Question 1

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

Accepted Answer

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 assets. D

Question 2

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?

Accepted Answer

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 different in nature for governments.
D)  Governments have limited debt capacity. C

Question 3

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.

Accepted Answer

A government transfer is the provision of either monetary or tangible assets by one government entity to another.Since there is no transfer of goods or services in return,and no expectation of repayment or financial return,the transaction is a non-exchange transfer.
Restrictive terms may be imposed by the transferor which may set eligibility criteria for who may receive the transfer or what must be done to receive the transfer.Or the restrictive term may be a stipulation which outlines how the transfer will be used and what must be done to keep the transfer.
Transferor accounting - The transferring government will recognize the transfer as an expense when it is authorized and the eligibility criteria have been met.This is the same requirement for both operating and capital transfers.
Recipient accounting - Operating transfers are recognized as revenue when the transfer has been fully authorized and the eligibility criteria have been met.If both criteria have been met,but cash has not yet been received,then a receivable will be recognized at this time.If stipulations are attached,then revenue is not recognized until the stipulations have been met.In this case,the revenue may be deferred until the stipulations are met.
Capital transfers are monetary transfers that will be used to acquire capital assets or direct transfers of the tangible asset itself.There are two approaches currently used by governments with respect to capital transfers.The first alternative is to recognize the revenue by matching it against the cost of the related tangible asset.For this method,the revenue is deferred and recognized as the asset is amortized.The second alternative is to recognize the revenue when the asset is ready for use.In this case,in future years,there will be an amortization cost with no offsetting revenue.To avoid the problem of including deferred revenue in the net asset calculation,PSAB suggests that the revenue be recognized when the transfer has been fully authorized by the transferor and the eligibility criteria have been met.The revenue is only deferred if the transfer results in a liability for the recipient.

Question 4

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

Accepted Answer

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 5

Which of the following is a non-financial asset?

Accepted Answer

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

Question 6

Which of the following is a financial asset?

Accepted Answer

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

Question 7

Who is the largest issuer of debt?

Accepted Answer

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

Question 8

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 ________.

Accepted Answer

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

Question 9

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

Accepted Answer

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 10

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

Accepted Answer

A)  When the funds are pledged
B)  When the funds are received
C)  When the funds are disbursed
D)  When the resources which were purchased with the funds are used

Question 11

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.

Accepted Answer

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

Question 12

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

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 13

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 the above government transfer is correct?

Accepted Answer

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

Question 14

What basis does the present government reporting method use?

Accepted Answer

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

Question 15

The CICA's Public Sector Accounting Board (PSAB)identified nine unique characteristics of governments that differentiate them from private sector reporting.List these nine characteristics.

Accepted Answer

The answer of The CICA's Public Sector Accounting Board (PSAB)identified...

Question 16

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

Accepted Answer

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 17

Recent surveys have suggested that there are several qualitative characteristics that are desirable in published financial reports of governmental units.List and briefly discuss each of the four major qualitative characteristic desired.

Accepted Answer

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

Question 18

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

Accepted Answer

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

Question 19

Which of the following accounting methods is most consistent with the budgetary spending limits that governmental managers must manage?

Accepted Answer

A)  Disbursement basis
B)  Expenditure basis
C)  Accrual basis
D)  Cash basis

Question 20

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

Accepted Answer

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

Exam 11: Public Sector Financial Reporting

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

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?