Question Tag: IPSAS

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  • 10 Marks

PSAF – May 2021 – L2 – Q2b – International Public Sector Accounting Standards (IPSAS)

Explain differences between accrual and cash accounting, justify IPSAS adoption, and describe commitment accounting benefits.

You have received an official memo from your Permanent Secretary, which reads:

Director of Account and Finance: Hope you are doing well. We have just closed from a workshop organised by the Ministry of Finance on public finance management not long ago, and the discussion was all about the adoption of IPSAS accrual accounting in the public sector. It was emphasised that migration from IPSAS Cash Basis to IPSAS Accrual Basis is necessary to improve financial reporting and transparency in the public sector. You know I have little knowledge in accounting, so I was completely lost in the discussions and I wished you had attended the workshop with me.

Another issue discussed was commitment accounting. We were made to understand that commitment accounting strengthens public finance management and therefore all Ministries, Departments and Agencies (MDAs) must ensure that every expenditure is committed in accordance with the appropriation prior to spending.

Please could you help me with some information on these issues?

Required:
Explain to the Permanent Secretary:
i. THREE differences between accrual accounting and cash accounting. (3 Marks)
ii. THREE justifications for adopting IPSAS accrual accounting in the public sector. (3 Marks)
iii. The term “commitment accounting” and illustrate THREE ways it could strengthen public financial management. (4 Marks)

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  • 20 Marks

PSAF – May 2024 – L2 – SB – Q2 – International Public Sector Accounting Standards (IPSAS)

Disclosures and interpretation of financial statements for public sector investments.

a. IPSAS 36 – Investments in Associates and Joint Ventures is a replacement of IPSAS 7 on Accounting for Investments in Associates.

You are required to:

Identify and briefly explain FOUR disclosures that should be made in the accounts on investments in associates. (8 Marks)

b. Interpretation of public sector financial statements is necessary in order to take decisive action in the public sector activities.

You are required to:

Identify and briefly explain THREE ways through which comparison of figures in respect of two or more years can be derived. (12 Marks)

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  • 6 Marks

PSAF – Nov 2016 – L2 – Q2b – International Public Sector Accounting Standards (IPSAS)

This question discusses the benefits of adopting IPSAS in public sector accounting, focusing on transparency, accountability, and credibility improvements.

Enumerate any FOUR benefits in the adoption of Public Sector Accounting Standards (IPSAS).

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  • 12 Marks

PSAF – Nov 2016 – L2 – Q2a – International Public Sector Accounting Standards (IPSAS)

This question outlines the benefits of migrating from IPSAS-CASH to IPSAS-ACCRUAL basis for public sector accounting.

In an effort to promote accountability and transparency in governance, the
administration has adopted and implemented the International Public Sector
Accounting Standards (IPSAS) from January 2014. The governments (Federal, State,
Local) and other public institutions adopted IPSAS in the reporting and presentation
of financial statements to improve the quality and comparability of financial
information, and to be in conformity with other advanced nations of the world. IPSASCASH is already adopted in the budgeting, accounting and presentation of financial
statements, while IPSAS-ACCRUAL takes effect from January 2016.
You are required to:

Identify any SIX benefits of migration from IPSAS-CASH basis to IPSAS ACCRUAL basis.

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  • 40 Marks

PSAF – Nov 2019 – L2 – Q1 – Public Sector Financial Statements

Prepare financial statements and journal entries for Ogogo Local Government based on trial balance and transactions provided, and identify external controls and challenges.

Ogogo Local Government is one of the 26 Local Governments in Alimosho state of
Federal Republic of Wazobia. The Local Government has adopted Treasury Single
Accounting (Direct method) and prepares its accounts using IPSAS accrual basis.
There has been wide spread fraud since the retirement of the Treasurer of the
council about two years ago. However, there was no adequate information to
suggest that there was fraud or misappropriation of funds. The Chairman invited
you to his office as the new Treasurer and handed over some of the financial data
from treasury department to you as detailed below:
The trial balance for the year ended December 31, 2017 is as follows:

 

The following transactions took place in the Office of the Treasurer of the Local
Government for the year ended December 31, 2018.
i. Listed below are the revenue and expenditure items for the year ended December 31, 2018

(ii) Code 1 is used as prefix for revenue, 2 for recurrent expenditure and 4 for
capital expenditure
(iii) Preliminary investigations carried out revealed the following irregularities,
which occurred and were discovered within the year:
• Included in the payments for the expenses under primary health care department were various duplicated vouchers amounting to N7million;
• There were some falsifications in the bills for items bought for the provision of water under other charges. The total discrepancies amounted to N3million.
(iv) The following agreed revenue demand notices were sent to the indigenes of the Local Government during the year.

