CPFM Module I
Public Sector Accounting and Reporting I flashcards
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What is the objective of public sector accounting, and how does it differ from private-sector reporting?
It provides information useful for accountability and decision making: how public resources were raised and used, supporting oversight by citizens, the legislature and other stakeholders. Private-sector reporting is aimed mainly at investor decision making.
Name the six qualitative characteristics of useful financial information in the IPSAS conceptual framework.
Relevance, faithful representation, understandability, timeliness, comparability and verifiability.
How are straight-line depreciation and the carrying amount worked out?
Annual depreciation = (cost - residual value) / useful life. Carrying amount after n years = cost - (n x annual depreciation). Example: a KES 50,000,000 county office, residual value KES 5,000,000, 20 years: KES 2,250,000 a year, carrying amount KES 43,250,000 after 3 years.
What is the difference between exchange and non-exchange revenue?
Exchange revenue: the entity gives approximately equal value in return, such as fees for a service. Non-exchange revenue: the entity receives value without directly giving approximately equal value back, such as taxes, grants and donations. It is the dominant revenue of public sector entities.
How is a change in accounting estimate treated, compared with a prior period error?
Change in estimate: applied prospectively, from the current period on. Prior periods are not restated. Prior period error: corrected retrospectively, by restating the comparative figures and adjusting opening net assets/equity.
Which accounting treatment follows from control, significant influence and joint control?
Control: full line-by-line consolidation, with intra-group items eliminated and a non-controlling interest. Significant influence: an associate, accounted for using the equity method. Joint control with rights to the net assets: a joint venture, also typically equity-accounted.
How is a cash-basis surplus reconciled to an accrual-basis surplus?
Cash-basis surplus + increase in receivables - increase in payables - depreciation (a non-cash expense) + increase in prepayments = accrual-basis surplus. Example: 120,000,000 + 8,000,000 - 5,000,000 - 15,000,000 + 2,000,000 = KES 110,000,000.
When is a provision recognised?
When all three conditions are met: 1. a present obligation exists as a result of a past event; 2. an outflow of resources is probable; 3. the amount can be reliably estimated. A provision is recognised on the statement of financial position; a contingent liability is only disclosed.
A county receives a KES 20,000,000 grant that must be returned if not spent on a specified project. By the year end it has spent 25% on the project. What does it recognise?
The return obligation makes it a conditional grant: a liability on receipt, becoming revenue as the condition is satisfied. Revenue = 20,000,000 x 25% = KES 5,000,000. Liability remaining = KES 15,000,000.
What is the difference between adjusting and non-adjusting events after the reporting date?
Adjusting: evidence of conditions that existed at the reporting date, such as a court ruling confirming an obligation that existed at year end. The statements are adjusted. Non-adjusting: conditions that arose after the reporting date, such as a fire after year end. Disclosed in the notes, not adjusted.
Which Kenyan laws set the framework for public sector accounting, and what do they require?
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How do the cash basis and the accrual basis differ?
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Road work worth KES 60,000,000 is completed in June (year end 30 June) but paid in August. How is it treated under each basis?
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What do the IPSASB, the PSASB and ICPAK each do?
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Which distinctive features of the public sector do IPSAS adapt IFRS principles to?
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What is the role of the IPSAS conceptual framework, and can it override an IPSAS?
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Who are the users of general-purpose financial reports in the public sector?
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What do faithful representation and verifiability each mean?
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Which qualitative characteristic does each failure breach: late reporting, a format changed every year, unexplained jargon, an omitted unfavourable fact?
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What is a public sector reporting entity?
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What is property, plant and equipment in the public sector, and how is it measured?
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What makes land or a building investment property rather than PPE?
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What is an intangible asset, and when is it recognised?
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What is a financial instrument?
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When is a non-current asset classified as held for sale, and how is it then measured?
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How are inventories measured in the public sector?
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How are contingent liabilities and contingent assets treated?
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How are foreign-currency transactions translated and retranslated?
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An agency draws a USD 1,000,000 loan at KES 128 to the dollar. The closing rate is KES 131. What is the exchange difference?
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When are borrowing costs capitalised?
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What is the difference between a condition and a restriction on a non-exchange transfer?
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A ministry receives an unconditional KES 20,000,000 donation. How much revenue is recognised on receipt?
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What are transfer expenses, and when are they recognised?
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How does the statement of cash flows classify cash flows, and why is it needed?
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How are financial instruments presented in the financial statements?
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When may an entity change an accounting policy?
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Equipment cost KES 10,000,000, depreciated straight-line over 10 years with no residual value. After 6 years its remaining life is revised to 2 years. What is the new annual depreciation?
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A KES 1,500,000 payable was left out of last year's statements in error. How is it corrected?
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What is a public sector combination?
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A parent's revenue is KES 70,000,000 and its subsidiary's KES 25,000,000, including a KES 3,000,000 service charge to the parent. What is consolidated revenue?
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A parent pays KES 24,000,000 for 70% of an entity with identifiable net assets of KES 30,000,000. What are the NCI and the goodwill?
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A county pays KES 10,000,000 for 25% of an associate, which earns a surplus of KES 8,000,000 and pays the county a KES 500,000 dividend. What is the carrying amount?
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What is a joint venture, and how is it usually accounted for?
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What are separate financial statements?
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What does the cash basis IPSAS permit?
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In a cash-to-accrual reconciliation, why is a decrease in payables added back?
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In a cash-to-accrual reconciliation, why is an increase in prepayments added?
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What is financial statements discussion and analysis for?
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Why does PSASB reporting guidance differ by entity type?
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What is a vote, and how is the net vote worked out?
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What are appropriations-in-aid, and what happens to A-in-A collected above the estimate?
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How does money leave the Consolidated Fund for a ministry's use?
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What does the year-end balance on each vote account represent?
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How is the surplus to be surrendered measured in the appropriation account?
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What happens to an unspent appropriation at the end of the financial year?
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How do supplementary estimates differ from an excess vote?
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In an IPSAS 24 comparison of budget and actual, what is the final budget and which variance is reported?
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