Public Sector & Not-for-Profit Accounting Flashcards

Which accounting standard-setter governs financial reporting for Canadian federal government entities?

Answer: PSAB

The Public Sector Accounting Board (PSAB) establishes accounting standards for Canadian public sector entities, including federal, provincial, and territorial governments.

Under public sector accounting, the modified accrual basis primarily differs from full accrual by:

Answer: Recognizing expenditures when the related liability is expected to be paid within the current period or shortly after

Modified accrual recognizes revenues when measurable and available, and recognizes expenditures when the liability is incurred and expected to be liquidated with current resources.

A not-for-profit organization (NPO) receives a donation restricted for building construction. Under Canadian GAAP for NPOs, which method allows this donation to be deferred until the asset is amortized?

Answer: Either the deferral method or restricted fund method

Under Canadian GAAP for NPOs, organizations may use either the deferral method or the restricted fund method to account for restricted contributions; both permit deferral matched to asset amortization.

In fund accounting used by governments, a debt service fund is established to:

Answer: Accumulate resources for repayment of long-term debt principal and interest

A debt service fund accumulates financial resources set aside for the payment of long-term debt principal and interest obligations.

Which financial statement is unique to public sector entities and not typically found in private sector reporting?

Answer: Statement of Remeasurement Gains and Losses

PSAB requires a Statement of Remeasurement Gains and Losses to separately report gains and losses arising from remeasuring financial instruments and foreign currency items at year-end.

An NPO uses the restricted fund method. An endowment contribution of $500,000 is received with the principal to be kept intact permanently. How should this be recorded?

Answer: As revenue in the endowment fund

Under the restricted fund method, endowment contributions are recognized as revenue in the endowment fund in the period received, as a separate fund exists for that purpose.

Government business enterprises (GBEs) in Canada are required to follow which accounting standards?

Answer: IFRS as adopted in Canada

Government business enterprises that operate on a commercial basis and are financially self-sustaining must apply IFRS as adopted in Canada, not PSAB standards.