(v) Included in the payments under works and housing is the cost of motor
vehicles of N25 million while medical equipment costing N35 million was
included in primary health care department expenses.
(vi) Included in the payments under works and housing is the cost of land
including construction of access roads, certificate of occupancy etc, amounting
to N100 million. The land was acquired by the Local Government and sold to
local prospective land owners at a cost of N520,000 per plot. The land consists
of 200 standard plots for the construction of houses of their choice. Only 150
plots were fully subscribed and paid for during the year.
(vii) Included in the payments under finance department is the cost of office
stationery of N25 million while the value of office stationery based on stock
sheet as at December 31, 2018 was N6.5 million.

viii) Capital grant from the State Government was received on December 31, 2017
and utilised in 2018.
(ix) The capital expenditure paid during the year was for the acquisition of land for the new Local Government Health Centers.
(x) Some of the accounting policies for depreciation adopted by the Government include the following depreciation rates;

Note: All non-current assets were purchased at the beginning of the
year.
(xi) The following expenses were incurred but not settled as at end of the year.

You are required to prepare:
a. The journal entries to record the loss of fund (3 Marks)
b. The statements of financial performance for year ended December 31, 2018
(15 Marks)
c. The statement of financial position as at December, 31 2018 (17 Marks)
d. Identify FIVE external controls and FIVE problems of Local Government in
Nigeria (5 Marks)

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  • 40 Marks

PSAF – Nov 2020 – L2 – Q1 – International Public Sector Accounting Standards (IPSAS)

Discuss IPSAS transition exemptions and prepare financial statements for Oranta State Government using IPSAS accrual.

IPSAS 33, gives a transition relief (exemption) of up to three years within which to develop models for transiting to IPSAS accrual. However, the government of Nigeria adopted accrual IPSAS on revenue from exchange transactions effective January 1, 2016.

Oranta State Government mandated the Accountant-General of the State to implement the IPSAS accrual in the preparation of their financial statements with effect from January 2018 which was complied with accordingly.

For the smooth implementation of IPSAS accrual, the State Executive Council approved the following:

(i) Asset valuation committee to be chaired by the Deputy Governor with the Commissioner of Finance, Commissioner of Budget and Planning, Chairman State Internal Revenue Service, Accountant-General of the State, and Head of Service as members while a Director in the Office of the Secretary to the State Government was appointed as the Secretary.
(ii) The Committee was mandated to value all the State assets and liabilities on or before the implementation of IPSAS accrual.
(iii) The Committee was allowed to engage the services of competent valuers for the job.
(iv) The valuation of the assets and liabilities should be on a continuous basis and any value agreed and approved by the State Executive Council should be brought into the books in the year of valuation.
(v) All assets and liabilities incurred after implementation of IPSAS accrual should be recognized in the year they occurred.

The consolidated trial balance for the year ended December 31, 2017, based on IPSAS cash is as follows:

Extracted consolidated cashbook for the year 2018:

The following information is relevant:
(i) The employees‟ salaries and wages bill for the month of December 2018
amounting to N6.5billion was outstanding at the end of the year.
(ii) The following information was extracted from the unit in charge of
accounting for property, plant and equipment (PPE): 100 sets of HP
computers were received from Koko Computers Limited to assist the State
government to eradicate ghost workers from the payroll- the HP series
P1120, 2016 model. Based on this information, a call was made to three of
their computer suppliers to find out the current price of the HP P1120. Two of
the suppliers quoted N450,000 each, while one quoted N500,500 each.
Based on this information, the fair value of the computers, were taken as
N500,000 each.
(iii) The government during the year received an asset valuation report from the
Asset Valuation Committee that was set up to carry out the valuation of the
old assets and liabilities of the State.
(iv) The following values were recommended and approved by the State
Executive Council respectively:

(v) Pension and gratuity of N15 billion was outstanding at the end of the year
(vi) Some of the accounting policies adopted by the government for depreciation
include the following rates;

(vii) During the year, one of the contractors took the State to court for breach of
contract. The case was still in court as at the end of the year and from all
indications, judgment will eventually be in his favour. The legal adviser
estimated the judgment debt to be N50million.
(viii) Value of office consumables based on inventory sheet as at December 31,
2018 was N550million.
(ix) The following expenses were incurred but not settled as at end of the year.

