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

Disclosures and interpretation of financial statements for public sector investments.

Question

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)

Answer

a. Disclosures for investments in associates:

Fair Value: The fair value of the investment in associate for which there are published price quotations.
Summarised Financial Information: Summarised financial information of associates, which includes significant financial data that supports the investment assessment.
Significant Influence: The reasons why an investor holds less than 20% of voting power in the investee but concludes that it has significant influence.
Reporting Date: The reporting date of the financial statements of an associate, including any differences from the reporting date of the investor.

b. Comparison of figures over the years:

Horizontal Analysis: This method compares financial data over a number of periods, providing insight into trends and growth patterns by calculating percentage changes year-on-year.
Vertical Analysis: This involves taking a single period’s financial statements and expressing each line item as a percentage of a base figure, allowing for easy comparison of financial performance.
Common-Size Statements: These statements normalize data from multiple periods into a standardized format (such as a percentage of sales or total assets), making it easier to analyze trends across time frames.