Deck 10: Reporting for Public Sector Entities

Question 1

When a government reports on a GBE it does so applying the _____________ method.

A)modified equity
B)cost
C)equity
D)consolidation.

Answer 1

A

Question 2

Representational faithfulness requires that the transactions and events reported on be presented in a manner that is in agreement with the underlying facts and circumstances.

Answer 2

True

Question 3

An objective of financial statements for public sector entities is to provide an accounting of financial affairs and resources.

Answer 3

True

Question 4

When a government reports on a GBE, it does so applying the cost method.

Question 5

An exchange gain or loss that arises prior to settlement (i.e. that is unrealized)is recognized in the statement of re-measurement gains and losses.

Question 6

Which of the following statements regarding governments is FALSE?

A)Governments are dependent on the profitable sales of goods and services to finance their operations.
B)Governments have the right to tax.
C)As long as they are fiscally responsible, governments have the opportunity to issue significant amounts of debt in the capital markets at preferential interest rates.
D)Governments and their agencies finance their operations by levying fees and incurring liabilities.

Question 7

A government partnership is a contractual arrangement between the government and a party or parties outside of the government reporting entity whereby the partners cooperate toward achieving significant clearly defined common goals.

Question 8

Which of the following is one of the "secondary criteria" used to determine whether a government organization is controlled by the government?

A)Establishes an organization's fundamental purpose and eliminates or significantly limits the ability of the organization to make future decisions by predetermining the financial and operating policies of the organization.
B)Directs the financial and operating policies of an organization on an ongoing basis.
C)Has power to unilaterally appoint or remove a majority of the members of the organization's governing body.
D)Can veto, overrule or modify the financial and operating policies established by an organization.

Question 9

Under the modified equity method, financial position and operating results of investments are presented as if they are using the equity method.

Question 10

The measure of net debt is an indicator of a public sector entity's financial position.

Question 11

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

Question 12

The carrying value of tangible capital assets represents a source of future cash flows from the capital assets to the government.

Question 13

The CICA PSA Handbook defines a public sector entity's ________________ as assets that could be used to discharge existing liabilities or finance future operations and are not for consumption in the normal course of operations.

A)current assets
B)non-financial assets
C)financial assets
D)tangible capital assets.

Question 14

Many view the presence of multiple objectives as the overriding characteristic of public sector entities.

Question 15

Under the PSA reporting framework, __________________ is a measure that demonstrates whether the asset position of the public sector entity has been maintained.

A)net assets
B)the operating surplus or deficit
C)net equity
D)revenues.

Question 16

The application of conservatism means that judgments needed when uncertainty exists should not be made in a manner that affects the neutrality of the information presented.

Question 17

A public sector financial reporting framework is needed because governments differ in their aims and objectives from business.

Question 18

Accountability value is in evidence when the information helps users assess a public sector entity's stewardship of the resources entrusted to it, including their application or consumption in service provision.

Question 19

A government business enterprise sells goods and services to individuals and organizations within the government reporting entity as its principal activity.

Question 20

A public sector entity's future revenue requirements are not constrained by obligations associated with past decisions and events.

Question 21

A government partnership is a contractual arrangement between the government and a party or parties outside of the government reporting entity that has all of the following characteristics EXCEPT:

A)The partners cooperate toward achieving significant clearly defined common goals.
B)At least one of the partners makes a financial investment in the government partnership.
C)The partners share control of decisions related to the financial and operating policies of the government partnership on an ongoing basis.
D)The partners share, on an equitable basis, the significant risks and benefits associated with the operations of the government partnership.

Question 22

Many view ______________ as the overriding characteristic of public sector entities.

A)multiple objectives
B)lack of equity ownership
C)public accountability
D)governance structures.

Question 23

What does the net debt indicate on a government's statement of financial position?

A)The government's ability to provide future services and programs.
B)The government's financial position.
C)The government's ability to raise revenues to meet its current year expenditures.
D)How much revenue the government must raise to cover its past spending.

Question 24

Which of the following reflects how gains and losses arising from foreign currency translation reflect PSA?