(x) An extract from the foreign loan amortisation schedule indicates that a total
sum of N32billion comprising principal and interest of N2billion was due
and paid during the year. Also domestic loan of N13billion comprising
principal and interest of N1billion was paid during the year. The interest
payable on domestic and external loans at the end of the year amounted to
N3billion and N5 billion respectively.
(xi) The investment of 10% treasury bills for 360 days was due to mature on
January 1, 2018 and reinvested immediately for another term.
(xii) The revolving loan attracts interest of 4% per annum and it is paid along
with the principal.
Required:
a. In line with the provisions of IPSAS 33, explain how the following revenue
from exchange transactions should be recognised:
i. Aid and grants receivable as at December 31, 2015 (2 Marks)

ii. Debt forgiveness approved on or after January 1, 2016 (2 Marks)
iii. Personal income tax on or after January 1, 2016 (2 Marks)
b. Prepare in vertical form:
i. Statement of financial performance for the year December 31, 2018.
(17 Marks)
ii. Statement of financial position for the year December 31, 2018.
(17 Marks)
(Total 40 Marks)

 

 

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  • 20 Marks

PSAF – May 2018 – L2 – Q3 – International Public Sector Accounting Standards (IPSAS)

Explains the term "agricultural activity," determination of fair value, and the accounting treatment for biological assets and agricultural produce.

IPSAS 27 deals with the accounting treatment and disclosures in relation to agricultural practice.

Required:

a. Explain the term “agricultural activity.” (5 Marks)

b. Explain how the fair value of a biological asset or agricultural produce is determined. (8 Marks)

c. Identify TWO ways in which an entity should recognize a biological asset or agricultural produce. (3 Marks)

d. Explain the accounting treatment of gains or losses arising from a biological asset or agricultural produce. (4 Marks)

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  • 10 Marks

PSAF – Nov 2021 – L2 – Q2a – International Public Sector Accounting Standards (IPSAS)

Identify the components and types of borrowing costs eligible for capitalisation under IPSAS 5.

IPSAS 5 – Borrowing Cost prescribes the accounting treatment for borrowing costs for general use.

Required:

Identify FOUR components and TWO types of borrowing costs that are eligible for capitalisation by the standard.

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  • 20 Marks

PSAF – Mar/Jul 2020 – L2 – Q1a – Accounting for Government Assets and Liabilities

Prepare a non-current assets schedule for a university and identify features of a finance lease in compliance with IPSAS.

In the year 2000, Amotekun State of Nigeria established two State Universities University of Education (ASUE), to cater for the indigenes of the state. The following information relates to each of the universities:
a. The Bursar of Amotekun State University, Oke-Mosan, delegated the preparation of Non-current assets schedule to be included in the final accounts of the University for the year ended December 31, 2018, to one of the Deputy Bursars in the Bursary Department.
In the discharge of the assignment, the Deputy Bursar reviewed the following documents:

  • International Public Sector Accounting Standards (IPSAS).
  • Previous year’s financial report.

    • He was able to obtain the following information:

    (i)

  • Non-current assets register.
  • Valuation reports, etc.

(i) It is the policy of the University to charge a full year’s depreciation on assets irrespective of the month of purchase or revaluation during the year, while no depreciation is charged on assets disposed of during the year.

(ii) Equipment on lease is depreciated equally over the period of the lease.

(iii) Land and buildings were professionally revalued during the year by Parisco & Associates, a firm of Chartered Surveyors and Valuers, and approved by the State Ministry of Works and Housing. The valuation, which was based on the open market value, produced a revaluation surplus of N150,000,000 over the carrying amount as at January 1, 2018.

(iv) The University purchased plant and machinery which was imported from the United Kingdom at a cost of N430,500,000. Installation and transportation costs to the University amounted to N20,500,000.

