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IFAC IPSASB Meeting Agenda Paper 7.0 March 2011 – Paris, France of 3

MJK February 2011

INTERNATIONAL FEDERATION

OF ACCOUNTANTS 545 Fifth Avenue, 14th Floor Tel: (212) 286-9344 New York, New York 10017 Fax: (212) 286-9570 Internet: http://www.ifac.org

Agenda Item

7�DATE: February 22, 2011MEMO TO: Members of the IPSASB FROM: Joy Keenan SUBJECT: Narrative Reporting – Discuss Issues

OBJECTIVE OF THIS SESSION

To discuss a draft Issues Paper on Narrative Reporting

AGENDA MATERIAL

7.0 Covering Memo

Appendix 1 – Approved Project Brief (for information)

Appendix 2 – Excerpt from Minutes on Narrative Reporting session from March 2008 IPSASB meeting

7.1 Issues Paper – Narrative Reporting

7.2 Summary of Requirements in Standards and Guidance

7.3 Research Details by Jurisdiction

ACTION REQUIRED

The IPSASB is asked to provide staff with comments and suggestions for further development of the Issues Paper – Narrative Reporting.

BACKGROUND

1. The Project Brief for narrative reporting was approved in March 2008. Due to the IPSASB’s decision to complete its convergence initiative throughout 2008-2009, work on this project was deferred. A copy of the approved Project Brief is appended to this paper.


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2. The topic of narrative reporting has been addressed in a number of jurisdictions internationally within English and non-English speaking jurisdictions. There are a variety of terms applied to it, including Management Discussion and Analysis (MD&A), Management Commentary (MC), Financial Statement Discussion and Analysis (FSD&A), Operating and Financial Review (OFR), Rapport de gestion, and Business Report.

3. While the terms used for this type of reporting vary widely, all center on providing narrative explanation by management to enhance the usefulness of financial information. The detail of what is required, however, also varies by jurisdiction to some degree.

4. Material on narrative reporting varies from accounting standards to recommended practices to requirements by regulators, legislatures and government agencies that specify form and content of public sector financial information to be included. In undertaking this project, the work of national standard setters both in the public and private sectors, regulatory guidance, and current practice will be considered.

5. The research undertaken to date is included in agenda papers 7.2 and 7.3. The information reflects material provided by Members and TAs to staff. Members are encouraged to provide staff with additional relevant sources of information to consider as the project progresses.

SCOPE

6. The Project Brief notes that: “This project will evaluate how a narrative explanation (termed Narrative Reporting for this project) by management should be used to enhance the usefulness of financial information provided by general purpose financial statements (GPFS).”

7. Because narrative reporting on financial statements is linked to the financial statements, this project is closely linked to Phase 1 of the IPSASB’s Conceptual Framework project (currently subject to public exposure), which sets out the objectives, users and qualitative characteristics of general purpose financial reports (GPFRs), which include the financial statements. This project will assume the same direction as the project on service performance reporting to be consistent with the users, user needs, and qualitative characteristics identified in the Conceptual Framework ED 1.

8. It may also need to consider the work currently under way in Phase 4 of the Conceptual Framework, dealing with presentation. This project deals with presentation of all GPFRs,


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and may have an impact on how narrative reports on financial information are presented within a GPFR.

9. At this stage the point of this paper is not to reach any conclusions but to have a preliminary discussion of some of the issues inherent in the project and provide feedback to staff to further develop the Issues Paper.

10. A task-based group (TBG) has been established to develop this project. The TBG members are:

Hong Lou Bharti Prasad Ron Salole Frans van Schaik

11. The TBG met briefly in Jakarta to discuss the project. One of the issues they identified, on which the IPSASB’s views are sought, pertains to the relationship of this project with the project on service performance reporting. This issue is discussed in agenda paper 7.1.

IFAC IPSASB Meeting Agenda Paper 6.1March 2008 – Toronto, Canada Page 1 of 10

INTERNATIONAL PUBLIC SECTOR ACCOUNTING STANDARDS BOARD

PROJECT BRIEF AND OUTLINE

1. Subject – Narrative Reporting (NR)

This project will evaluate how a narrative explanation (termed Narrative Reporting for this project) by management should be used to enhance the usefulness of financial information provided by general purpose financial statements (GPFS).

2. Project Rationale and Objectives

In the private sector and in many governmental jurisdictions, it is reasonably widely accepted that NR enhances the usefulness of financial information. The focus of the project will be to identify and standardize the unique aspects of NR and how they “add value” in a public sector financial reporting context.

NR provides stakeholders with a narrative description of various matters, such as the major factors underlying the performance of the entity during the reporting period or the known factors which are likely to influence its performance in the future. This description can assist in placing aspects of the financial statements in context. NR can also enhance the value of financial information for decision making and to make assessments of the entity’s discharge of accountability.

As the appropriate scope of NR for the public sector is considered, the project will examine the current International Accounting Standards Boards (IASB) active project on Management Commentary (MC), as well as existing national standards and guidance on NR (or its equivalent) in the public and private sectors, where standards, guidance, and regulatory requirements for NR have a long history. In addition, NR approaches of other public sector bodies interested in making comparative fiscal information, such as Eurostat, IMF, World Bank and the United Nations will be considered.

a) Issues Identification

The main issues to be considered in the NR project are:

� What are the objectives of NR?

� What are the main attributes of high quality narrative explanations?

� Are there essential content elements to include in NR?

� What type of guidance is appropriate?

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IFAC IPSASB Meeting March 2011-Paris France Appendix 1 – Approved Project Brief (for information)

Agenda Paper 7.0


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b) Objectives to be achieved

The objective of the project is to provide guidance for NR.

