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IPSAS 1 Presentation of Financial Statements identifies a complete set of financial statements (under the accrual basis) as a statement of financial position, statement of financial performance, statement of changes in net assets/equity, cash flow statement, and accounting policies and notes to the financial statement.Required:
Identify four major disclosures that must be made in respect of the general government sector in the preparation of financial statements. (4 marks)
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Financial Reporting is not an end in itself. Its usefulness is by reference to the users of General-Purpose Financial Reports (GPFR) and their information needs. Until the information provided meets the information needs of the users, that information is worthless. Thus, accountants must be knowledgeable of the class of users of the information and the need for such information. The Conceptual Framework identifies the primary users whose information needs should be paramount in the preparation of GPFR.
Required:
Discuss FOUR (4) matters that the information provided in a GPFR helps primary users to assess an entity. (5 marks)
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You are the Head of Finance of Public Sector Reform Secretariat, Office of the President. You have received the following e-mail from the Chief Executive Officer.
Email:
“Dear Head of Finance,
I have been invited by the Office of Head of Civil Service to attend a seminar on the theme ‘Fundamentals of Public Financial Reporting’. Among the topics listed for discussion are the following:
I am aware of your expertise in public financial management and will greatly appreciate it if you could prepare some briefing notes for me to bridge my knowledge gap prior to the conference.”
Required:
As Head of Finance and a recipient of the e-mail, provide your response in a memo to the Chief Executive Officer.
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According to the Conceptual Framework for General Purpose Financial Reports (GPFR), the objective of measurement in financial reporting in public sector entities is to select those measurement bases that most fairly reflect the cost of services, operational capacity, and financial capacity of the entity in a manner that is useful for accountability and decision-making purposes.
Required: Explain the under listed bases and discuss the extent to which each measurement reflects the cost of service, operational capacity, and financial capacity of an entity.
i) Historical cost
ii) Market Value
iii) Replacement cost
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In line with the Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities issued by the International Public Sector Accounting Standards Board (IPSASB), explain the difference, if any, between a General-Purpose Financial Report and a Special-Purpose Financial Report.
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Find Related Questions by Tags, levels, etc.
Public sector entities are required to present financial reports in compliance with the International Public Sector Accounting Standards (IPSAS). However, Government Business Enterprises (GBEs) are to present the financial reports using IFRS due to their peculiar characteristics that separate them from other public sector entities.
In determining whether an entity is a GBE for financial report purposes, one must examine their nature and characteristic rather than the legal form. In the entity you work for, there is controversy among top management about whether to use IPSAS or IFRS.
Required: Identify FOUR characteristics of GBEs in accordance with IPSAS 1, Presentation of Financial Statements. (4 marks)
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The following revelations were made about the financial reporting process of a covered entity:
i) The users of the financial statements of the entity is less interested in the financial information because it does not provide information that enables the users to either confirm their expectation or make predictions.
ii) Equipment purchased during the year was recognized as an expense in the statement of financial performance, even though the entity applies the accrual principles.
iii) A revenue transaction of a significant value was completely omitted from the financial statement of the entity unintentionally.
iv) The financial statements showed the budget amounts alongside the actual amounts of the year in the Statement of Financial Performance.
v) The Accountant confirmed that some records relating to expenses were done based on WhatsApp messages (online texting app) from the Principal Spending Officer.
Required: Explain how each of the transactions (i) to (v) would affect a specific qualitative characteristic of the financial statements of the entity. (10 marks)
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| Revenue | GH₵ | GH₵ | |
|---|---|---|---|
| GOG Subvention | 152,000 | ||
| Internally Generated Fund (IGF) | 1 | 187,000 | |
| Donations | 4 | 45,000 | 384,000 |
| Description | GH₵ | GH₵ | |
|---|---|---|---|
| Compensation | 2 | 68,000 | |
| Use of Goods & Services | 3 & 5 | 35,000 | |
| Consumption of Fixed Asset | 13,000 | (116,000) | |
| Surplus | 268,000 |
Additional Information:
Required:
i) Redraft the financial statement under Cash Accounting Basis for the year ended 31 December 2022, showing the necessary adjustments. (7 marks)
ii) Justify THREE (3) reasons management would want to prepare the financial statement under Cash Accounting Basis. (3 marks)
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b) With reference to IPSAS 3: Accounting Policies, Changes in Estimates and Errors:
i) Explain the guiding principles for formulating accounting policy. (2 marks)
ii) The conditions that mandate a change in accounting policy. (2 marks)
iii) The treatment of changes in accounting policy required by IPSAS 3. (2 marks)
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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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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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Many individuals with an interest in the performance of a public entity do not have the power to require the entity to produce customized financial or performance information. Instead, they rely on the General-Purpose Financial Reports that public entities provide. General-Purpose Financial Reports are designed to provide financial and, where required, performance information to a range of users. To be relevant, the information must meet the accountability and/or decision-making needs of the users.
Required:
Explain TWO (2) constraints on the information included in General-Purpose Financial Reports. (4 marks)
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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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Find Related Questions by Tags, levels, etc.
General purpose financial reporting is concerned with the provision of information to users for accountability and decision-making purposes. It is said that financial reporting is not an end in itself but a means to an end. However, this does not mean that every public sector entity is a reporting entity.
Required:
i) In reference to the Conceptual Framework of General Purpose Financial Reporting, explain the information needs of FIVE (5) primary users of general purpose financial reports.
(7 marks)
ii) Discuss the statement “This does not mean that every public sector entity is a reporting entity.”
(3 marks)
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Below are some observations made after an assessment of the General-Purpose Financial Report (GPFR) prepared by a public sector entity in 2018:
i) Not only were transactions not treated in accordance with the IPSAS, some were omitted unknowingly.
ii) In presenting the financial performance, position, and cash flow for the current financial year, 2018, the accountant has also provided information on the current year’s budget.
iii) Investment amounting to GH¢1,000,000 in short-term security reported in the financial position lacks supporting documents even though the investment may exist.
iv) The financial report was dated 30 June 2019, which is an improvement over the previous years, which was signed in September 2018.
Required:
In line with the Conceptual Framework for GPFR by public sector entity:
Explain the qualitative characteristics of GPFR for each observation in (i) to (iv) above and explain how each of the observations affects the usefulness of the GPFRs to the users.
(5 marks)
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Some accountants hold the view that development of a Conceptual Framework for General Purpose Financial Reporting (simply, the Conceptual Framework) in the Public Sector is needless and a mere information overload on the Accountants. This argument is predicated on the fact that the Conceptual Framework does not establish authoritative requirements for financial reporting by public sector entities that adopt IPSAS, nor does it override the requirements of the International Public Sector Accounting Standards (IPSAS) or the Recommended Practice Guides (RPGs).
Required:
i) Explain the connection between the Conceptual Framework on one hand and IPSAS and RPGs on the other hand.
(2 marks)
ii) Illustrate a practical case where the Conceptual Framework would be useful to an accountant in the preparation and presentation of a General Purpose Financial Report for his organization.
(4 marks)
iii) Explain TWO (2) constraints on information included in the General Purpose Financial Reports.
(4 marks)
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One objective of Public Sector Accounting is accountability. Accountability requires that government justifies how public resources are raised and utilized by means of Financial Reporting. Financial Reporting helps to improve the performance of, and trust in, the public sector.
Required:
Explain FOUR (4) other objectives of Financial Reporting in public sector organizations.
(6 marks)
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