Section 13.7 - Non-Monetary Exchange Transactions
Date: June 2008
Approved: Senior Associate Vice President for Business and Finance
Revenues and expenses resulting from non-monetary exchange transactions must be recognized at estimated fair market value when the exchange occurs.
A non-monetary exchange transaction occurs when the University receives goods or services from an external entity, in exchange for providing other goods or services. The exchange must reflect an agreement requiring that both sides of the exchange be executed. If either side in the exchange fails to fulfill the terms of the agreed exchange, the entire transaction will be penalized or cancelled. The values of the exchange may or may not be equal. See the Decision Flow Chart and Frequently Asked Questions links in the Related Documentation section for additional details.
A non-monetary exchange transaction may, in part, include cash, and it may occur in conjunction with several types of financial activity, including, but not limited to:
- Sponsorship agreements; (See Section 11.13, Sponsorship Gifts)
- Reduction in revenue or cost transactions, including:
- Reduced fees charged by the University for goods/services it provides;
- Reduced revenue in a revenue-generating contract;
- Reduced cost of goods/services procured;
- Gift-in-kind transactions (see Section 11.3, Campus Processing of Gifts);
- Grant/contract awards; and
- Separate, free-standing “trade agreements” involving no cash.
Reporting Non-Monetary Exchange Transactions
Instructions and Guidelines
When a transaction qualifies as a non-monetary exchange, units must complete and submit a Report of Non-Monetary Exchange Transactions to the OBFS, University Accounting and Financial Reporting (UAFR). Submit the form promptly after the transaction has occurred. UAFR will analyze the information to determine whether the activity needs to be recorded for financial statement purposes and if so, work with the unit to ensure that it is properly recorded. Non-monetary exchanges will be recorded at the estimated fair market value of the goods and/or services provided by the University. If that cannot be determined, the exchange is recorded at the estimated fair market value of the goods and/or services received.
The following examples have been designed to help you recognize transactions that may qualify as non-monetary exchanges. For further clarification, or if you have questions regarding the policy or the reporting process, contact UAFR.
NOTE: These examples are not intended to reflect other possible financial ramifications, such as tax reporting consequences.
- Example 1 - Sponsorship Gift Agreement:
A university’s performing arts center enters into a sponsorship gift agreement with a local hotel. The agreement provides for acknowledgements of the hotel in the center’s events program, in return for a cash payment. The agreement also provides the hotel with two performing arts show season tickets (estimated fair market value = $1600). In exchange, the hotel agrees to provide accommodations for the artist performing the shows (estimated fair market value of rooms = $1000). The cash payment/sponsor acknowledgement is accounted for in Section 11.13, Sponsorship Gifts. The exchange of ticket for accommodations is accounted as a non-monetary exchange with a value $1600 (fair market value of goods provided by the University).
- Example 2 - Cost Reduction:
A unit is charged a reduced rate of $250 per day for use of a local hotel’s conference room (normally rented at $500 per day) for a University-sponsored event in exchange for providing hotel advertising on brochures and flyers publicizing the event (estimated fair market value of $200). The value of the non-monetary exchange will be $200 (fair market value of goods provided by the University).
- Example 3 - Gift-in-Kind:
A local department store agrees to donate one year’s worth of paper supplies to one of the Housing Department’s dormitories. In giving the gift, they indicate they will add another $3,000 worth of paper supplies if the store can use the dormitory cafeteria space once a month for staff meetings during the next year. The fair market value of use of the cafeteria space for this purpose cannot be determined. The receipt of one year’s supplies will be recorded as a gift-in-kind according to Section 11.3, Campus Processing of Gifts. The value of the non-monetary exchange would be $3,000 (fair market value of services received by the University).
- Example 4 -Trade Agreement:
A university’s athletic department allows radio stations across the state to carry coverage of its live sporting events (estimated fair market value = $1,800) in exchange for radio spots to advertise ticket sales (estimated fair market value = $2,500). The value of the non-monetary exchange will be $1,800 (fair market value of services provided by the University).
Please send questions regarding this policy manual to OBFSPolicies@uillinois.edu.
Last Updated: April 23, 2009