Not for profit and public sector entities

Which of the following statements about a not-for-profit entity is valid?

• There is no requirement to calculate an earnings per share figure as it is not likely to have shareholders who need to assess its earnings performance

• Its financial statements will not be closely scrutinised as it does not have any investors

• The current value of its property, plant and equipment is not relevant as it is not a commercial entity

• Interpretation of its financial performance using ratio analysis is meaningless

Although the objectives and purposes of not-for-profit entities are different from those of commercial entities, the accounting requirements of not-for-profit entities are moving closer to those entities to which IFRSs apply.

Which of the following IFRS requirements would NOT be relevant to a not-for-profit entity?

• Requirement to capitalise a finance lease

• Preparation of a statement of cash flows

• Disclosure of non-adjusting events after the reporting date

• Disclosure of earnings per share

A local authority department is responsible for waste collections. They have an annual budget to provide a regular collection service from households in the local area. The budget was increased to enable the department to increase the percentage of waste disposed of in an environmentally friendly manner.

Which of the following is the best measurement to justify the increase in the budget?

• An increase in the number of collections made during the period

• The percentage of waste recycled rather than being placed in landfill sites

• The fair value of the machinery used in making the collections

• A breakdown of expenditure between the cost of making collections and the cost of processing waste

Which of the following are unlikely to be stakeholders in a charity?

• Government

• Taxpayers

• Financial supporters

• Shareholders

Which of the following is NOT true of entities in the charity sector?

• Their objective is to provide services to recipients and not to make a profit. .

• They have only a narrow group of stakeholders to consider.

• They have to be registered

• Their revenues arise mainly from contributions rather than sales.

The International Public Sector Accounting Standards Board regulates public sector entities and is developing a set of accounting standards which closely mirror IFRS. Which of these is the main concept which needs to be introduced into public sector accounting?

• Faithful representation

• Relevance

• Accruals

• Materiality

Which of the following is the main aspect in which public sector bodies differ from charities?

• Performance measured by KPIs

• Importance of budgeting

• No requirement to earn a return on assets

• Funded by government

Although the objectives and purposes of not-for-profit entities are different from those of commercial entities, the accounting requirements of not-for-profit entities are moving closer to those entities to which IFRSs apply. Which of the following IFRS requirements would NOT be relevant to a not-for-profit entity?

• Disclosure of non-adjusting events after the reporting date

• Preparation of a statement of cash flows

• Requirement to capitalise a leased asset

• Disclosure of dividends per share

Public sector entities have performance measures laid down by government, based on Key Performance Indicators. Which THREE of the following are likely to be financial KPIs for a local council?

• Rent receipts outstanding

• Interest cover

• Return on capital employed

• Financial actuals against budget

What are examples of not-for-profit and public sector entities.

• Central and local government departments

• charities

• hospitals

• schools