Subject: PUBLIC SECTOR ACCOUNTING & FINANCE (PSAF)

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PSAF – Mar 2025 – L2 – Q5- International public sector accounting standards

Explain major activities of IPSASB to deliver its mandate.

Question

a) The International Public Sector Accounting Standards Board (IPSASB) – formerly the Public Sector Committee (PSC) – of the International Federation of Accountants (IFAC) focuses on the accounting, auditing and financial reporting needs of national, regional, and local governments, related governmental agencies and the constituencies they serve. In 2004, the PSC was relaunched as the IPSASB with revised terms of reference to reflect the Board’s mandate.

Required: (i) Explain the major areas of activities undertaken by IPSASB to deliver its mandate. (ii) Discuss FOUR non-authoritative materials that the IPSASB develops and issues in fulfilling its objectives.

b) Public Financial Management requires regulation within a macroeconomic framework to ensure that public funds are sustainable, reduction of fiscal risk and to support the general economic policy of the Government. In the Government’s quest to realise this goal, the role of the Ministry of Finance and the Bank of Ghana cannot be overlooked.

Required: Explain FIVE roles each of the Minister for Finance and the Bank of Ghana in supporting the general economic policy of government.

Answer

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Tags: Guidance, IPSASB, Public Sector Accounting, Stakeholder engagement, Standard Setting
Level: Level 3

Topic: The context of public financial management
Series: MAR 2025

PSAF – Mar 2025 – L2 – Q4 – Financial statements discussion and analysis

Prepare a paper evaluating Borga and Obi Manso’s 2023 financial performance using specified metrics.

Question

Below are IPSAS-compliant financial statements of two developing countries, Borga and Obi Manso for the year ended 31 December 2023 expressed in the local currency of Ghana and published by an international public financial management organization domiciled in Accra, Ghana.

Statement of Financial Performance for the Year ended 31 December 2024

	Borga	Obi Manso
	GH¢ million	GH¢ million
Revenue
Tax Revenue	302,400	317,300
Non Tax Revenue	50,400	76,000
Grants and Donations	10,440	5,985
	363,240	399,285
Expenditure
Employee compensation	190,512	161,880
Goods and Services	41,208	50,350
Consumption of Fixed Assets	4,680	8,550
Interest	77,880	76,000
Social Benefits	8,160	17,100
Subsidies	–	4,275
Other Expenses	4,800	9,880
	327,240	328,035
Surplus	36,000	71,250

Statement of Financial Position as at 31 December 2024

	Borga	Obi Manso
	GH¢ million	GH¢ million
Assets
Non-Current Assets
Property, Plant and Equipment	96,000	180,500
Equity Investments	42,000	33,250
Loans Receivables	4,800	2,850
	142,800	216,600
Current Assets
Loan Receivables	33,600	37,050
Inventory	4,800	11,400
Cash and Cash Equivalent	57,600	30,400
	96,000	78,850
Total Assets	238,800	295,450
Funds and Liabilities
Current Liabilities
Payables	36,000	40,850
Deposits and Trust Monies	58,800	57,000
	94,800	97,850
Non-Current Liabilities
Domestic Debt	24,000	38,000
External Debt	50,400	85,500
	74,400	123,500
	169,200	221,350
Accumulated Funds	69,600	74,100
Funds and Liabilities	238,800	295,450

Required: a) Prepare a paper for presentation at an upcoming PFM forum to evaluate the performance of the two countries using the following metrics: i) Revenue to Total Assets ii) Current Ratio iii) Debt to Owners Fund iv) Accumulated Fund to Total Assets v) Common Size analyses of Tax Revenue, Compensation of Employees and Surplus

b) Using the metrics above, interpret the performance of the two countries under efficiency, short-term liquidity and long-term liquidity/stability of the countries with a metric each.

Answer

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Level: Level 2

Topic: Financial Statements Discussion and Analysis
Series: MARCH 2025

PSAF – Mar 2025 – L2 – Q3- Public sector fiscal planning and budgeting

Examine implications of Ghana's 2025-2028 fiscal policy proposals per PFM Act 2016.

