KOTEBE METROPOLITAN

UNIVERSITY

DEPARTMENT OF ACCOUNTING AND FINANCE

COURSE TITLE: ETHIOPIAN GOVERNMENT ACCOUNTING

COURSE CODE: AcFn 3122

GROUP MEMBERS
NAME ID.No. SECTION

1. ALMAZ WURGIE EDAcF/010/10 A

2. BETHLEHEM SURAFEL EDAcF/020/10 A
3. BETWEDED MEKONNEN EDAcF/023/10 A
4. DAWIT GETAHUN EDAcF/032/10 A
5. DESALEGN TALE EDAcF/035/10 A
6. EMEBET TESEMA EDAcF/037/10 A

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Submitted to: Asst. pro. Muse B.
Submission date: March 20, 2021
 1. Describe the major standard setters in federal government accounting.

 IASB( international accounting standard board)

The international accounting standard board typically abbreviated IASB, is the organization that
establishes international financial reporting standard or IFRS that are accepted through the world
and international financial reporting standard for small medium enterprise. IASB operates under
the oversight of the IFRS foundation. The IASB was formed in 2001 to replace the international
accounting standard committee (IASC) going back to 1973. IASB is committed to developing,
in the public interest, a single set of high quality, global accounting standards that require
transparent and comparable information in financial statements.

 IPSASB(International public sector accounting standards board)

IPSASB is an independent standard setting board supported by IFAC public sector committee.
International public sector accounting standard board current activities are focused on the
development the development of international public sector accounting standards (IPSAS) for
financial reporting by governments and other public sector entities. The IPSAS are designed to
apply to public sector entities that meet all the following criteria
a. Are responsible for the delivery of service to benefit the public and/or to redistribute
income and wealth
b. Mainly finance their activities, directly or indirectly , by means of taxes and /or transfer
from other levels of government, social contributions, debt or fees, and
c. Do not have a prime objective to make profits

 FASAB
The federal accounting standard advisory board (FASAB) was created to establish the financial
reporting and accounting standards for federal government. FASAB is federal advisory
committee whose mission is to improve federal financial reporting through issuing federal
financial accounting standards and providing guidance after considering the needs of external
and internal users of federal financial information.

2. How reporting is different from business organization in government accounting?

Describe
Governments are fundamentally different from for-profit business enterprises in several
important ways. They have different purposes, processes of generating revenues, stakeholders,
budgetary obligations, and propensity for longevity. These differences require separate
accounting and financial reporting standards in order to provide information to meet the needs of
Stakeholders to assess government accountability and to make political, social, and economic
decisions.

Some of the most significant standards that address difference in government and business
financial reporting include

 The measurement and recognition of certain types of revenues (for example, taxes and
grants):

Governments acquire most capital assets because of the asset’s capacity to provide services
to the citizenry, whereas business enterprises acquire capital assets with the objective of
using them to generate future cash flows. Consequently, GASB Statement prescribes a
method of assessing and measuring impairment of capital assets that reflects reductions in
service potential of capital assets as a result of impairing events or changes in circumstances
because the purpose of government is to provide services.

In contrast, business enterprises assess and measure impairment of capital assets by

evaluating the future cash flows expected to be produced by the asset because the purpose of
business enterprises is to create wealth.

 The view that capital assets provide services to citizens rather than contribute to future cash
flows:

Generating property tax revenue is a transaction unique to government, and, as previously

noted, accounting standards for taxation should reflect reporting of property taxes as
revenues in the same period as the cost of the services for which they were levied to pay in
accordance with the need of users of governmental financial statements to assess inter period
equity. For this revenue source, governments control all major events associated with
potential points of recognition. Governments establish the assessment dates, the levy dates,
the collection or due dates, and the periods for which the taxes are levied.

 The use of fund accounting and budgetary reporting to meet public accountability needs:
 Fiscal accountability for governmental activities is achieved by preparing financial
statements using the current financial resource flows measurement focus the long-standing
measurement focus of governmental funds and a modified accrual basis of accounting. This
measurement focus emphasizes control and accountability over the raising and spending of
public moneys.