(v) The Deputy Bursar that prepared the non-current assets schedule last year classified some of the computer equipment purchased on May 15, 2017, costing N26,000,000 as office equipment. A reclassification is required in the current year.

(vi) Office furniture and fittings costing N12,250,000 were disposed of during the year for N11,500,000, which resulted in a profit of N750,000.

(vii) The University entered into an equipment lease agreement with Ode Finance Limited; the terms and conditions of the finance lease are as follows:
Principal sum: N45,000,000
Lease period: 5 years
Lease rentals: N10,000,000 p.a.
(viii) During the year, the University acquired a fleet of vehicles at the cost of N50,000,000. The State Government financed this acquisition.

Required: i. In accordance with IPSAS 13, identify FIVE features of a finance lease. (5 Marks) ii. Prepare the non-current assets schedule of Amotekun State University suitable for publication. (15 Marks)

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  • 4 Marks

PSAF – Nov 2016 – L2 – Q4d – Public expenditure and financial accountability framework

Discuss methods used by the government to ensure the success of financial reforms in the public sector.

As a means to ensure strong financial management in the public sector and citizen confidence in public institutions, the government has introduced a number of financial reforms including International Public Sector Accounting Standards (IPSAS) in public financial management.Required:
Discuss FOUR methods used by government to ensure the success of these reforms.
(4 marks)

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  • 10 Marks

PSAF – Nov 2019 – L2 – Q1c – International public sector accounting standards

Discuss the objective of measurement for asset recognition and suggest appropriate measurement bases for specific assets.

Measurement of assets for recognition in the financial statements is a critical consideration in financial reporting and has been problematic in the public sector given the nature of assets involved. A public sector organization is currently in transition from cash basis accounting to accrual basis accounting which requires measurement and recognition of all assets in the general-purpose financial reports. Of much concern to the entity is how to select the appropriate measurement basis for the assets of the entity listed below to ensure that the objectives of financial reporting are achieved:

  • Human resource software developed by the entity
  • Stock of books in the library
  • Vehicles donated to the entity

You have been consulted on the issues raised above to help the entity choose appropriate measurement for the recognition of the above-listed assets.

Required:
In line with the Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities issued by International Public Sector Accounting Standards Board (IPSASB):

i) Discuss the objective for the measurement of assets in financial statements that should guide the choice of measurement bases for asset recognition. (4 marks)

ii) Suggest an appropriate measurement basis for each of the assets indicated above, and discuss how your selected measurement basis meets the objectives of measurement in each case. (6 marks)

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  • 6 Marks

PSAF – Nov 2019 – L2 – Q1b – International public sector accounting standards

Formulate accounting policies for land, building, and inventory for public sector entities.

Formulate accounting policies on the following items relating to the financial statement of public sector entities:

i) Land and Building
ii) Inventories

(6 marks)

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  • 4 Marks

PSAF – Nov 2019 – L2 – Q1a – General purpose financial reporting framework

Explain the importance and content of notes to the financial statements for a public sector entity.

An Accounting Trainee has been given an assignment to prepare a complete set of financial statements of a public sector entity from data set provided by the Director of Finance. The Trainee prepared the financial statements to the admiration of the Director, except that no notes to the financial statements were provided. The Director made him aware that the notes to the financial statements are an essential component of the financial statements whether applying the cash basis of accounting or accrual basis of accounting as it enhances the usefulness of the financial reports to users. The Trainee has been directed to you to educate him further on the relevance of notes to the financial statements.

Required:
Write out your explanatory notes to the Trainee, the usefulness of notes to the financial statements, and the information that should be included in the notes to the financial statements of a public sector entity. (4 marks)

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  • 4 Marks

PSAF – Nov 2017 – L2 – Q2a – Public Sector Fiscal Planning and Budgeting

Describe the challenges faced by public institutions classified as GBEs in preparing financial statements under obsolete financial laws.

A public sector institution has recently had its operations enhanced and modified such that they qualify as Government Business Enterprise (GBE) within the meaning of IPSAS 1. The management of the institution, in preparing their financial report for 2015, realized that the existing financial laws and regulations do not support their new status.

