CPFM Module II
Public Sector Accounting and Reporting II flashcards
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At which three bases can a financial instrument be measured, and what decides the basis?
Amortised cost, fair value through surplus/deficit, or fair value through net assets. The basis depends on the entity's business model and the instrument's cash-flow characteristics.
When is a cash-generating asset impaired, and what is its recoverable amount?
It is impaired when its carrying amount exceeds its recoverable amount. Recoverable amount = the higher of fair value less costs to sell and value in use. Impairment loss = carrying amount - recoverable amount.
What is the reliable test between a defined contribution and a defined benefit pension?
Who bears the risk of the eventual cost. Defined contribution: a fixed contribution and no further obligation once it is paid over. Defined benefit: the employer bears the risk, because the cost depends on future salary, service and longevity, so the obligation is estimated actuarially and carried as a liability.
What are social benefits, and when are they recognised as an expense?
Cash or in-kind transfers to individuals and households to mitigate social risks such as unemployment, old age and disability. They are recognised as an expense when the eligibility criteria for the benefit are met.
What does segment reporting do for the users of a public entity's statements?
It disaggregates the entity's financial information by distinguishable activities or geographical areas. Users see performance and resource allocation across the entity's different functions, not only a single consolidated total.
How is a historical cost restated in a hyperinflationary economy?
Restated amount = historical cost x (current price index / price index at acquisition). The statements are restated for changes in general purchasing power, so historical-cost figures stay meaningful.
How does a joint operation differ from a joint venture?
Joint operation: each party has rights to the assets and obligations for the liabilities, and recognises its own share of them directly. Joint venture: the parties have rights only to the net assets, and each recognises a single equity-accounted investment line.
How are a budget variance and its percentage worked out in a budget comparison?
Variance = actual amount - budgeted amount. Variance % = variance / budgeted amount x 100. A material variance is explained in the notes to the financial statements.
Why does a public entity report service performance information alongside its financial statements?
Its success is not measured by profit. The financial statements show what was spent and earned; service performance reporting shows what was achieved, outputs and outcomes against stated objectives.
What does a lessee recognise under the right-of-use model?
A right-of-use asset and a corresponding lease liability for most leases. Each year it then charges interest on the liability and depreciation on the asset, rather than a single lease rental expense.
What does impairment of financial assets recognise?
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What is hedging?
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Which risks do financial instrument disclosures cover?
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On what basis is a non-cash-generating asset impaired, and why?
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Name three public-sector indicators that a non-cash-generating asset may be impaired.
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What is value in use, and why can it not be used for a non-cash-generating asset?
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A toll-road asset: carrying amount KES 30,000,000, fair value less costs to sell KES 24,000,000, value in use KES 26,000,000. What is the impairment loss?
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A clinic (non-cash-generating) has a carrying amount of KES 33,000,000. A new equivalent would cost KES 40,000,000, less KES 12,000,000 for age and wear. What is the impairment loss?
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How does a lessor classify its leases?
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A county leases equipment for 5 years at KES 3,000,000 at the end of each year, discounting at 10%. How is the lease liability first measured?
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A lease liability and right-of-use asset start at KES 11,372,360, with a 10% rate and a 5-year term. What are the year 1 charges?
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Which standards now govern property, plant and equipment and leases, and what did they replace?
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Which IPSAS deal with impairment of non-cash-generating and of cash-generating assets?
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What are short-term employee benefits, and when are they expensed?
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Give an example of an other long-term employee benefit and of a termination benefit.
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An agency pays 12% of gross salary into a defined contribution scheme. What is its monthly expense for an employee on KES 150,000 a month?
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A scheme pays 2% of final salary per year of service. What does an employee retiring after 25 years on KES 200,000 a month receive?
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How are biological assets and agricultural produce measured?
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What is a service concession arrangement?
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When does the grantor recognise the underlying asset in a service concession arrangement?
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A programme pays KES 2,500 a month to each of 50,000 eligible households for a full year. What is the annual cost, and how is it recognised?
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Which IPSAS cover revenue from non-exchange and from exchange transactions?
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Revenue of KES 800,000,000: licensing 550,000,000, inspection 170,000,000, training 80,000,000. Which are segments at a 10% threshold?
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An asset cost KES 10,000,000 when the general price index was 100; the index is now 180. What is its restated carrying amount?
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Why can unrestated historical cost mislead in a hyperinflationary economy?
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What is the test for a related party, and who typically qualifies in the public sector?
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What is a joint arrangement?
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Two counties each hold 50% of a joint operation with assets of KES 50,000,000 and yearly costs of KES 12,000,000. What does each recognise?
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For which four kinds of interest does IPSAS 38 require disclosure?
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Name the IPSAS on consolidation, associates and joint ventures, joint arrangements, disclosure of interests, and public sector combinations.
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Why is the general government sector disclosed separately?
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A county's development budget is KES 400,000,000 and actual development spending KES 352,000,000. What are the variance and variance %?
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What does IPSAS 33 provide?
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How is the cash-basis IPSAS, Financial Reporting under the Cash Basis of Accounting (revised 2017), structured?
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What do RPG 1, RPG 2 and RPG 3 cover?
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How does sustainability reporting differ from integrated reporting?
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What do ESG reporting and climate-related risk reporting each disclose?
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What does risk management reporting disclose?
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