Earnings on permanent fund assets are used to support a specific function; how would these earnings be recorded?

• A. Revenues by the permanent fund
• B. Revenues to the library fund
• C. Interfund transfers
• D. Other financing sources

Answer: (A)

Earnings on permanent fund assets are investment earnings that belong to the fund and are reported as the permanent fund’s revenues. In GASB accounting, those earnings stay within the permanent fund and are used to support the fund’s designated function, rather than being counted as revenues of another fund or as an interfund transfer or financing source. The permanent fund records the investment income as its own revenue, and then, when expenditures are made to support the function, those outflows are drawn from that fund. So the correct treatment is to recognize these earnings as revenues by the permanent fund.