When should property taxes destined for debt service be recognized as revenue?

Property taxes destined for debt service should be recognized as revenue in the period when levied because this aligns with the accounting principle of recognizing revenues when they are earned, regardless of when the cash is received. In governmental accounting, property taxes are formally assessed and become a legally enforceable claim as of the levy date. This date signals that the revenue is measurable and available for use, and thus it should be reflected in the financial statements of that period.

This approach ensures that financial statements provide a more accurate picture of the government's financial position, allowing for better accountability and assessment of resources available to service debt obligations. Recognizing revenue at the levy date reflects the legal entitlement to the funds, which is essential for budgeting and financial planning. Additionally, recognizing it only upon payment or collection would distort the timing of revenue reporting and might mislead stakeholders about the financial standing of the entity.