A)An exchange gain or loss that arises prior to settlement (i.e. that is unrealized)is recognized in the statement of remeasurement gains and losses.
B)Exchange gains and losses are generally recognized in profit or loss. In the case of exchange differences arising on a monetary item that forms part of a reporting entity's net investment in a foreign operation, the consolidated financial statements initially recognize exchange gains and losses in OCI.
C)Exchange gains and losses are generally recognized in profit or loss.
D)In the case of most self-sustaining foreign operations, exchange gains and losses are recognized in a separate component of shareholders' equity.

Question 25

Financial Statement Presentation, CICA PSA Handbook, requires governments and public sector entities to include indicators of financial position, the measure of operating surplus or deficit and other information for the benefit of financial statement users. The statement of financial position indicators include:

A)Net debt.
B)Operating surplus or deficit.
C)Change in net debt.
D)Cash and cash equivalents.

Question 26

Factors considered to contribute to the reliability of information include all of the following EXCEPT:

A)representational faithfulness
B)completeness
C)neutrality
D)timeliness.

Question 27

For public policy reasons, governments will on occasion invest in outside entities. When the investment represents less than a control position, it is a(n)________________ (unless there is shared control that constitutes a government partnership).

A)loan receivable
B)portfolio investment
C)forgivable loan
D)appropriation.

Question 28

Regarding the qualitative characteristics of public sector reporting, which of the following items apply to "relevance?"

A)Representational faithfulness.
B)Completeness.
C)Neutrality.
D)Timeliness.

Question 29

The application of __________________ means that judgments needed when uncertainty exists should not be made in a manner that affects the neutrality of the information presented.

A)Conservatism
B)Representational faithfulness
C)Completeness
D)Verifiability.

Question 30

What do the total tangible capital assets indicate on a government's statement of financial position?

A)How much revenue the government must raise to cover its past spending.
B)The government's financial position.
C)The government's ability to raise revenues to meet its current year expenditures.
D)The government's ability to provide future services and programs.

Question 31

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

A)the accounting principles are not adjusted to government accounting principles.
B)the investment should be reported using the cost method.
C)the investment account should not be adjusted for the net income or loss.
D)its assets and liabilities are added to the government's statement of financial position.

Question 32

The federal government provided $300,000 to a university to develop and operate an English as a Second Language program. Which of the following statements about the above government transfer is TRUE?

A)This is an exchange transaction with an eligibility criteria.
B)This is an exchange transaction with a stipulation criteria.
C)This is a non-exchange transaction with a stipulation criteria.
D)This is a non-exchange transaction with an eligibility criteria.

Question 33

Which of the following statements regarding a public sector entity's net debt is FALSE?

A)The measure of net debt is an indicator of a public sector entity's financial position.
B)Required under the PSA reporting framework, it is an indicator of financial capacity or constraints facing the public sector entity.
C)A net debt position is effectively a 'lien' on the public sector entity's financial capacity.
D)The entity's future revenue requirements are not constrained by obligations associated with past decisions and events.

Question 34

______________ means the information given is free from a bias that would lead users towards making decisions influenced by the way the information is measured or presented.

A)Representational faithfulness.
B)Neutrality.
C)Relevance.
D)Reliability.

Question 35

___________________requires that the transactions and events reported on be presented in a manner that is in agreement with the underlying facts and circumstances.

A)Representational faithfulness
B)Comparability
C)Reliability
D)Accountability value.

Question 36

Which of the following statements relating to non-exchange transactions is FALSE?

A)Many of the revenues of government are confiscatory by nature.
B)Governments have the right to tax and do not directly exchange or give up economic resources when they levy taxes, or impose fines and penalties.
C)Rates or charges associated with the services that public sector entities offer are set to maximize the return to shareholders.
D)A public sector entity may be granted the authority to collect fees when granting a non-exclusive right or privilege such as a driver's license.

Question 37

What reporting basis should the government use in reporting its investment in Turbine Corp., a government business enterprise, use?

A)Equity method.
B)Modified equity method.
C)Consolidation.
D)Cost method.

Question 38

Which of the following is a financial asset?

