Public Sector and other issues

Question 1

What is meant by the public sector?

Answer 1

Businesses and industries that are owned or controlled by the government.

Question 2

Objective and Focus

What are the key characteristics of the public sector? (4)
What are the key characteristics of the private sector? (3)

Answer 2

What are the key characteristics of the public sector?

• Providing services efficiently to the public.
• Accountability and transparency in the use of public funds.
• Wide range of stakeholders.
• The financial accounts are publicly available and used by the government to assess performance and decide on future funding.

What are the key characteristics of the private sector?

• Aims to maximise profit and shareholder value.
• The objective of financial statements under the Conceptual Framework and IFRS is providing financial information that is useful to investors and others when deciding whether to provide resources to a company.
• Wider citizenship role?

Question 3

Types of transactions and regulation

Public sector (3)
Private sector (3)

Answer 3

Public Sector

• Non-exchange transactions exist where money is received without giving equal value in exchange.
• E.g. taxes, grants, donations
• Not covered by IFRS
• IPSAS International Public Sector Accounting Standards

Private Sector

• IFRS assumes that transactions are on a commercial (for-profit) basis
• IFRS 15 Revenue from contracts with customers
• Goods or services are exchanged for monetary consideration.

Question 4

Assets and reporting

Public sector (6)
Private sector (3)

Answer 4

Public Sector

• Assets are held for the provision of services.
• Measurement of assets needs a monetary value but issues with fair values.
• Others used e.g. Current operational value
• Adherence to government regulation (which may change)
• Demonstrate budgetary compliance
• Financial statements show how public funds have been managed and spent.

Private Sector

• Assets are held in order to generate future economic benefits or cash flows.
• Provide a true and fair view of the financial position and performance of the business in order for investors and creditors to make informed decisions about providing resources to the company.
• Fair values – based on arm’s length transactions in an orderly market.

Question 5

What is the main conclusion about the complexity and volume of transactions? (2)
How are modern-day hospitals treated according to the slide? (2)
What are hospitals concerned with according to the slide?
What is the likelihood of hospitals showing financial deficits?

Answer 5

What is the main conclusion about the complexity and volume of transactions?

• Large increase in complexity and volume of transactions.
• Financial and non-financial KPIs, overarching board of governors, different types of income, treat people out of compassion.

How are modern-day hospitals treated according to the slide?

• Modern-day hospitals are treated more like a business than an institution for health.
• Annual report refers to trading activities and the tone is similar to a FTSE report.

What are hospitals concerned with according to the slide?

• Concerned with effectiveness, efficiency, and economy, but efficiency and economy dominate.

What is the likelihood of hospitals showing financial deficits?

• Unlikely to deliberately show financial deficits as it impacts future income (and jobs!) as performance affects future funding.

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