How MPSAS 23 affects non-exchange transactions

What is the definition of non-exchange transactions according to MPSAS?

Transactions where an entity either receives value from another entity without directly giving approximately equal value in exchange, or gives value to another entity without directly receiving approximately equal value in exchange

Transactions in which one entity receives assets or services, or has liabilities extinguished, and directly gives approximately a significantly higher value (primarily in the form of cash, goods, services, or use of assets) to another entity in exchange

Transactions in which one entity receives assets or services, or has liabilities extinguished, and directly gives approximately a significantly lower value (primarily in the form of cash, goods, services, or use of assets) to another entity in exchange

Transactions in which one entity receives assets or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of cash, goods, services, or use of assets) to another entity in exchange

Which of the following are not regarded as revenue from non-exchange transactions?

Sale of goods by a public sector entity where the consideration receivable is equivalent to the market value

Taxes paid by taxpayers because the tax law mandates the payment of those taxes

The off-market portion of the interest payments of a loan received from the government

A RM 5 million funding from a multi-lateral development body

Agency Y receives RM 20 million funding from a multi-lateral development body. The agreement stipulates that Agency Y must repay RM 15 million of the funding received over a period of 10 years, at 2 percent interest when the market rate for a similar loan is 6 percent. What would be the revenue from non-exchange transaction in this case?

The off-market portion of the interest payments in terms of the agreement is the non-exchange transaction

The RM 5 million grant received is the non-exchange transaction

The RM 5 million grant received and the off-market portion of the interest payments in terms of the agreement, are non-exchange transactions

There are no non-exchange transactions in this case - the transaction is an exchange transaction in its entirety

Revenue from non-exchange transactions consists of transfers and taxes. Which of the following correctly represents revenue related to transfers?

Dividends receivable, grants, gifts and donations, fines, bequests, services-in-kind and debt forgiven

Interest receivable, grants, gifts and donations, royalties receivables, services-in-kind and debt forgiven

Grants, gifts and donations, fines, bequests and debt forgiven

Dividends receivable, interest receivable and royalties

Where the national government imposes a tax that is collected by its taxation agency (say, an inland revenue board), which party or entity recognises revenue?

Neither the national government nor the inland revenue board recognises the revenue as it has not been collected or received yet

The inland revenue board

The national government

The national government and the inland revenue board

MPSAS 23 does not permit taxation revenue to be grossed up for the amount of tax expenditures. For example, in some jurisdictions, homeowners are permitted to deduct mortgage interest and property taxes from their gross income when calculating tax-assessable income. Why would taxation revenue not allowed to be grossed up with these expenses (eg mortgage interest and property taxes) when calculating tax-assessable income?

Because it is not a common practice in most jurisdictions for taxation revenue to be grossed up with such tax expenditures

Because these tax expenditures are foregone revenue, not expenses, and do not give rise to inflows or outflows of resources – ie they do not give rise to assets, liabilities, revenue, or expenses of the taxing government

Because these types of tax expenditures (known as concessions) are available to all citizens and residents and if an entity (including a natural person) does not pay tax, it can still access the concession

Even though such concessions are expenses to the entity, they still do not give rise to inflows or outflows of resources

Lenders will sometimes waive their right to collect a debt owed by a public sector entity, effectively cancelling the debt. For example, a national government may cancel a loan owed by a local government. How is this event or transaction recognised according to MPSAS 23?

The event or transaction has no effect on the measurement and recognition of assets, liability and revenue of the local government

The event or transaction has no effect on the measurement and recognition of assets, liability and revenue of the local government. However, a disclosure by way of notes is required by MPSAS 23

The local government recognises an increase in net assets because a liability it previously recognised is extinguished. Revenue arising from debt forgiveness is measured at the fair value of the debt forgiven

The local government recognises an increase in net assets because a liability it previously recognised is extinguished. Revenue arising from debt forgiveness is measured at the carrying amount of the debt forgiven

Which of the following DOES NOT accurately describe the accounting for gifts and donations in accordance with MPSAS 23?

On initial recognition, gifts and donations including goods in-kind are measured at their fair value as at the date of acquisition, which may be ascertained by reference to an active market, or by appraisal

For most gifts and donations, they are measured at fair value because their fair value will be readily ascertainable by reference to quoted prices in an active and liquid market

Cash or other monetary gifts or donations and goods-in-kind are usually recognised on the date which they become receivable

It is recognised as assets and revenue when it is probable that the future economic benefits or service potential will flow to the entity and the fair value of the assets can be measured reliably

The federal government (transferor) grants RM 20 million to a provincial government (reporting entity) to be used to improve and maintain rail services. Specifically, the money is required to be used as follows: 40 percent for existing rail system upgrades, 50 percent for new rail systems, and 10 percent for rolling stock purchases and improvements. The agreement requires the grant to be spent as specified in the current year or be returned to the national government. How would the provincial government account for this transaction?

The provincial government recognises the grant money as an asset. The provincial government also recognises a liability in respect of the condition attached to the grant. As the province satisfies the condition, that is, as it makes authorised expenditures, it reduces the liability and recognises revenue in the statement of financial performance of the reporting period in which the liability is discharged

The transaction is treated as an off-balance sheet transaction and therefore there will be no effect on the financial statements of the provincial government. However, a disclosure by way of notes is required by MPSAS 23

The provincial government recognises the grant money as an asset and revenue from non-exchange transaction immediately upon receipt of the RM20 million

The provincial government recognises the grant money as an asset. The provincial government also recognises a liability in respect of the condition attached to the grant. The liability is transferred or recognised as revenue in the statement of financial performance once the federal government provides a certification of approval for recognition of revenue

Which of the following correctly describes the accounting treatment of contributions from owners of a public sector entity that meet the definition stipulated in MPSAS?

It is recognised as an expense

It is not recognised as revenue

It is recognised as revenue from exchange transactions

It is recognised as revenue from non-exchange transactions

How MPSAS 23 affects non-exchange transactions

What is the definition of non-exchange transactions according to MPSAS?

Which of the following are not regarded as revenue from non-exchange transactions?

Revenue from non-exchange transactions consists of transfers and taxes. Which of the following correctly represents revenue related to transfers?

Where the national government imposes a tax that is collected by its taxation agency (say, an inland revenue board), which party or entity recognises revenue?

Lenders will sometimes waive their right to collect a debt owed by a public sector entity, effectively cancelling the debt. For example, a national government may cancel a loan owed by a local government. How is this event or transaction recognised according to MPSAS 23?

Which of the following DOES NOT accurately describe the accounting for gifts and donations in accordance with MPSAS 23?

Which of the following correctly describes the accounting treatment of contributions from owners of a public sector entity that meet the definition stipulated in MPSAS?

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