Required: Describe FOUR challenges Public Institutions (like the one in the preamble) face in the preparation of their financial statements when some financial laws and regulations needed to support reporting on their new status and operations have become obsolete. (4 marks)

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  • 4 Marks

PSAF – Nov 2017 – L2 – Q1b – General Purpose Financial Reporting Framework

Discuss the qualitative characteristics of financial statements that MMDAs fall short of according to IPSAS 1.

The Public Accounts Committee of Parliament has bemoaned the state of financial reporting in the Metropolitan, Municipal and District Assemblies (MMDAs). According to the Chairman, the financial statements fall short of confirmatory and predictive value. In fact, the financial statements are characterized by errors, omissions, and misstatements, and as if this is not enough, the final reports are approved at a later year. The citizens also complain seriously about their inability to appreciate the information reported, robbing them of their right to assess the accountability of the government.

Required:
Explain FOUR qualitative characteristics that the final reports of MMDAs fall short of in accordance with IPSAS 1: Presentation of Financial Statements. (4 marks)

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  • 6 Marks

PSAF – Nov 2017 – L2 – Q1a – International Public Sector Accounting Standards

Explain the challenges faced during the transition to accrual basis accounting in the public sector.

With the adoption of the International Public Sector Accounting Standards (IPSAS), public sector financial reports are to be prepared on an accrual basis in line with the financial laws of Ghana.

Required: Explain FOUR transitional challenges that are likely to be encountered when migrating from the current system of reporting to the accrual basis. (6 marks)

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  • 20 Marks

PSAF – Mar 2023 – L2 – Q2a – Preparation and presentation of financial statements for local government

Preparation of a Statement of Financial Performance for Nsuta-Appiah Krom Municipal Assembly for the year ended 31 December 2021.

The following Trial Balance is the financial details of Nsuta-Appiah Krom Municipal Assembly for the year ended 31 December 2021.

Additional Information:

  1. It is the policy of the Assembly to adopt Accrual Basis in preparing its Financial Statements in compliance with Public Financial Management Act, 2016 (Act 921), Public Financial Management Regulation 2019 L.I 2378 and the International Public Sector Accounting Standards (IPSAS) and Local Governance Act 2016, (Act 936).
  2. Office consumables in respect of stationery and other items bought for GH¢1,800,000 remained unused during the year. The current replacement cost of the inventories is GH¢1,550,000. Meanwhile, the net realizable value of the inventories is estimated at GH¢1,400,000. No market exists for unused office consumables and other items.
  3. Property Rates received in respect of the 2022 financial year amounted to GH¢2,050,000.
  4. Salaries outstanding during the year amounted to GH¢750,000, and other expenses amounting to GH¢1,105,000 paid in respect of the 2022 financial year.
  5. Consumption of fixed assets is charged on a straight-line basis for the year as follows:
    • Motor vehicles: 10 years
    • Furniture, Fixtures & Fittings: 5 years
    • Building and Structures: 50 years
  6. Included in the Work in Progress is an amount of GH¢2,000,000 relating to a Building that was completed, commissioned, and put to use on 5 July 2021, after an additional amount of GH¢800,000 was spent to complete the pavement aspect of the building. This expenditure has not yet been paid.
  7. Interest on Loans to staff is at the rate of 15% per annum and interest on long-term Loans is at the rate of 10% per annum.

Required:

a) Prepare a Statement of Financial Performance for Nsuta-Appiah Krom Municipal Assembly for the year ended 31 December 2021.
(9 marks)

b) Prepare a Statement of Financial Position for Nsuta-Appiah Krom Municipal Assembly as at 31 December 2021.
(9 marks)

c) State TWO (2) Accounting Policies adopted and applied in preparing the financial statements.
(2 marks)

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  • 10 Marks

PSAF – Mar 2023 – L2 – Q1a – Accounting policies for cash and accrual-based accounting systems

Explains the assertion that cash basis information can be derived from accrual basis accounting and discusses how accrual accounting provides superior cash information.

In a recent meeting held to discuss the implementation of accrual basis of accounting in your entity, the principal spending officer was apprehensive about how the change from cash basis to accrual basis would impact on accountability for cash. The Director of Finance convinced him that accrual basis provides much superior cash information about the entity and therefore there is no need to be concerned about the transition from cash accounting to accrual accounting. He further stated that “cash basis information could be derived from accrual basis accounting”.