Question

a) The Government has unveiled its transformative agenda, driven by its fiscal strategy, covering the period 2025 -2028. In the Agenda 2028 document released by the government, the following strategies were outlined:

Taxes on individual income (referred to as pay-as-you-earn) will be suspended until 2029.
Development will be driven by debt, with the government leveraging its goodwill to borrow from development partners and investors to fund its development programmers and projects. By the end of 2024, the debt-to-GDP ratio was projected to reach 80%.
There will be significant government expenditure aimed at boosting development and enhancing citizens’ living conditions. Data from 2024 indicate that the fiscal balance relative to GDP stands at 17%.
All forms of extravagance and wastefulness within the public sector will be eradicated to ensure efficiency, effectiveness, and value for money across all government operations.
The statement also noted that the government reserves the right to suspend the fiscal rules and targets as and when necessary.

Required:
i) Examine the implications of the government’s policy propositions (1 to 4) in relation to the principles of formulating and implementing fiscal policy objectives outlined in the Public Financial Management Act 2016, (Act 921).

ii) Discuss the steps and events that will necessitate a cabinet approval for a suspension of the fiscal rules and targets under the Public Financial Management Act 2016, (Act 921).

b) The Public Expenditure and Financial Accountability (PEFA) Framework is designed to evaluate the public financial management performance of public institutions. However, some critics, including the Director of Finance of your entity, argue that PEFA represents a form of neo-colonialism repackaged for Africa, and therefore, African countries should resist its assessment.

Required:
i) Explain to the Director of Finance FOUR reasons your country’s PFM system should be subjected to PEFA assessment.

ii) Discuss FOUR limitations of the PEFA framework used to assess PFM systems.

Answer

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Tags: Debt Management, Efficiency, Fiscal Policy, Government Expenditure, PFM Act, Public Financial Management, Tax suspension
Level: Level 2

Topic: Public expenditure and financial accountability framework
Series: MARCH 2025

PSAF – Mar 2025 – L2 – Q2 – International public sector accounting standards

Explain the meaning of a qualifying asset per IPSAS for Ghana Highway Authority.

Question

Ghana Highway Authority prepares its financial statements in accordance with International Public Sector Accounting Standards (IPSAS). The Government of Ghana has approved the sum of GH¢678,000 to the Ghana Highway Authority for the construction of a qualifying infrastructural asset.
The following costs were incurred during the construction of the Asset:
i) The sector minister in the process recommended his brother as a consultant to conduct feasibility analysis on the construction of the asset. The consultant charged the Authority the sum of GH¢350,000.
ii) An installation of platforms to enable the project to be undertaken were designed and built at a cost of GH¢225,900.
iii) Some foreign elements of the service required that Letter of Credit was processed to enable execution of the project, and the legal fees charged was GH¢275,000.
iv) Importation of specific components from Germany to execute the project in question cost the Authority €58,890.
v) Haulage and Freight charges cost €5,725.
vi) Cleaning and engine oil for first testing of equipment at the project site amounted to GH¢19,430.
vii) The cost of warranty on the asset was €3,400 should the Authority take advantage of the warranty agreement.
viii) Delivery, handling and other overhead amounted to GH¢156,800 out of which 60% were attributable.
ix) The Ghana Highway Authority consequently incurred cost of GH¢398,560 in modification of an adjoining infrastructure to facilitate the project.
The Government of Ghana was not able to provide all the amount hence the Minister for Finance gave approval to the Chief Executive Officer (CEO) of the Authority to borrow the excess amount from open market which a financial institution provided at a commercial rate of 35% per annum. Government of Ghana (GoG) accounting policy adopts the allowed alternative approach of borrowing costs under IPSAS 5: Borrowing Costs.
A check from the professional website of the Institute of Architects and Engineers in Ghana indicates that the professional fee that can be charged under the service rendered by the consultant would cost only GH¢195,000.
To the extent that the funds borrowed was not GoG funds, and the fact that the funds would be required after 100 days to pay for the cost of the asset, which was provided earlier than envisaged, the CEO took advantage of the 14 weeks’ grace period for payment and invested the funds in a 91-day investment which yielded a return of 24.09% per annum at first maturity when the funds were held in anticipation of payment.
The prevailing exchange rate on the date of the contract was GH¢13.50 to €1.00, however on the day of payment the exchange rate shot up to GH¢15.57 to €1.00.

Required:
a) Explain what is meant by a qualifying asset.

b) Determine the cost of the qualifying asset for capitalization.

c) Based on the information provided, indicate FIVE notes to the accounts in the books of the Ghana Highway Authority.

d) Explain another method or approach by which the borrowing cost could be recognized under IPSAS 5: Borrowing Costs.

