In an exchange transaction “each party receives and gives up essentially equal values.”¹ In an exchange-like transaction “the values exchanged, though related, may not be quite equal or in which the direct benefits may not be exclusively for the parties to the transaction.”² Because there are instances where parties to services may be willing to receive or pay amounts that are similar, but not precisely equal nor exclusively for the parties involved³, “the difference between exchange and exchange-like transactions is merely one of degree.” Meaning the latter are treated as exchange transactions for GAAP accounting recognition purposes² because the exchange characteristics of like-exchange transactions are strong enough to justify treating them as exchange transactions for accounting recognition, and at the end of the day, each party still gives up or receives something of value.

GASB Statement No. 33 instructs that nonexchange transactions can be identified as falling into one of four classes “based on shared characteristics that affect the timing of recognition:

1. Voluntary nonexchange transactions, which result from legislative or contractual agreements, other than exchanges, entered into willingly by the parties to the agreement (for example, certain grants and private donations);

2. Derived tax revenues, which result from assessments imposed on exchange transactions (for example, income taxes, sales taxes, and other assessments on earnings or consumption);

3. Imposed nonexchange revenues, which result from assessments imposed on nongovernmental entities, including individuals, other than assessments on exchange transactions (for example, property taxes and fines); (and,)

4. Government-mandated nonexchange transactions, which occur when a government at one level provides resources to a government at another level and requires the recipient to use the resources for a specific purpose (for example federal programs that state or local governments are mandated to perform).”

So why should we care about these accounting niceties?

Because as we examine the “operating incidences,”⁴ “realities,”⁵ “operative effect,”⁶ and common traits of all fees the District assesses, we should harken back to the instructions of GASB Statement No. 33. In other words, are the District’s monetary exactions the product of exchange or exchange-like transactions? Because if the latter, according to International Public Sector Accounting Standard (“IPSAS“) No. 23, Revenue From Non-Exchange Transactions and our What Are Our RFF/BFF According to Us discussion, they are taxes rather than fees.

And now you know.

1. See GASB Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions. GASB is “the independent, private-sector organization…that establishes accounting and financial reporting standards for U.S. state and local governments that follow” Generally Acceptable Accounting Practices (“GAAP”) [see https://www.gasb.org/about-us]. Since Nevada local governments’ financial statements [see NRS 354.486(3)], other schedules required for funds [see NRS 354.612(2)], and annual reports concerning capital improvements [see NRS 354.5947(2)] must all be prepared in accordance with GAAP, the simple fact of the matter is GASB governs the District’s financial reporting of the.
2. According to footnote 1 of GASB Statement No. 33, “in contrast to a pure exchange transaction, an exchange-like transaction is one in which the values exchanged, though related, may not be quite equal or in which the direct benefits may not be exclusively for the parties to the transaction. Nevertheless, the exchange characteristics of the transaction are strong enough to justify treating the transaction as an exchange for accounting recognition.”
3. Examples would include permits and professional or regulatory licensing fees, which are often accounted for under specific lease (see GASB Statement No. 87) or asset backed (see GASB Statement No. 94) arrangement standards.
4. See Clean Water Coalition v. The M Resort, LLC, 127 Nev. 301, 255 P. 3d 247, 256 (2011) citing State of Hawaii v. Medeiros, 89 Haw. 361, 973 P.2d 736, 741 (1999).
5. See Hukle v. City of Huntington, 134 W.Va. 249, 58 S.E.2d 780, 783 (1950).
6. See Emerson College v. City of Boston, 391 Mass. 415, 462 N.E.2d 1098, 1105 (1984).