Barter Transactions

Office of Origin: Financial Services
Date Adopted: 11-22-11
Date Reviewed: 01-15-12, 11-20-17, 1/23/18
Last Date Modified & Approved: 01-15-12, 11-20-17, 1/23/18

The main objective of all barter arrangements should be to provide Lake Michigan College (the College) with important financial, sales, or marketing benefits. Barter arrangements may not be used for personal benefit.

All barter transactions are subject to Generally Accepted Accounting Principles (GAAP) and Internal Revenue Service regulations.

To ensure compliance to these standards and regulations, no employee can enter into a barter transaction without approval of the Director of Finance.  

Before the entering into a barter transaction, the following should be considered:

  • Additional approvals and transactional controls are often necessary to protect the College’s assets during a barter transaction due to expiration dates, use and authorization, and contract monitoring.
  • The goods and services acquired in a barter transaction must be recorded, tracked, and expensed as they are used.   
  • It may be necessary to forego additional cash sales in order to meet the barter obligation (ticket sales, rental space, etc.).
  • In some barter arrangements, one party may agree to exchange goods or services with a greater dollar value than the fair market value of the goods or services received.  Such an agreement may effectively discount the remaining product/services, and could make it more difficult to make cash sales at standard prices.
  • Barter arrangements could result in acquiring goods or services for which the College has little or no use.
  • Depending upon local and federal tax laws, bartered goods or services could be subject to sales and income taxes, which are payable in cash.

Procedures are in place for approving, recording, and monitoring of barter transactions.

Responsibility: Chief Financial Officer

References

  • Tax Equity and Fiscal Responsibility Act of 1982
  • Statement of Financial Accounting Standard No. 63
  • Accounting Principles Board Opinion No. 29, “Accounting for Nonmonetary Transactions”