Answer

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Level: Level 2

PSAF – Mar 2025 – L2 – Q1- Preparation and presentation of financial statements for covered entities

Prepare the Statement of Financial Performance for Hamile Teaching Hospital for 2023 per IPSAS and related regulations.

Question

The Trial Balance below relates to Hamile Teaching Hospital, a public hospital.

Trial Balance for the year ended 31 December 2023
	Debit	Credit
	GHc’000	GHc’000
Government subvention		100,750
Out-patient services fees		35,000
In-patient services fees		40,000
Development Partner grants (ii)		16,000
Established position salaries	62,000
Casual Labour	5,600
Contract appointment (local and foreign)	1,400
Limited engagements	200
Rent (iii)	500	150
Insurance	340
Consultancy services	120
Conferences, workshops and training	4,500
Purchase of drugs	60,000
Purchase of medical consumables	80,000
Office expenses	20,000
Repairs and maintenance	6,000
Interest on loan	10,000
Pharmacy sales		180,000
Diagnostic		85,000
Mortuary Services		9,400
Cafeteria and Canteen		4,650
Extension services		14,500
Furniture and office equipment (iv)	200,000	40,000
Medical equipment & accessories (iv & v)	420,000	120,000
Motor vehicles (iv)	120,000	20,000
Land and buildings (iv)	300,000	70,000
Bank and Cash	30,000
Receivable from National Health Insurance Scheme (vi)	65,000
Receivable from patients	15,000
Payables		26,000
Loan from foreign Institution (2028) (vii)		350,000
Inventory of drugs	22,000
Inventory of medical consumables	12,000
Accumulated Fund		336,210
Other expenses	13,000
	1,447,660	1,447,660

Additional Information:
i) The hospital prepares its financial statements in accordance with the International Public Sector Accounting Standards (IPSAS), the Public Financial Management Act 2016, (Act 921), the Public Financial Management Regulation 2019, L.I 2378, and the current Chart of Accounts of the Government of Ghana.
ii) The Development Partner grants received from the Health Care Fund, an international organization that provides free medical care to the rural poor and vulnerable individuals, are typically unconditional. However, 40% of this year’s grant is subject to certain conditions, which had not been met as of December 31, 2023.
iii) Rent received in advance during the year amounted to GH¢20,000 while rent owed by the hospital for the year amounts to GH¢300,000.
iv) The hospital charges consumption of fixed assets on straight line basis as follows

Non-current Assets	Estimated Useful Life
Furniture and office equipment	5 years
Medical equipment and accessories	4 years
Motor vehicles	5 years
Buildings	10 years

Land constitutes 30% of the amount of land and building shown in the trial balance.
v) A medical equipment valued at GH¢20,000,000 which is included in the medical equipment and accessories listed on the trial balance, was completely damaged due to consistent power fluctuations. The value of this equipment should be written off.
vi) The hospital submitted a claim of GH¢11,000,000 to the National Health Insurance Scheme for services provided to patients in the last quarter of 2023, but the payment has not yet been received. This transaction has not yet been reflected in the trial balance.
vii) The hospital took a loan of $100,000,000 from Health World Bank on January 1, 2023, when the exchange rate was $1 to GH¢3.50. The exchange rate on 31 December 2023 is $1 to GH¢5.
viii) The inventories on 31 December 2023 were as follows:

Inventory type	Cost	Net Realizable Value	Current Replacement
	GHc’000	GHc’000	GHc’000
Drugs	15,000	16,000	14,000
Medical consumables	10,000	11,000	9,000

Required:
Prepare for Hamile Teaching Hospital:
a) Statement of Financial Performance for the year ended 31 December 2023.

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

c) Disclosure notes to the financial statements.

Answer

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Topic: Preparation and presentation of financial statements for covered entities
Series: MARCH 2025

PSAF – Nov 2024 – L2 – Q5c – Functions of the State Interests and Governance Authority

Explains four functions of the State Interests and Governance Authority (SIGA) in overseeing state entities.

Question

The Nine Hundred and Ninetieth Act of the Parliament of the Republic of Ghana entitled the State Interests and Governance Authority Act, 2019 was established to oversee and administer state interests in state-owned enterprises, joint venture companies, and other state entities and to provide for related matters.

