CGA Public Sector & Not-for-Profit Accounting 3

Question 1

A hospital (an NPO) receives a pledge of $100,000 with payment expected in 18 months. Under Canadian GAAP for NPOs using the deferral method, how is this pledge treated at year-end?

Accepted Answer

Recognized as revenue and recorded as a receivable if collection is reasonably assured

Answer

Recognized as revenue only when cash is received

Answer

Recorded as a contingent asset with no financial statement entry

Answer

Deferred until the pledge payment is within 12 months

Question 2

The 'whole-of-government' approach in public sector consolidated financial statements requires:

Accepted Answer

Consolidation of all government-controlled entities into a single set of financial statements

Answer

Each government department to issue separate audited statements

Answer

Reporting only tax revenues and transfer payments

Answer

Using cash basis for all controlled entities

Question 3

Which PSAB standard addresses the disclosure requirements for government transfers (grants) to third parties?

Accepted Answer

PS 3410 – Government Transfers

Answer

PS 3210 – Assets

Answer

PS 3100 – Restricted Assets and Revenues

Answer

PS 2601 – Foreign Currency Translation

Question 4

For an NPO using the restricted fund method, unrestricted contributions received are recognized:

Accepted Answer

As revenue in the general fund in the period received

Answer

In the restricted fund in the period received

Answer

As deferred revenue until designated by management

Answer

As an increase in endowment fund balance

Question 5

What distinguishes a 'controlled entity' from an 'organization subject to significant influence' in the government reporting entity?

Accepted Answer

Control means the government has the power to govern financial and operating policies; significant influence means the ability to affect but not control those policies

Answer

Controlled entities must be majority-owned; significant influence requires 20–50% ownership

Answer

Controlled entities use equity method; significant influence entities are not consolidated

Answer

The distinction is based solely on the level of funding provided by the government

Question 6

A public sector entity enters into a Public-Private Partnership (P3) for a new bridge. Under PSAB, the infrastructure asset should typically be recognized on the government's books when:

Accepted Answer

The government controls the asset and receives substantially all of the service potential

Answer

The private partner completes construction and transfers the asset

Answer

The final payment is made to the private partner at end of the concession period

Answer

The partnership agreement is signed

Question 7

Which statement best describes the concept of 'accountability' as it applies to public sector financial reporting?

Accepted Answer

Governments must demonstrate responsible stewardship of public resources and report on achievement of service objectives to citizens and legislators

Answer

Governments must maximize profit and return surplus to taxpayers

Answer

Public sector entities must apply the same standards as publicly listed private companies

Answer

Accountability requires governments to balance budgets every fiscal year