Users will be able to process department accruals and deferrals using the Year-End Department Accrual (YEDA) starting on July 12. Users who need to submit accruals and deferrals for expenses and income that exceed the fiscal year-end threshold of $10,000 should use the YEDA to do so no later than Friday, July 14. Recharges can be accrued using the new YERA document if both departments agree to the charge and it is material.
Why are Accruals and Deferrals Required?
As covered in this year’s Fiscal Year-End workshop, the goal of the year-end accrual/deferral process is to recognize expenses and revenues in the period in which the economic events occur, regardless of when payment is made or received. This means that expenses for goods and services should be recorded in the fiscal year when they are received, and income from goods and services should be recorded in the fiscal year when they are provided.
Which Expenses and Income must be Accrued or Deferred?
Accrual and deferral entries are recorded based on a materiality threshold, which is $10,000 for the 2016-17 fiscal year. Individual transactions should be evaluated for accrual/deferral based upon this threshold and, if necessary, be recorded to the appropriate fiscal year using the YEDA e-document.
The threshold of $10k applies to most expenses and income, but some limited exceptions are listed in the fiscal closing instructions. Generally, items less than $10K should not be accrued or deferred unless there are special circumstances. If you are not sure if you need to create an accrual or deferral transaction, please discuss the potential transaction with your unit's financial management. If questions still exist contact General Accounting.