Chapter 14 Financial Statements PDF

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Summary

CHAPTER 14 FINANCIAL STATEMENTSLearning Objectives State the general principles in the presentation of financial statements. Prepare a complete set of general purpose financial statements of a government entity, including a partial note to the financial statements. Describe the accounting and disclo...

Description

CHAPTER 14 FINANCIAL STATEMENTS

Learning Objectives State the general principles in the presentation of financial statements. Prepare a complete set of general purpose financial statements of a government entity, including

a

partial

note

to

the

financial

statements. Describe

the

accounting

and

disclosure

requirements for events after the reporting date, changes in accounting policies, changes in accounting estimates, and correction of errors. State

the

“other

reports”

prepared

by

government entities.

General



Purpose

Financial

Statements

General Purpose Financial Statements are those intended to meet the needs of users who are not in a position to demand reports tailored to meet their particular information needs. (PPSAS 1.3)

Objectives of General Purpose Financial Statements

a. To provide information about the entity’s financial position, financial performance, and cash flows that is useful to a wide range of users in making economic decisions; and b. To demonstrate the accountability of the entity for the resources entrusted to it.

Responsibility for Financial Statements 

The responsibility over financial statements rests with the entity’s management, particularly the Head of the Entity jointly with the Head of Finance/Accounting.

Components of General Purpose Financial Statements 1. Statement of Financial Position; 2. Statement of Financial Performance; 3. Statement of Changes in Net Assets/Equity; 4. Statement of Cash Flows; 5. Statement of Comparison of Budget and Actual Amounts; and 6. Notes to the Financial Statements, comprising a summary of significant accounting policies and other explanatory notes.

General Principles 

Fair Presentation



Consistency of Presentation



Compliance with PPSASs



Materiality and Aggregation



Departure from PPSAS



Offsetting



Going Concern



Comparative Information

Identification of the Financial Statements 

The following information shall be displayed prominently and repeatedly: a. Name of the reporting entity;

MODULE ACCOUNTING FOR GOVERNMENT AND NON-PROFIT ORGANIZATIONS b. Whether the financial statements cover the individual entity or a group of entity; c. The reporting date or the period covered by the financial statements, whichever is appropriate to that component of the financial statements; d. Name of fund cluster; e. The reporting currency; and f. The level of rounding-off of amounts. (PPSAS 1.61)

Reporting Period 

Financial statements shall be presented at least annually.

Statement of Financial Position 

The statement of financial position is presented in comparative, condensed and detailed formats. 1. Condensed Statement of Financial Position – presents only line items. 2. Detailed Statement of Financial Position – presents all the asset, liability and equity accounts in the Revised Chart of Accounts.

Current vs. Noncurrent 

The statement of financial position shall show distinctions between current and noncurrent assets and liabilities. Current Assets

a. Expected to be realized in, or is held for sale or consumption in, the

Current Liabilities b. Expected to be settled in the entity’s normal operating cycle

entity’s normal operating cycle. b. Held primarily for trading.

c. Held primarily for trading.

c. Expected to be realized within 12

d. Due to be settled within 12 months

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MODULE ACCOUNTING FOR GOVERNMENT AND NON-PROFIT ORGANIZATIONS months after the reporting date. d. It is cash or a cash equivalent,

after the reporting date. e. The entity does not have an

unless it is restricted from being

unconditional

right

to

defer

exchanged or used to settle a

settlement of the liability for at

liability for at least 12 months after

least 12 months after the reporting

the reporting date.

date.

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MODULE ACCOUNTING FOR GOVERNMENT AND NON-PROFIT ORGANIZATIONS

Statement of Financial Performance 

Generally, revenue and expenses are recognized in surplus or deficit, except for the following which are recognized directly in equity: a. Correction of prior period errors; b. Effect of changes in accounting policies; and c. Gains or losses on remeasuring available-for-sale financial assets.

Presentation of Expenses 

Expenses may be presented according to their function or nature, whichever is more relevant.



If expenses are classified by function, additional disclosures shall be made on the nature of expenses, including depreciation, amortization and employee benefits expenses.

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MODULE ACCOUNTING FOR GOVERNMENT AND NON-PROFIT ORGANIZATIONS

Statement of Changes in Net Assets/Equity 

The statement of changes in net assets/equity shows the increase or decrease in the entity’s net assets during the period resulting from the following: a. Surplus or deficit for the period; b. Items of revenue and expense that are recognized directly in equity; c. Effects of changes in accounting policies and corrections of errors; and d. The balance of accumulated surpluses or deficits at the beginning of the period and at the reporting date, and the changes during the period.

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