Financial reporting for governmental fund activities allows stakeholders to assess whether
sufficient resources (generally cash and other liquid assets) existed to finance the current
period’s activities. This assessment is particularly important to those who pay taxes and
receive services. Fiscal accountability is demonstrated, for example, when governments
prepare fund-based financial statements, which show whether resources were obtained and
used in accordance with the legally adopted budget and in compliance with other finance-
related legal or contractual requirements. GASB Statement requires governments to report a
balance sheet and a statement of revenues, expenditures, and changes in fund balances for
their general fund, other major governmental funds, and other governmental funds in the
aggregate. Governments also demonstrate accountability through reporting financial
statements of fiduciary funds, which are used to report assets held in a trustee or agency
capacity for others and therefore cannot be used to support the government’s own programs.
These funds are not reported as part of the resources available to finance public services and
goods, but rather are reported separately to demonstrate accountability for these resources.

 The use of accountability principles rather than equity control to define the financial
reporting entity:

Combinations of business enterprises are based upon control obtained through acquisition of net
assets or equity interest, both forms of ownership and the financial benefits and burdens that
accompany that ownership interest. The standard for determining the reporting entity for
governments reflects a difference of the governmental environment—the lack of equity
ownership. Consequently, control through equity ownership is not the starting point for the
governmental reporting entity standard. Governmental combinations principally are based upon
control over other governments through complex relationships of accountability, which is a
broader concept than that of business enterprises.

 The treatment of pensions and other postemployment benefits to allocate cost of services
equitably to applicable periods:

Financial reporting standards for pensions for both governments and business enterprises are
similar in that they are based on the concept that these benefits are deferred compensation for
employee services and should be accounted for in accrual-basis statements as the benefits are
earned, rather than when paid. Moreover, both sets of standards currently include provisions for
deferral and amortization for past service costs.

Beyond that, however, the measurement approaches adopted for use in the public and private
sectors are different, as are many of the specific measurement and presentation choices, for
reasons rooted in the different environments and the different information needs of stakeholders.
The longevity of governments, the importance of the cost-of-services information, and the desire
of stakeholders to measure inter period equity all influence the GASB’s standards for defined
benefit pension. The focus of business enterprise accounting for pension benefits worldwide
generally appears to be moving toward the measurement of the fair values of pension or assets
and liabilities.

The pension accounting approach for governments harmonizes accounting with the actuarial
funding characteristics of public pension plans. Governmental accounting standards permit the
use of a number of actuarial cost and amortization methods commonly used in actuarial
valuations for funding purposes that are also appropriate for accrual accounting purposes. This
approach was based on research studies conducted with financial statement users at the time the
pension standards were being developed. As long as the individual government’s funding
approach met established accrual-based parameters, the transparency sought by most
governmental financial statement users was achieved. As applied by government employers and
pension plans, these parameters make it possible to allocate expenses to periods in a way that
charges each period a level percentage of payroll for normal cost. This method equitably spreads
the burden of an ongoing benefit program among different generations of taxpayers.

Annual Reporting: Every year, government organizations must put together a CAFR,
Comprehensive Annual Financial Report. Profit businesses generally also file annual financial
reports, often called annual reports. Although annual reports published by profit businesses do
conform to GAAP standards, they are not required to do so, and they do not need to follow the
stringent rules for CAFRs, which are usually far more extensive than annual reports that profit
business file.

The longevity of government and its role to maintain and enhance the well-being of citizens
through the provision of public services also result in information demands that differ from those
of business enterprises. For example, governments do not operate in a competitive marketplace,
face virtually no threat of liquidation, and do not have equity owners. Consequently, information
on fair values of capital assets is of limited value and measures of net income and earnings per
share have no meaning to users of governmental financial reports. Instead, users need
information to assess the government’s stewardship of public resources, including information to
evaluate the manner and extent to which resources are devoted to specific services and the costs
of providing those services. Users also need information to determine compliance with legally
authorized spending authority. Creditors of both businesses and governments are interested in
information on the ability to repay debt. However, government creditors focus more on
information regarding the government’s ongoing ability to raise taxes and the costs of activities
that could compete for those resources, rather than on information about how earnings are
generated.