Which statement is false regarding revenue recognition for income taxes in governmental funds?

The assertion that estimated income tax refunds should be classified as liabilities regardless of timing is accurate, as it highlights the financial obligations that a government may encounter due to income tax laws. When a government anticipates that it will need to return funds to taxpayers as refunds, it appropriately recognizes these expected refunds as liabilities on its financial statements. This is important for providing a clear picture of the government’s financial position, as it ensures that both assets and liabilities are accurately reported.

The recognition of liabilities from estimated refunds is crucial because it aligns with the principle of matching expenses with revenues. This approach is vital in governmental accounting, where clarity about potential future obligations helps maintain transparency and accountability in financial reporting.

Other statements present different norms and practices in revenue recognition for governmental funds. For instance, income tax revenues being recognized on a cash basis indicates that income taxes are recorded when the cash is received, which is reflective of governmental practices. The classification of income tax revenues net of anticipated refunds is also essential since it provides a more realistic view of available resources. Additionally, comparing income taxes to sales taxes in terms of recognition criteria underscores the similarities in how different types of tax revenues are treated under applicable accounting standards.