Required:

Explain FOUR functions of the State Interests and Governance Authority (SIGA).

Answer

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Topic: Public expenditure and financial accountability framework
Series: Nov 2024

PSAF – Nov 2024 – L2 – Q5b – Nolan’s Principles of Public Life

Explains four of Nolan’s Seven Principles of Public Life, which guide ethical behavior in public office.

Question

Nolan’s Seven Principles of Public Life serve as guidelines for ethical behavior in public service. They are not typically enforceable through direct legal actions; instead, they often operate as moral and professional standards shaping the behavior of individuals in public office.

Required:

Explain FOUR of these principles.

Answer

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Tags: Accountability, Integrity, Leadership, Nolan’s Principles, Professionalism, Public Ethics, Public Governance, Public Service, Selflessness
Level: Level 2

Topic: Public expenditure and financial accountability framework
Series: Nov 2024

PSAF – Nov 2024 – L2 – Q5a – Public Financial Management Regulations

Explains the provisions in PFM Regulation 2019 for a Principal Spending Officer in the payment process and differentiates between misapplication and misappropriation of funds.

Question

a) The Public Financial Management Regulation makes the Principal Spending Officer (PSO) personally responsible for all payments of the covered entity. To mitigate possible risk exposure of the PSO during the payment process, the regulations provide guidance to assist approving authorities before signing off any payment.

In recent times, the Auditor-General has faulted PSOs for infractions such as misapplication of funds, misappropriation of funds, and partially accounted payments among others. Similar observations were cited in the 2023 Management Letter of Nipa Ye Municipal Assembly.

Required:

i) With reference to the PFM Regulation 2019, LI 2378, explain the provisions available to the PSO in the payment process before approval.

ii) Distinguish between misapplication of funds and misappropriation of funds as used by the Auditor-General with an example each.

Answer

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Topic: Public expenditure and financial accountability framework
Series: Nov 2024

PSA – Nov 2024 – L2 – Q4c – Events After the Reporting Date

Explanation of events occurring after the reporting date and their impact on financial statements.

Question

Explain THREE limitations of ratio analysis

Answer

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Tags: Adjusting Events, Events After Reporting Date, Financial Statements, Non-adjusting Events
Level: Level 2

Topic: General purpose financial reporting framework
Series: Nov 2024

PSAF – Nov 2024 – L2 – Q4b – Public Expenditure and Financial Accountability

Explanation of the Public Expenditure and Financial Accountability framework and its application.

Question

Based on your results in (a), write a report to the newly appointed board analyzing and indicating whether their performance is better in comparison with the old board.

Answer

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Tags: Accountability, Budgeting, Compliance, Financial Reporting, Public Expenditure
Level: Level 2

Topic: Financial Statements Discussion and Analysis
Series: Nov 2024

PSAF – Nov 2015 – L2 – Q6b – Fiscal Policy and Public Finance

Discusses three allocation roles of government in developing economies to support resource distribution.

Question

Discuss THREE allocation “roles of government” in the context of a developing economy.

Answer

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Tags: Developing Economies, Economic Development, Government Roles, Public Goods, Resource Allocation
Level: Level 2

Topic: Fiscal Policy and Public Finance
Series: NOV 2015

PSAF – Nov 2015 – L2 – Q6a – Introduction to Public Sector Accounting

Describe key characteristics of a developing economy with reference to Nigeria.

Question

In spite of the abundant human and natural resources with which Nigeria is endowed, the country is conspicuously listed among developing countries of the world. In light of the foregoing:

a. Explain FOUR features of a developing economy with particular reference to Nigeria.

Answer

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Tags: Dependency Burdens, Developing Economy, Economic Characteristics, Low Living Standards, Nigeria
Level: Level 2

Topic: Introduction to Public Sector Accounting
Series: NOV 2015

PSAF – Nov 2015 – L2 – Q5b – Public Sector Audit

Identify audit tests for revenue collectors and internal control questionnaires for imprest accounts.

Question

i. State THREE tests to be carried out when auditing a revenue collector.
(3 Marks)

ii. Identify any THREE internal control questionnaires to evaluate the operation of imprest accounts.
(3 Marks)

Answer

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Tags: financial accountability, Imprest Account, Internal Control, Revenue Collector Audit
Level: Level 2

Topic: Public sector audit
Series: NOV 2015

PSAF – Nov 2015 – L2 – Q5a – Public Sector Audit

Outline audit objectives for Treasury, Agency, and Government Enterprise accounts.

