CPFO Accounting 2026 – 400 Free Practice Questions to Pass the Exam

The recognition of an expenditure related to rebatable arbitrage in a governmental fund occurs as amounts become due and payable to the federal government. This is because rebatable arbitrage pertains to the earnings on bond proceeds that exceed the yield allowed under federal tax law. As arbitrage earnings are subject to rebate payments, the timing of when these payments are legally due defines when the expenditure should be recognized.

This approach aligns with the principle of recognizing expenses when they are measurable and obligated, ensuring that the financial statements reflect the actual liabilities that the government is required to settle. The recognition at the point of being due and payable enhances the transparency and accountability of financial reporting in governmental funds.