Question 1

What is reported on the statement of remeasurement gains and losses?

Accepted Answer

Unrealized remeasurement gains and losses are reported on the statement of remeasurement gains and losses.

Question 2

What does the Public Sector Accounting Board (PSAB)recommend with respect to tax revenue?

Accepted Answer

Tax revenue should be reported net of tax concessions, and collection costs should be expensed, according to PSAB recommendations. This approach provides a clearer picture of the actual revenue available to the public sector entity after accounting for the costs associated with collecting the revenue and any concessions granted.

Question 3

Which of the following are qualitative characteristics of good financial reports for governments?

Accepted Answer

Comparability among governments allows for meaningful comparisons between different entities, consistency between years ensures that trends and changes can be identified over time, completeness ensures that all relevant information is included and not selectively reported, and timeliness ensures that the financial reports are useful for decision-making. Qualitative characteristics such as full disclosure, transparency, accuracy, and audit are also important, but are not included in the options given.

Question 4

What reporting basis should Wind Power Plus, a government business enterprise, use?

Accepted Answer

Wind Power Plus is a government business enterprise, which means it is expected to generate a profit and operate in a commercial manner. Therefore, it is reasonable to assume that the modified equity method would be the most appropriate reporting basis for Wind Power Plus. This method recognizes the government's investment in the enterprise as equity, and the government's share of profits and losses is recorded in the financial statements. It also ensures that the financial statements reflect the commercial reality of the enterprise while recognizing the government's influence over the enterprise.

Question 5

Research surveys have suggested that there are several qualitative characteristics that are desirable in published financial reports of governmental units. Explain why comparability is so important to users and what this means for users.

Accepted Answer

The answer of Research surveys have suggested that there are...

Question 6

Under the modified equity method, government business enterprises must follow ________.

Accepted Answer

Government business enterprises can choose to follow either the PSA Handbook or IFRS for accounting purposes. Therefore, the modified equity method would allow for either of these frameworks to be used.

Question 7

The Public Sector Accounting Board suggested several objectives for the financial statements of federal, provincial, and territorial governments. List and briefly explain each of the four objectives and how these objectives are met with the various financial statements issued by governments.

Accepted Answer

The answer of The Public Sector Accounting Board suggested several...

Question 8

A government business enterprise's net income or loss is reported on the government's statement of operations. In addition, ________.

Accepted Answer

Government business enterprises follow commercial accounting principles and are not adjusted to government accounting principles.

Question 9

According to the recommendations of the Public Sector Accounting Board, when should revenue be recognized related to funds received from external parties that have imposed restrictions that limit the use of the funds?

Accepted Answer

Revenue related to funds received from external parties that have imposed restrictions limiting the use of the funds should be recognized only when the funds are used for the purpose(s) specified. This is in line with the principle of the matching of revenue and expenses, where revenue is recognized when the related expenses are incurred. Until the funds are used for their designated purpose, they must be recorded as liabilities on the balance sheet rather than as revenue on the income statement.

Question 10

Clearly distinguish between a government business organization and a non-business government organization.

Accepted Answer

The answer of Clearly distinguish between a government business organization...

Question 11

What valuation must government organizations use to report derivatives?

Accepted Answer

Government organizations must use fair value to report derivatives as per International Public Sector Accounting Standards (IPSAS). Fair value provides a more accurate representation of the current market value of the derivatives and reflects changes in their value over time. Other valuation methods like cost or amortized cost may not reflect the true value of the derivatives and can lead to the potential over or undervaluation of a government organization's financial assets. Lower of cost or fair value is also not a suitable choice for reporting derivatives as it is mainly applicable to inventories and not financial assets.

Question 12

What is impairment testing of tangible capital assets based on?

Accepted Answer

Impairment testing of tangible capital assets is based on impairment of future service potential. This means that the value of the asset is assessed based on its ability to provide future benefits or services, rather than on its anticipated residual value or net present value. The focus is on whether the asset will continue to be useful in the future and provide value to the organization.

Question 13

A provincial government provides a grant to one of its cities to support a winter festival. The provincial government can recognize this transfer when it has been fully authorized. When is the transfer considered fully authorized?

Accepted Answer

The transfer is considered fully authorized when it has been approved by the legislature, which is the decision-making body of the provincial government. Written approval from a government minister, receipt of the grant, or use of the grant by the city do not necessarily indicate that the transfer has been fully authorized by the appropriate governing body.

Question 14

What basis does the present government reporting method use?

Accepted Answer

The answer of What basis does the present government reporting...

Question 15

According to PSAB, when and how is revenue measured in government entities? Explain how transfers made through the tax system and tax concessions are different and how PSAB suggests these be treated.

Accepted Answer

The answer of According to PSAB, when and how is...

Question 16

Describe the major differences in characteristics that exist when comparing a large government agency to a large public company.

Accepted Answer

The answer of Describe the major differences in characteristics that...

Question 17

The federal government provided $500,000 to a university to develop and operate a bridging program for foreign-trained accountants. Which of the following statements about this government transfer is correct?

Accepted Answer

The answer of The federal government provided $500,000 to a...

Question 18

To enhance users' abilities to evaluate a government's financial results, budget numbers are included on some of the financial statements. Which statements would include the budget numbers?

Accepted Answer

Budget numbers are typically included on the statement of operations and statement of changes in net debt. These statements show the government's revenue, expenses, and changes in their overall debt. Including the budget numbers allows users to compare the actual results to what was originally planned, providing insight into how well the government is managing their finances.

Question 19

In general, there are three types of government organizations. Identify and describe these three types and the accounting standards that are followed by each type of entity.

Accepted Answer

The answer of In general, there are three types of...

Question 20

What is the only item that will appear under the investing section of a government statement of cash flows?

Accepted Answer

The investing section of a government statement of cash flows only includes the sale and purchase of financial assets, such as stocks, bonds, and other securities. This section does not include the sale and purchase of nonfinancial assets, such as land or buildings, which would be included in the capital financing section, or the amortization of tangible capital assets, which would be included in the operating section.

Quiz 11: Public Sector Financial Reporting