Question 1

Who is the largest issuer of debt?

Accepted Answer

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

Question 2

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.

Accepted Answer

The answer of Tangible capital assets owned by governments are...

Question 3

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?

Accepted Answer

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 4

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 transactions.

Question 5

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 6

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

Accepted Answer

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 7

What valuation must government organizations use to report derivatives?

Accepted Answer

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

Question 8

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

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 9

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 10

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

Accepted Answer

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 11

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

Accepted Answer

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 12

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?

Accepted Answer

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 13

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

Accepted Answer

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 14

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

Accepted Answer

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.

Question 15

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 16

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

Accepted Answer

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

Question 17

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

Accepted Answer

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 18

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 19

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

Accepted Answer

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

Question 20

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

Accepted Answer

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

Exam 11: Public Sector Financial Reporting