Question

Describe the financial reporting objectives of government sector

Answer 1

The main objectives of financial reporting in the government sector are

a) Financial reporting should assist in fulfilling the government's duty to be publicly accountable and should enable users to assess that accountability by:

1. Providing information to determine whether current-year revenues were sufficient to pay for current-year services
2. Demonstrating whether resources were obtained and used in accordance with the entity's legally adopted budget, and demonstrating compliance with other finance-related legal or contractual requirements
3. Providing information to assist users in assessing the service efforts, costs, and accomplishments of the governmental entity

b) Financial reporting should assist users in evaluating the operating results of the governmental entity for the year by:

1. Providing information about sources and uses of financial resources
2. Providing information about how it financed its activities and met its cash requirements
3. Providing information necessary to determine whether its financial position improved or deteriorated as a result of the year's operations

c) Financial reporting should assist users in assessing the level of services that can be provided by the governmental entity and its ability to meet its obligations as they become due by:

1. Providing information about its financial position and condition
2. Providing information about its physical and other nonfinancial resources having useful lives that extend beyond the current year, including information that can be used to assess the service potential of those resources
3. Disclosing legal or contractual restrictions on resources and the risk of potential loss of resources.