A)Prepaid expense.
B)Supplies inventory.
C)Loan to another government.
D)Tangible capital asset.

Question 39

Which of the following reflects how a non-controllinged interest is presented according to IFRS?

A)When a non-controlled interest exists in an entity controlled by a government, the proportionate consolidation method is used to account for portion of the entity controlled by the government.
B)A non-controlled interest is presented separately within equity, separate from owners' equity.
C)An enterprise may consolidate its subsidiaries.
D)An enterprise may account for its subsidiaries using either the equity method or the cost method.

Question 40

For an organization to be classified as a government business enterprise, all of the following must apply EXCEPT:

A)It is a separate legal entity with the power to contract in its own name and that can sue and be sued.
B)It has been delegated the financial and operational authority to carry on a business.
C)It sells goods and services to individuals and organizations within the government reporting entity as its principal activity.
D)It can maintain operations and meet its liabilities from revenues received from sources outside of the government reporting entity.

Question 41

Which of the following statements about the modified equity method is FALSE?

A)When a government reports on a GBE, it does so applying the modified equity method.
B)Under the modified equity method, financial position and operating results are presented as they are using equity method.
C)When a GBE reports other comprehensive income, it is reported on a single line on the statement of remeasurement gains and losses.
D)Under the modified equity method, adjustments are made to conform the financial position or operating results of the GBE to the accounting principles followed by the government.

Question 42

Which of the following is NOT one of the four primary elements of the public sector financial reporting framework?

A)Assets.
B)Liabilities.
C)Revenues.
D)Equity.

Question 43

Which of the following is a non-financial asset?

A)Investment in a government enterprise.
B)Crown land.
C)Available-for-sale investment.
D)Tangible capital asset.

Question 44

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

A)When the transfer has been approved by the legislature.
B)When the appropriate government minister has provided written approval for the transfer.
C)When the grant has been received by the city.
D)When the grant has been used by the city for the required purpose.

Question 45

Why is a public sector financial reporting framework needed?

Question 46

What are the primary criteria in evaluating whether a government organization is controlled by a government?

Question 47

Why is the net debt indicator relevant to reporting on the results of organizations within the government reporting entity?

Question 48

______________ is present when knowledgeable and independent observers would concur with how a transaction or event is represented in the financial statements.

A)Verifiability.
B)Comparability.
C)Reliability.
D)Conservatism.

Question 49

What are the qualitative characteristics of public sector financial reports?

Question 50

Remeasurement gains and losses can arise when there are ___________________ associated with financial instruments or the translation of amounts denominated in a foreign currency.

A)outstanding debts
B)unrealized gains and losses
C)translation and financial exposures
D)realized gains and losses

Question 51

Compare the accounting treatment of purchase premiums arising on an acquisition of a business according to PSA, IFRS, and ASPE.

Question 52

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.

Question 53

Based on the organizations' objectives, which of the following government organizations can choose to report under the CICA PSA Handbook or IFRS?

A)Other government organizations.
B)Local governments.
C)Government business enterprises.
D)Government not-for-profit organizations.

Question 54

One of the objectives of government reporting is to allow users the ability to assess the government's finances. A statement of financial position is prepared and the government's "net debt" is presented on this statement. Describe what is meant by "net debt" and why this is an important indicator of the government's financial position.

Question 55

Which of the following is NOT a suggested objective for financial statements for public sector entities?

A)To determine if programs are economical, efficient, and effective.
B)To provide an accounting of financial affairs and resources.
C)To enable evaluation of compliance with legislation.
D)To provide information on financing and investing activities.

Question 56

What is a portfolio investment with concessionary terms?

Question 57

What does the carrying value of tangible capital assets represent to government?

A)Source of future cash flows from the capital assets.
B)Unexpired service potential of the capital assets.
C)Tax value of the capital assets.
D)Acquisition cost of Crown assets.

Question 58

____________________ value is in evidence when information helps users assess a public sector entity's stewardship of the resources entrusted to it, including their application or consumption in service provision.

A)Accountability
B)Predictive
C)Feedback
D)Representational