Deck 11: Public Sector Financial Reporting

Question 1

Who is the largest issuer of debt?

A)Banks
B)Government
C)Publicly accountable enterprises
D)Private enterprises

Answer 1

B

Question 2

Which financial statements are recommended by the PSAB for presentation by governments?

A)Statement of financial position, statement of operations, statement of changes in net debt, statement of remeasurement gains and losses, and statement of cash flows
B)Statement of financial position, statement of operations, statement of remeasurement gains and losses, and statement of net debt
C)Statement of financial position, statement of cash flows, and statement of operations only
D)Statement of financial position, statement of cash flows, and statement of net debt only

Answer 2

A

Question 3

For government accounting purposes, what is the difference between financial and non-financial assets?

A)Financial assets can only be used for providing services, and non-financial assets can only be used for debt repayment.
B)Financial assets can only be used for debt repayment, and non-financial assets can only be used for providing services.
C)Non-financial assets can be used for providing services and debt-repayment, but financial assets can only be used for providing services.
D)Non-financial assets can only be used for providing services, but financial assets can be used for providing services and debt-repayment.

Answer 3

D

Question 4

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

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

Question 5

Which of the following would be a reconciling item on the statement of change in net debt?

A)Adding back the cost of tangible capital assets
B)Adding back the cost of debt servicing
C)Adding back the amortization expense
D)Adding back transfer payments to other governments

Question 6

How does a government statement of cash flows (SCF)differ from one prepared by a business enterprise?

A)A government SCF must be prepared using the direct method.
B)A government SCF must be prepared using the indirect method.
C)A government SCF reconciles cash and cash equivalents, not just cash.
D)A government SCF has a section for capital transactions.

Question 7

Which of the following statements about the valuation of Crown property on the statement of financial position is true?

A)Crown property is valued at acquisition cost.
B)Crown property is valued at fair market value.
C)Crown property is valued at its depreciated value.
D)Crown property is not recognized on the financial statements.

Question 8

Which of the following are combined to produce the accumulated deficit or surplus on a government's statement of financial position?

A)Net assets and net debt
B)Financial assets and net debt
C)Financial assets and liabilities
D)Tangible capital assets and net debt

Question 9

Which of the following is not a typical characteristic of a non-business organization?

A)No equity investors
B)May have restrictive funds
C)Relies on the sale of goods and services
D)Provision of collective goods and services

Question 10

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 ability to provide future services and programs
C)The government's financial position
D)The government's ability to raise revenues to meet its current year expenditures

Question 11

Which governments or government organizations are required to follow the PSA Handbook for financial reporting purposes?

A)Governments and government business enterprises
B)Governments and government not-for-profit organizations
C)Government business enterprises and government not-for-profit organizations
D)Government not-for-profit organizations and other government organizations

Question 12

On what statement does the amortization of tangible capital assets appear as a reconciling item?

A)Statement of financial position
B)Statement of operations
C)Statement of changes in net debt
D)Statement of cash flows

Question 13

The Public Sector Accounting Board (PSAB)has identified a number of characteristics that differentiates governmental reporting from private sector reporting. Which of the following is one of those characteristics?

A)The government's goal is to make a surplus.
B)The focus of governmental capital spending is to maximize returns.
C)Tangible capital assets are viewed differently by governments.
D)Governments have limited debt capacity.

Question 14

The PSAB has identified a number of key characteristics of public sector entities. Which of the following is not one of these characteristics?

A)Have non-exchange transactions
B)Importance of budgets
C)Legislated financial framework
D)May have equity ownership

Question 15

What does the net debt 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 ability to provide future services and programs
C)The government's financial position
D)The government's ability to raise revenues to meet its current year expenditures

Question 16

Local government auditors are required to report in accordance with ________.

A)municipal legislation governing municipal reporting
B)provincial legislation governing municipal reporting
C)federal legislation governing municipal reporting
D)IFRS

Question 17

What can the non-financial assets of a government be used for?

A)Providing services only
B)Debt payment only
C)Providing services and debt payment
D)Neither service provision nor debt payment

Question 18

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

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

Question 19

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

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

Question 20

One of the objectives of government is to provide services to the public. In order to meet legislated social goals, another major goal of government is to ________.

A)create a surplus
B)reduce taxation
C)redistribute wealth
D)increase Crown assets

Question 21

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

A)Any realized remeasurement gains and losses
B)Any unrealized remeasurement gains and losses
C)Realized and unrealized gains and losses arising from foreign currency translations
D)Realized gains and losses arising from the disposal of portfolio investments

Question 22

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

A)Tax revenue should be reported at gross.
B)Tax revenue should be reported net of tax concessions and collection costs.
C)Tax revenue should be reported net of tax concession, and collection costs should be expensed.
D)Tax revenue should be reported net of tax collection costs, and tax concessions should be expensed.

Question 23

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

A)Comparability among years, consistency among governments, completeness, and timeliness
B)Comparability among governments, consistency between years, completeness, and timeliness
C)Comparability with business, consistency between years, completeness, and timeliness
D)Full disclosure, transparency, accuracy, and audit

Question 24

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

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

Question 25

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.

Question 26

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

A)the PSA Handbook
B)IFRS
C)ASPE
D)either the PSA Handbook or IFRS

Question 27

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.

Question 28

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

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

Question 29

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?

A)When the funds are pledged
B)When the funds are received
C)When the funds are committed
D)When the funds are used for the purpose(s)specified

Question 30

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

Question 31

What valuation must government organizations use to report derivatives?

A)Cost
B)Amortized cost
C)Fair value
D)Lower of cost or fair value

Question 32

What is impairment testing of tangible capital assets based on?

A)Impairment of future cash flows
B)Impairment of future service potential
C)Impairment of anticipated residual value
D)Impairment of net present value

Question 33

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?

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

Question 34

What basis does the present government reporting method use?

A)Cash
B)Modified cash
C)Modified accrual
D)Full accrual

Question 35

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.

Question 36

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

Question 37

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?

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

Question 38

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?

A)Statement of operations and statement of changes in net debt
B)Statement of operations and statement of cash flows
C)Statement of financial position and statement of operations
D)Statement of financial position and statement of changes in net debt

Question 39

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 40

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

A)Sale and purchase of financial assets
B)Sale and purchase of nonfinancial assets
C)Sale and purchase of tangible capital assets
D)Amortization of tangible capital assets

Question 41

PSAB defines a government organization as one that is "controlled by the government". Explain what is meant by "control" and how this is assessed for governments. Explain how controlled entities are reported.

Question 42

Tangible capital assets owned by governments are viewed differently than tangible capital assets owned by business enterprises. Explain this difference and describe how tangible capital assets are reported for governments.

Question 43

One of the largest sources of revenue for governments is government transfers. Government transfers represent non-exchange revenue. Explain what "government transfer" is and why it is a non-exchange transaction. How are government transfers reported? Be sure to address reporting from the transferor and the recipient perspectives, separately.

Question 44

One of the objectives of government reporting is to allow users the ability to assess the government's finances. A statement of changes in net debt is required. Describe what is meant by "net debt" and why this is an important indicator of the government's financial position. What information does this statement provide?