Required:
i) Explain the assertion that “cash basis information can be derived from accrual basis accounting” as stated by the Director of Finance. (4 marks)
ii) Discuss how accrual accounting provides superior cash information about an entity. (6 marks)

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  • 20 Marks

PSAF – March 2024 – L2 – Q2 – Preparation of Financial Statements for Central Government

Prepare the Statement of Financial Performance, Statement of Financial Position, and Statement of Budget Information for a central government department based on the given trial balance.

The following Trial Balance was extracted from the records of the Department of Social Integration, a central government department, for the year ended 31 December 2023.

Additional Information:

  1. The Department prepares its financial statements in compliance with the International Public Sector Accounting Standards, the Public Financial Management Act 2016, Act 921, and the Chart of Accounts of the Government of Ghana.
  2. Included in printing materials and stationery is a closing inventory valued at cost of GH¢380,000. The estimated net realizable value and replacement cost of the inventory are GH¢320,000 and GH¢330,000 respectively. The printing is not for commercial purposes.
  3. In June 2023, the government conducted a massive recruitment into the civil services, of which 20 employees were posted to the Department. However, they have not been paid salaries for the period. The amount owed to these employees is GH¢2,500,000 and this should be reflected in the financial statement of the period.
  4. The Department currently pays rent for two of its Regional Offices, and at the end of the year rent of GH¢200,000 was outstanding. Further, the Department also rented part of its premises at the Headquarters. At the end of the financial year, an amount of GH¢150,000 was received to cover 2024 rent. Meanwhile, GH¢20,000 rent has not been received from tenants for the year 2023. These transactions have not been accounted for.
  5. Depreciation of fixed assets is charged on a straight-line basis as follows:
Assets Estimated useful life (in years)
Motor vehicle 5 years
Furniture 4 years
Computers 3 years
Premises 20 years
  1. It was revealed that computer accessories costing GH¢340,000 acquired in 2022 were accounted for as goods and services. However, the Auditor for the 2023 financial year recommended that the transaction should be accounted for as a non-current asset. The recommendation is yet to be implemented.
  2. The budget extract of the Department for 2023 is as follows:
Item GH¢’000
Approved budget allocation 20,000
Internally generated fund 3,000
Donor support 1,000
Compensation for employees 10,000
Use of Goods and Services 6,000
Other expenses 5,500

Required: Prepare in compliance with the International Public Sector Accounting Standards, the Public Financial Management Act 2016, and the Chart of Accounts of Ghana: a) A Statement of Financial Performance for the year ended 31 December 2023.

b) A Statement of Financial Position as at 31 December 2023.

c) A Separate Statement of Budget Information in comparison with the Actuals for the year ended 31 December 2023.

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  • 10 Marks

PSAF – Dec 2023 – L2 – Q1b – General purpose financial reporting framework

Explain five qualitative characteristics that financial statements should satisfy according to IPSAS.

The Financial Statements and budget information presented below were submitted to the Finance and Administration Committee of Ghana Library Authority (GLA) on 30 April 2022 for consideration. The Committee was concerned about the delay in submitting the financial information. They reasoned that it might not be useful for decision-making.

GLA
Statement of Financial Performance for the year ended 31 December 2020

Item Actual (GH¢’000) Budget (GH¢’000)
Revenues
GoG Subvention 170,500 152,050
Internally Generated Fund 58,500 93,650
Donations and grants 17,000 12,500
Total Revenues 246,000 258,200
Expenses
Compensation for employees 159,200 150,000
Use of goods and services 57,000 72,500
Consumption of fixed assets 6,500 –
Interest 4,500 4,700
Other expenses – 3,700
Total Expenses 227,200 230,900
Net operating result 18,800 27,300

GLA
Statement of Financial Position as at 31 December 2020

Item GH¢’000
Non-Current Assets
Property, plant and equipment 600,000
Investment 150,000
Total Non-Current Assets 750,000
Current Assets
Receivables 11,500
Cash and Bank 105,000
Total Current Assets 116,500
Total Assets 866,500
Liabilities and Funds
Loans 450,000
Payables 53,000
Accumulated fund 363,500
Total Liabilities and Funds 866,500

Required:
With reference to IPSAS Conceptual Framework, explain FIVE (5) Qualitative Characteristics that the above Financial Statements should have satisfied before it can be considered useful for decision-making and for exercising accountability. (10 marks)

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