Tag (SQ): Consolidation

Zamunda Transport Agency
(a) (i) A government has established a Zamunda Transport Agency. The Zamunda Transport Agency has assumed many responsibilities previously held by the government. The agency is responsible for the regional transportation network in the metro and regional areas of the jurisdiction, including public transport and major roads and bridges. The agency receives approximately 2/3rds of its funding for operations from a share of the government’s fuel taxes and general tax revenues. The remainder of the revenue for operations comes from non-government sources such as fares, advertising, and property development. The government contributes toward rapid transit projects. The agency has raised capital through significant borrowings that are guaranteed by the government. The agency is allowed to operate autonomously; however, the agency’s mandate is established by legislation, and the government sets the regional transportation vision. The government has the power to appoint and remove a majority of the members of the board of directors of the Zamunda Transport Agency. The government has never exercised this power. The agency’s board of directors is responsible for hiring, compensating, and monitoring the performance of the management and for providing oversight of the agency’s strategic planning, finances, major capital projects, and operations. The government has the power to veto operating and capital budgets, including fares and capital financing plans.

Required:
In line with IPSAS 35 Consolidated Financial Statements, assess whether the government has control over the Zamunda Transport Agency.                                                                                                                                                                                                             (ii)Discuss the procedures you will follow in preparation of the financial statements, given that control has been established in question (a).                                                                                                                                                                                                                                                                                                                                                                                                                                                                     (b)

Zamunda Transport Agency

(b) Explain the following terms used in the IPSAS:

(i) Equity method of accounting;

(ii) Joint arrangement;

(iii) Economic entity view of financial reporting; and

(iv) Associate.