Question

The functions of the office of the Auditor-General for the Federation is to audit the accounts of all Accounting Officers and all persons entrusted with the collections, receipts, custody, issue, or payment of Federal Government monies or with the receipt, collection, issue, sale, transfer, or delivery of any stamps, securities, stores, or other property of the Government of the Federation and for the certification of the annual accounts of the Government.

In light of the above, state three audit objectives of:
i. Treasury Accounts.
ii. Agency Accounts.
iii. Government Enterprise Accounts.

Answer

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Tags: Agency Accounts, Asset Security, Audit Objectives, Compliance, Government Enterprise Accounts, Treasury Accounts
Level: Level 2

Topic: Public sector audit
Series: NOV 2015

PSAF – Nov 2015 – L2 – Q4 – Public Sector Financial Statements

Prepare the financial statements of Egbin Electricity Board for 2014, including statement of financial performance and position.

Question

The following information has been extracted from the books of Egbin Electricity Board, a public sector-owned electricity generating company, for the year ended December 31, 2014:

Item	N’000
Accumulated Depreciation, January 1, 2014	45,224
Sale of Electricity	114,392
Purchase of Electricity	95,784
Meter reading, billing, and collection	1,624
Non-Current Assets Expenditure	84,102
Debtors for electricity consumption	12,006
Training and welfare	692
Stock and work-in-progress	1,234
Rents, Rates, and Insurance	2,126
Electricity Estimated unread consumption	7,222
Administration and General Expenses	1,476
Electricity Council Grant	21,556
Preparation of Electricity Council’s Expenses	362
Bank Balance and Cash	1,284
Depreciation for the year	3,634
Hire purchase and deferred payment	2,672
Interest and Financing Expenses	2,434
Creditors and accrued liabilities	13,926
Profit on contracting and sale of appliance poles	534
Reserves	23,116
Rental of Meters Application	556
Distribution cost	4,476
Customer Service	1,810

Required:

Prepare in vertical form the Statement of Financial Performance and Statement of Financial Position for Egbin Electricity Board for the year ended December 31, 2014.

Answer

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Tags: Financial Reporting, Public Sector Accounting, Statement of Financial Performance, Statement of Financial Position
Level: Level 2

Topic: Public Sector Financial Statements
Series: NOV 2015

PSAF – Nov 2015 – L2 – Q3c – Government Revenue

Compute Irepodun State Government's revenue budget for 2015 fiscal year.

Question

Irepodun State is inhabited by 8,000,000 citizens. The State is expected to generate revenue from different sources. The following details are provided for the 2015 fiscal year:

(i) The number of taxable adults residing in the State is 3,500,000. The rate of tax payable per resident is N20,000 per taxable adult on average per annum.
(ii) There are 22,500 industries which are expected to pay land use charges of N10,000 per industry.
(iii) There are 2,300,000 residential buildings expected to pay land use charge of N4,500 per house per annum.
(iv) The modern markets built by the State Government will generate N12,000 per annum per stall and N5,000 per annum per seller and hawker operating in the markets. There are 3,000 modern stalls and 250,000 sellers and hawkers assumed to operate in the markets each year. The local governments within the areas of the markets’ location are entitled to 50% of revenue generated from the markets.
(v) There are 5,000 mass transit buses owned by the State Government, each of which generates N5,000 per business day. Assume 28 business days in a month.
(vi) The State expects the following additional revenue in the year:

Revenue Source	N’Million
Statutory allocation from the Federation	25,000
Miscellaneous Revenue	3,000

Required:

Compute the revenue budget of Irepodun State Government for the fiscal year 2015.

Answer

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Tags: Fiscal Planning, Public Sector Revenue, Revenue Budget, Tax computation
Level: Level 2

Topic: Government Revenue
Series: NOV 2015

PSAF – Nov 2015 – L2 – Q3b – Treasury Management in the Public Sector

Describe five weaknesses in Nigeria's cash management practices.

Question

Discuss any FIVE weaknesses in the current system of cash management in Nigeria.

Answer

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Tags: Budgetary Control, Cash Management, Government Revenue, Inter-Agency Collaboration, Oil Dependence, Treasury Monitoring
Level: Level 2

Topic: Treasury Management in the Public Sector
Series: NOV 2015

PSAF – Nov 2015 – L2 – Q3a – Treasury Management in the Public Sector

State four key objectives of cash planning and management.

