revenue (Part 3) – Disclosures

Exhange and non exchange image_3

Posted on 6 April 2017

This is the third post in a three part series on exchange and non-exchange revenue. The first post discussed the classification of revenue as exchange or non-exchange, and the second covered the recognition of revenue. In this post, I’m going to set out the information you need to disclose in Tier 1 & 2 financial statements about exchange and non-exchange revenue. If you’ve been following this series, you’ll probably come to the conclusion that this is quite the process, so hang in there, we’re nearly done.

There is obviously a lot of behind the scenes work that needs to be done when deciding whether your revenue is exchange or non-exchange, and then whether the revenue needs to be recorded in this financial year, or can be deferred until a later date. However, all the reader can see in the financial statements is a set of numbers. Therefore, it’s really important to have good disclosures around your revenue so that the reader can understand how you arrived at your decisions. This will allow them to make informed decisions based on the information they read.

The information below is a summary of paragraphs 39 onwards in PBE IPSAS 9: Revenue from Exchange Transactions and paragraphs 106 onwards in PBE IPSAS 23: Revenue from Non-Exchange Transactions. I have tried to simplify some of the technical language, but I would still recommend reading the standard thoroughly to make sure you have included all relevant disclosures.

Exchange Revenue Disclosures

Exchange revenue must be broken down into each significant category including services, sale of goods, interest, royalties, dividends or similar revenue and members fees or subscriptions.

There may be other categories that are significant to your charity, and some of the categories above may not apply, so judgement must be applied. The test for whether something is significant is: Would it affect a reader's understanding of the financial statements if the item was left out? You can provide the breakdown either in the Statement of Comprehensive Revenue and Expenses, or in the notes to the accounts.

You must explain the policy adopted for recognising the revenue, including the methods used to determine the stage of completion of services. What this means is that if you have a contract to perform a service, and the service is not completed at the end of the financial year, you need to record how you calculated the amount of revenue for the year based on how much of the contract you have completed.

For example:

“Revenue from services rendered is recognised in the surplus or deficit in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by reference to surveys of work performed. Under this method, revenue is recognised in the accounting periods in which the services are provided.”

Effectively this means that if 50% of the work was completed, then 50% of the revenue has been recognised.

You also need to include the amount of revenue from exchanges of goods or services included in each of the categories. i.e. if you had a contra agreement with another organisation and had traded goods or services instead of money. For example, a charity that has a revenue line in its Statement of Comprehensive Revenue and Expenses or in the notes called “Contra Sponsorship” could include a policy which says:

“Sponsorship contra is non-cash revenue with an equal and opposite expense, recognised only if the fair value can be reliably measured. The sponsors enter into an agreement to become official partners of the charity and provide certain goods and services. In return the charity provides marketing and other sponsorship benefits to the sponsors. The revenue is measured at the fair value of the goods or services received, net of any cash amounts payable.”

Non-Exchange Revenue Disclosures

There are a few more disclosures required for non-exchange revenue which affect both the presentation of the figures, and also the accounting policies. In terms of the numbers, the standard talks quite a lot about disclosing taxes received as this standard is also used for Public Sector entities. Therefore I am going to leave those items out, as this is unlikely to apply to charities.

The following must be disclosed about non-exchange revenue either in the notes or in the Statement of Comprehensive Revenue and Expenses:

  • Each major class of non-exchange revenue (this includes items that are cash, assets or non-cash e.g. services in kind where it’s possible to measure them)
  • The amount of receivables that relate to non-exchange revenue
  • Any liabilities (deferred revenue) recorded for non-exchange revenue that are subject to conditions (refer to the second blog in this series for criteria)
  • Any liabilities that relate to loans below normal market terms (refer to paragraphs 105A and 105B of the standard for this specific circumstance)
  • Any assets that are subject to restrictions and the nature of the restrictions (these will be assets where no liability/deferred revenue has been recognised but there are still stipulations attached to the revenue)
  • Any income in advance
  • Any liabilities forgiven


In the notes to the financial statements, the following items must be disclosed:

  • The accounting policies adopted for the recognition of revenue from non-exchange transactions
  • How the “fair value” was arrived at for major classes of non-exchange revenue
  • The nature and type of major classes of bequests, gifts and donations, showing separately major classes of goods-in-kind received.

To explain these fully, it will be easiest to demonstrate by example. I have seen a few financial statements where the preparer started the revenue policies section with a brief explanation of what non-exchange revenue is. For example:

“Non-exchange transactions are transactions where an entity gives value to another entity without directly receiving approximately equal value in exchange.”

Some charities also explain their rationale for why they decided an item was exchange or non-exchange revenue when it is not immediately obvious. For example:

“The sale of goods consists of contributions from clients towards the services we provide. The value the clients receive is significantly higher than the amount they pay, and therefore this revenue has been treated as non-exchange.”     

This is an easy way to set the context for the disclosures in this section. Some examples of specific revenue disclosures are listed below:

Grant Revenue

Grant revenue includes grants given by other charitable organisations, philanthropic organisations and businesses. Where there are unfulfilled conditions attached to the grant, the amount relating to the unfulfilled condition is recognised as a liability and released to revenue as the conditions are fulfilled.


Donations are recognised as revenue upon receipt and include donations from the public, donations received for specific programmes or services and donated goods in-kind. Donations in-kind include donations received for consumables and are recognised as both revenue and an expense when the goods are received. Donations in-kind are measured at their fair value as at the date of acquisition, ascertained by reference to the expected cost that would otherwise be incurred by the charity.


Bequests are recognised as revenue on receipt, unless the conditions of the Will require performance of certain conditions. However, if the conditions of the Will require performance of certain conditions which cannot be met, then the bequest is returned to the Estate of the deceased. Where there is an unspent amount from conditioned bequest revenue relating to the specific purpose to the bequest, the remaining revenue is recorded as income in advance until such time as the conditions are met.

You might also find it useful to search on the internet for a model set of Public Benefit Entity Not for Profit Financial Statements to get an idea of what they should look like. We will also be adding good examples we come across to our website.

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