Exercise 2-1 Statement of Financial Position - AFOA Canada

1 AFOA Workshop Preparing Financial Statements Under the Common Government Reporting ModelSolutions to ExercisesSolution to Exercise 2-11 Exercise 2-1 Statement of Financial PositionPart 1 Categorize items into the following AssetsCashAccounts receivableShort-term investmentsTrust funds held by federal governmentEquity in commercial enterprisesInventories for resaleNon- Financial AssetsTangible capital assetsInventories of suppliesPrepaid expensesLiabilitiesAccounts payableDeferred revenueLong-term debtAFOA Workshop Preparing Financial Statements Under the Common Government Reporting ModelSolutions to ExercisesSolution to Exercise 2-12 Exercise 2-1 Statement of Financial PositionPart 2 Recast the Statement of Financial Position in the proper format. (Providecategories and account titles only no numbers.) Financial AssetsCashAccounts receivableShort-term investmentsTrust funds held by federal governmentEquity in commercial enterprisesInventories for resaleLiabilitiesAccounts payableDeferred revenueLong-term debtNet Debt( Financial assets liabilities)Non- Financial assetsTangible capital assetsInventories of suppliesPrepaid expensesNet Assets(All assets liabilities)AFOA Workshop Preparing Financial Statements Under the Common Government Reporting ModelSolutions to ExercisesSolution to Exercise 2-13 Lone Pine First NationConsolidated Statement of Financial Position *As at March 31, 200X200X200 WFINANCIAL ASSETSCash (Note 3)2,488,8881,223,639 Accounts receivable (Note 4)823,698438,459 Short-term investments (Note 5)1,127,7641,170,740 Trust funds held by federal government (Note 6)

2 346,947330,465 Equity in commercial enterprises (Note 7)3,913,7933,879,612 Inventories for resale (Note 8)151,269143,708 Total Financial Assets8,852,3597,186,623 LIABILITIESA ccounts payable (Note 9)233,716169,511 Deferred revenue (Note 10)700,711504,304 Long-term debt (Note 11)6,645,2566,485,876 Total Liabilities7,579,6837,159,691 NET DEBT1,272,67626,932 NON- Financial ASSETST angible capital assets (Note 12)*11,088,01912,332,575 Inventories of supplies (Note 13)57,44156,761 Prepaid expenses (Note 14)133,280111,490 Total Non- Financial Assets*11,278,74012,500,826 ACCUMULATED SURPLUS*12,551,41612,527,758 Contingencies (Note 15)* Tangible capital asset accounting is not in accordance withPublic Sector AccountingHandbook, Section PS 3150. Therefore, balances for Tangible Capital Assets, Total Non- Financial Assets and Accumulated Surplus are not Workshop Preparing Financial Statements Under the Common Government Reporting ModelSolutions to ExercisesSolution to Exercise 2-21 Exercise 2-2 Statement of OperationsWhat corrections need to be made to Lone Pine s Statement of Revenues andExpenditures?

3 Provide a list and indicate if you have enough information to make thenecessary corrections.(1) Should be titled a Statement of Operations(2) Statement should include revenue and expenses NOT revenue and expenditures.(3) Because expenditures should not be included in this Statement , the Capital itemshould be removed from this Statement .(4) Amortization expense should be added in with other expenses. Note: this should bedone by function (health, education, etc.) and should not be a separate line is not enough information to make this correction.(5) Need to reconcile to accumulated surplus/deficit at the beginning and end of theyear.(6) Because Lone Pine is not accounting for tangible capital assets in accordance withPS 3150, it is not possible to correct certain balances. There is not enoughinformation to make this correction.

4 (7) Budget information for the current year needs to be included. There is not enoughinformation to make this Workshop Preparing Financial Statements Under the Common Government Reporting ModelSolutions to ExercisesSolution to Exercise 2-22 Lone Pine First NationConsolidated Statement of OperationsFor the year ended March 31, 200X200X200X200 WBudgetActualActualREVENUEF ederal Government:Indian and Northern Affairs3,825,0003,818,5874,181,918 Health Canada1,965,0001,966,8262,051,842 Human Resources and Social Development Canada 200,000195,873123,324 Canada Mortgage and Housing Corporation78,00074,156104,960 Provincial government300,000299,741246,301 Interest, rent and sundry309,000285,061315,000 Trust funds held by federal government16,00016,48215,963 Economic Activities750,000872,425736,809 Net income from commercial enterprises100,000229,62555,6447,543,000 7,758,7767,831,761 EXPENSES*Education1,430,0001,452,0771,44 3,400 Health1,489,0001,478,5971,446,668 Economic development780,000804,599770,899 Housing945,000954,197949,152 Community services305,000470,187454,682 Social services913,000954,265943,576 Band government750,000771,514799,040 Employment programs140,000128,927123,452 Public works100.

