What classification applies to a government grant that can be used for capital or operating purposes if ultimately expended on capital assets?

The classification of a government grant that can be utilized for capital or operating purposes but is ultimately spent on capital assets aligns with the concept of program revenues, specifically capital grants and contributions. Capital grants and contributions are specifically designated for acquiring or improving capital assets, such as infrastructure, buildings, or equipment, and are classified as program revenues because they are earmarked for specific functions or programs within the government.

If a grant allows for spending on both capital and operating purposes but is ultimately used for capital assets, this aligns more closely with capital grants, distinguishing it from operating grants, which are directed toward day-to-day operational expenses rather than long-term investments. Hence, while the grant could feasibly fall under operating grants initially, the definitive action of spending it on capital assets firmly categorizes it under program revenues related to capital grants and contributions.

Therefore, the best classification for this scenario is program revenues - capital grants and contributions, ensuring clarity in how the funds are utilized and reported in financial statements, emphasizing the long-term benefits created through capital expenditures.