Question

Cash management is one of the challenges of Treasuries all over the world.

a. Identify any FOUR objectives of cash planning and management.

Answer

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Tags: Budget Execution, Cash Management, Financial Monitoring, Idle Cash, Procurement
Level: Level 2

Topic: Treasury Management in the Public Sector
Series: NOV 2015

PSAF – Nov 2015 – L2 – Q2 – Pension Accounting in the Public Sector

Analysis of pension misappropriation under the Pension Reform Act, detailing offences, penalties, and competent jurisdictions.

Question

Mr. Betta Tomoro is a staff of Goodlife Local Government Council of Welfare State. He has been in the local government council’s employment for twenty-five (25) years. Recently, he attained the age of fifty-two (52) years. He had risen to the post of an Assistant Director on grade level 15, step 2. Mr. Betta Tomoro and his employer had contributed the sum of N8.5 million under the old Pension Scheme and Pension Reform Act 2014. Monthly contributions are sent to his Pension Fund Administrator (PFA), Diversity Pension Managers Limited.

It is the practice of the Pension Fund Administrator to send to Mr. Betta Tomoro the records of his pension on a monthly basis. However, in April 2015, no further record was received by Mr. Betta Tomoro concerning his pension fund. This resulted in his visit to the Pension Fund Administrator’s office to inquire about the sudden stoppage of his pension fund.

During cross-examination at the Court of Competent Jurisdiction to hear pension-related offences, it was found that five staff members of Diversity Pension Managers Limited had bought mansions in Victoria Garden City and other houses in London valued at N380 million. They jointly floated a company, Owo-mugun Limited, with all operational infrastructure in place, all valued at N175 million. They also had N18 million in various local and international bank accounts.

After two hearings on the allegations of criminal misappropriation of clients’ pension monies filed against these staff, judgment was reserved by the court for December 15, 2015.

Required:

a. In line with the Pension Reform Act 2014, identify TWO acts that constitute criminal offences.
(4 Marks)

b. If by December 15, 2015, the five staff are found guilty of misappropriation of clients’ pension fund, state THREE penalties provided to be imposed on them as per the Pension Reform Act 2014.
(6 Marks)

c. Identify THREE Courts of Competent Jurisdiction that can hear pension-related cases as provided in the Act.
(3 Marks)

d. If Mr. Betta Tomoro preferred to withdraw his service voluntarily from Goodlife Local Government Council at the age of forty-five (45) years, what provisions would be available to him concerning his pension contribution?
(3 Marks)

e. Assuming the prevailing interest rate is 21.5%, compute the total amount payable by the convicts (including interest) if the entire amount misappropriated is ordered to be refunded by the court.
(4 Marks)

Answer

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Tags: Courts of Competent Jurisdiction, Criminal Offences, Interest Rate, Penalties, Pension Fund Misappropriation, Pension Reform Act, Voluntary Withdrawal
Level: Level 2

Topic: Pension Accounting in the Public Sector
Series: NOV 2015

PSAF – Nov 2015 – L2 – Q1 – International Public Sector Accounting Standards (IPSAS)

Evaluate financial treatment for leased machinery, borrowing costs, and investment properties in a public sector agency's financial statements.

Question

Top-Hill State Investment Agency, a government business entity, provided the following transactions for the financial year ended December 31, 2014:

a. On January 1, 2014, the company acquired machinery on lease with a fair value of ₦500,000 and a residual value of NIL at the end of its economic life of five years. The lease payment of ₦139,778 was made first on January 1, 2014, with payments due on the first day of each financial year. The implicit interest rate was set at 8%.

b. Top-Hill State Investment Agency incurred borrowing costs of ₦5 million for the financial year ended December 31, 2014, with ₦1.2 million specifically related to constructing a qualifying asset. The Agency’s policy is to capitalize borrowing costs in line with IPSAS 5 on “Borrowing Costs.”

c. The Agency applies the cost model to its investment properties. At the end of the 2013 financial year, the investment properties carried a value of ₦4.5 million. The Agency depreciates these properties using a 25% reducing balance. The fair value as of December 31, 2014, was ₦4.2 million.