5 000102,785108,700 Administration fees and technical services135,000138,426143,987 Interest400,000402,560413,705 Land claim70,00076,984281,7317,457,0007,735,1 187,878,992 ANNUAL SURPLUS (DEFICIT)*86,00023,658(47,231)ACCUMULATE D SURPLUS ATBEGINNING OF YEAR*12,527,75812,527,75812,574,989 ACCUMULATED SURPLUS ATEND OF YEAR*12,613,75812,551,41612,527,758* Tangible capital asset accounting is not in accordance withPublic Sector AccountingHandbook, Section PS 3150. Therefore, balances for Expenses, Annual Surplus (Deficit),Accumulated Surplus at Beginning of Year and Accumulated Surplus at End of Year arenot correct. Expenses only include amortization for the tangible capital assets that LonePine has recognized on the Statement of Financial Workshop Preparing Financial Statements Under the Common Government Reporting ModelSolutions to ExercisesSolution to Exercise 2-31 Exercise 2-3 Statement of Change in Net DebtLone Pine First NationConsolidated Statement of Change in Net DebtFor the year ended March 31, 200X200X200X200 WBudgetActualActualANNUAL SURPLUS/(DEFICIT)86,00023,658(47,231)Acq uisition of tangible capital assets(725,000)(727,839)(826,489)Proceed s on sale of tangible capital assets092,73786,453 Amortization of tangible capital assets*1,860,0001,866,0001,845,000(Gain) Loss on sale of tangible capital assets013,658(5,289)1,221,0001,268,2141, 052,444 Inventories of supplies0(680)643 Prepaid expenses0(21,790)

6 13,5420(22,470)14,185(INCREASE)/DECREASE IN NET DEBT1,221,0001,245,7441,066,629 NET DEBT AT BEGINNING OF YEAR26,93226,932(1,039,697)NET DEBT AT END OF YEAR1,247,9321,272,67626,932* Tangible capital asset accounting is not in accordance withPublic Sector AccountingHandbook, Section PS 3150. Therefore, balances for Amortization of Tangible CapitalAssets are not Workshop Preparing Financial Statements Under the Common Government Reporting ModelSolutions to ExercisesSolution to Exercise 2-41 Exercise 2-4 Statement of Cash FlowsLone Pine First NationConsolidated Statement of Cash FlowsFor the year ended March 31, 200X200X200 WCash provided by (used for):OPERATINGA nnual Surplus/(Deficit)23,658(47,231)Items not affecting cash(Gain) Loss on disposal of tangible capital assets13,658(5,289)Amortization of tangible capital assets*1,866,0001,845,000 Net income from commercial enterprises(229,625)(55,644)Changes in non-cash items on Statement of Financial Position (Increase) decrease in accounts receivable(385,239)(28,456)(Increase) decrease in trust funds held byfederal government(16,482)(15,963)(Increase) decrease in inventories for resale(7,561)5,790(Increase) decrease in inventories of supplies(680)643(Increase) decrease in prepaid expenses(21,790)13,542 Increase (decrease) in accounts payable64,205(24,563)Increase (decrease) in deferred revenue196,407(85,433)

7 Profit distributions from commercial enterprises195,44440,6441,697,9951,643,0 40 CAPITALP roceeds from disposal of tangible capital assets92,73786,453 Purchase of tangible capital assets(727,839)(826,489)(635,102)(740,03 6)INVESTINGP roceeds from redemption of short-term investments1,170,7401,106,388 Purchase of short-term investments(1,127,764)(1,170,740)42,976( 64,352)FINANCINGA cquisition of long-term debt408,875386,452 Payment of long-term debt(249,495)(248,869)159,380137,583 Increase (decrease) in cash for the year1,265,249976,235 Cash, beginning of the year1,223,639247,404 Cash, end of the year2,488,8881,223,639* Tangible capital asset accounting is not in accordance withPublic Sector AccountingHandbook, Section PS 3150. Therefore, balances for Amortization of Tangible CapitalAssets are not Workshop Preparing Financial Statements Under the Common Government Reporting ModelSolutions to ExercisesSolution to Exercise 3-11 Exercise 3-1 Accounting for Tangible Capital Assets according toPS 3150 This is a suggested solution.

8 It does not include all the information that Darlenemay need. Further detail can be found in the workshop PSA Handbook should be consulted as the primary authoritative source ofGAAP for the public (1) The tangible capital assets balance on the Statement of Financial Position includesthe assets of the gas station, the general store and the caf but not the fishinglodge and the forestry operations. Is that right?Yes, that is correct. The fishing lodge and the forestry operations are governmentbusiness enterprises (GBEs) and they are included in the Lone Pine FinancialStatements on a modified equity basis. Only the net assets in these GBEs are reflectedon the Statement of Financial Position .(2) Am I missing any tangible capital assets?Yes, any buildings bought before 1996. The water improvement system is anotherasset.

9 There must be more infrastructure assets. Are there any bridges, for example?With infrastructure items you will need to decide whether to use the single asset orcomponent approach. You will also have to make a list of assets that have been fullyamortized but are still in use.(3) What do I do about those TCAs that we don t have records for any longer?You will need to develop an estimate using a logical method. You could use one of fourmethods: (1) reproduction cost; (2) replacement cost; (3) market value; or (4) fair chapter 7 of the PSAB Guide to Accounting and Reporting for Tangible CapitalAssets. This guide can be downloaded from the web for free. The address is includedin the List of References to this workshop binder.(4) The amortization policy has not been reviewed in the past couple of years. Is itokay?

10 It might be okay but it should be reviewed. Some of the categories, such as buildings,appliances and vehicles seem to have a shorter life than they Workshop Preparing Financial Statements Under the Common Government Reporting ModelSolutions to ExercisesSolution to Exercise 3-12(5) Do I have to worry about TCAs on any other Financial Statement beside theStatement of Financial Position ?All four Financial statements will be affected by the implementation ofPS 3150. AllTCAs will have to be included in the Statement of Financial Position . Depreciationexpenses have to be included in the Statement of Operations while capital expenditureswill need to be removed. The Statement of Cash Flows will show amortization as anadd-back to operating surplus/deficit. The Statement of Cash Flows will also include thepurchase of TCAs.