Required:

Explain how the newly leased machinery should be treated in the Financial Statements (Extracts) of the Agency.
State the amount to be taken to the Statement of Financial Performance (Extracts) and the Statement of Financial Position (Extracts) for the year ended December 31, 2014. (20 Marks)
Explain how the ₦5 million borrowing costs should be treated in the financial statements (Extracts) and state the amount to be recorded in the Statement of Financial Performance (Extracts) and the Statement of Financial Position (Extracts) for the year ended December 31, 2014. (4 Marks)
Identify and explain the accounting entries required as of December 31, 2014, to account for the Investment Properties. Show workings. (6 Marks)

Answer

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Tags: Borrowing Costs, Capitalization, Investment properties, IPSAS Compliance, Leased Machinery
Level: Level 2

Topic: International public sector accounting standards
Series: NOV 2015

Subject: PUBLIC SECTOR ACCOUNTING & FINANCE (PSAF)

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PSAF – Mar 2025 – L2 – Q5- International public sector accounting standards

Explain major activities of IPSASB to deliver its mandate.

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PSAF – Mar 2025 – L2 – Q4 – Financial statements discussion and analysis

Prepare a paper evaluating Borga and Obi Manso’s 2023 financial performance using specified metrics.

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PSAF – Mar 2025 – L2 – Q3- Public sector fiscal planning and budgeting

Examine implications of Ghana's 2025-2028 fiscal policy proposals per PFM Act 2016.

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PSAF – Mar 2025 – L2 – Q2 – International public sector accounting standards

Explain the meaning of a qualifying asset per IPSAS for Ghana Highway Authority.

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PSAF – Mar 2025 – L2 – Q1- Preparation and presentation of financial statements for covered entities

Prepare the Statement of Financial Performance for Hamile Teaching Hospital for 2023 per IPSAS and related regulations.

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PSAF – Nov 2024 – L2 – Q5c – Functions of the State Interests and Governance Authority

Explains four functions of the State Interests and Governance Authority (SIGA) in overseeing state entities.

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PSAF – Nov 2024 – L2 – Q5b – Nolan’s Principles of Public Life

Explains four of Nolan’s Seven Principles of Public Life, which guide ethical behavior in public office.

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PSAF – Nov 2024 – L2 – Q5a – Public Financial Management Regulations

Explains the provisions in PFM Regulation 2019 for a Principal Spending Officer in the payment process and differentiates between misapplication and misappropriation of funds.

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PSA – Nov 2024 – L2 – Q4c – Events After the Reporting Date

Explanation of events occurring after the reporting date and their impact on financial statements.

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PSAF – Nov 2024 – L2 – Q4b – Public Expenditure and Financial Accountability

Explanation of the Public Expenditure and Financial Accountability framework and its application.

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PSAF – Nov 2015 – L2 – Q6b – Fiscal Policy and Public Finance

Discusses three allocation roles of government in developing economies to support resource distribution.

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PSAF – Nov 2015 – L2 – Q6a – Introduction to Public Sector Accounting

Describe key characteristics of a developing economy with reference to Nigeria.

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PSAF – Nov 2015 – L2 – Q5b – Public Sector Audit

Identify audit tests for revenue collectors and internal control questionnaires for imprest accounts.

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PSAF – Nov 2015 – L2 – Q5a – Public Sector Audit

Outline audit objectives for Treasury, Agency, and Government Enterprise accounts.

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PSAF – Nov 2015 – L2 – Q4 – Public Sector Financial Statements

Prepare the financial statements of Egbin Electricity Board for 2014, including statement of financial performance and position.

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PSAF – Nov 2015 – L2 – Q3c – Government Revenue

Compute Irepodun State Government's revenue budget for 2015 fiscal year.

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PSAF – Nov 2015 – L2 – Q3b – Treasury Management in the Public Sector

Describe five weaknesses in Nigeria's cash management practices.

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PSAF – Nov 2015 – L2 – Q3a – Treasury Management in the Public Sector

State four key objectives of cash planning and management.

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PSAF – Nov 2015 – L2 – Q2 – Pension Accounting in the Public Sector

Analysis of pension misappropriation under the Pension Reform Act, detailing offences, penalties, and competent jurisdictions.

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PSAF – Nov 2015 – L2 – Q1 – International Public Sector Accounting Standards (IPSAS)

Evaluate financial treatment for leased machinery, borrowing costs, and investment properties in a public sector agency's financial statements.

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