The initial objective is to produce a Consultation Paper - “Narrative Reporting: Exploring the Issues for Standardization and Use in Public Sector General Purpose Financial Reporting.” The Consultation Paper will highlight and analyze existing approaches by the IASB and in jurisdictions where NR is a feature of governmental financial management.

Preliminary research conducted that indicates NR is used by various groups to enhance GPFR in current practice. Unlike traditional financial statements, NR often includes non-financial information coupled with financial information to explain the current status and potential future financial status while introducing the idea of prospective or future looking financial data. The project will consider whether the standardization of this process will improve financial reporting within the public sector.

i. Target Audience

The definition of the users and objectives of NR should correspond closely with the Conceptual Framework work as it develops.

In considering how NR will be developed for the public sector, a consideration of those who currently define the form and content of public sector narrative explanations will be undertaken. In establishing guidance we must be cognizant of regulators and/or the equivalent government agencies that currently set the form and content (i.e. US Office of Management & Budget, European Commission, FReM) of certain types of reporting.

ii. Project Deliverables

The next step in this project would be to develop a draft Consultation Paper to be presented at the June Moscow IPSASB meeting. Once approved, this Consultation Paper would be issued for comment and eventually lead to guidance or standards as necessary.

iii. Content of IPSAS

This is not a project directly related to the general purpose financial statements. Therefore, it is not feasible or appropriate to provide definitive final outputs at the initiation stage. Dependent upon decisions following analysis of submissions on a Consultation Paper, an Exposure Draft of a Standard and/or detailed Guidance will be developed.


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c) Link to IFAC/IPSASB Strategic Plans

i. Link to IPSASB Strategy

In the IPSASB Strategy and Operating Plan MD&A (NR) is listed as a potential project that is public sector specific and is identified as important. At the March 2007 meeting in Accra, the IPSASB approved the initiation of this project in 2008. The NR project was linked to the #2 IPSASB Strategic Theme of Public Sector specific project. High quality NR will enhance the quality and transparency of public sector financial reporting by providing better information for public sector financial management and decision making.

ii. Link to IFAC Strategic Plan

The alignment of the IPSASB Strategic theme concerning NR results in a direct impact on the IFAC Strategic Theme of “Recognition as the International Standard Setter” as well as a direct impact on the “Enhancement of collaborative efforts.”

3. Outline of the Project

a) Project Scope

The scope of the project is to determine how a narrative explanation by management in the public sector should be used to enhance the usefulness of financial information within general purpose financial statements (GPFS) and how it should be included within general purpose financial reporting (GPFR).

The NR guidance would apply to all public sector entities other than Government Business Enterprises.

Note that there are linkages with the Conceptual Framework, Long-Term Fiscal Sustainability and Performance Reporting projects.

b) Major Problems and Key Issues that Should be Addressed

Key Issue #1 - What are the objectives of NR?

The first issue will be to consider the objectives of narrative reporting since this will ultimately lead to developing the guidance needed to meet those objectives. The work of the IASB and national standard setters will be considered and evaluated in this context.

Key Issue #2 - What are the main attributes of high quality narrative explanations?

In establishing the main attributes that make narrative explanations useful and of high quality, the needs of the public sector GPFR user will be important. Certain definitions like “supplement and complement” will be explored. In addition, the term “through the eyes of management” will be assessed to determine if it is


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appropriate in the public sector and, if so what it means. The use of prospective forward looking information will also be considered.

Key Issue #3 - Are there essential content elements to include in NR?

There are a variety of approaches to the format and elements of NR prescribed by standard setters and regulators. It will be important to consider the approach that will yield the highest quality NR that allows comparison to other entities and periods.

Key Issue #4 – What type of Guidance is appropriate?

There are a number of potential ways that guidance could be developed, including:

� Recognizing best practices;

� Issuing specific non-mandatory guidance;

� Issuing a standard that applies when certain conditions exist

(IPSAS 24, “Presentation of Budget Information in Financial Statements); and

� Issuing a standard (revised or new) that is mandatory.

While the IPSASB has primarily issued standards, as the first project addressing reporting outside of GPFS, there may be other appropriate vehicles. In considering the type of guidance, audit and assurance aspects of NR will also be addressed.

4. Describe the Implications for any Specific Persons or Groups

a) Relationship to IASB

As noted, the IASB project on MC will be followed closely for points of convergence where possible.

b) Relationship to other projects in process or planned

There are close linkages with the Conceptual Framework project, Long Term Fiscal Sustainability, and Performance Reporting.

c) Other

This project has implications for the following:

� Assurance and verifiability (IAASB/INTOSAI); and

� Budget and statistical groups involved with public sector financial statements.


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5. Development Process, Project Timetable and Project Output

a) Development process

The development of outputs will be subject to the IPSASB’s formal due process. The issuance of documents for public comment will be subject to the usual IPSASB voting rules. As the project progresses, regular assessments will be made to confirm the proposed path in the project timetable remains the most appropriate.

The initial output will be a Consultation Paper. Following analysis of submissions on the Consultation Paper, a decision will be made on whether to develop an Exposure Draft of Reporting Requirements and/or Guidance. An Exposure Draft and/or Guidance will also be subject to formal due process, including a consultation period of at least four months.

b) Project timetable

The project timetable should identify the major project milestones and the expected timeline for achieving the objectives.

Major Project Milestones Expected Completion

Present Project Brief & Draft Issues Paper

March 2008

Approve Consultation Paper October 2008

Response date March 31, 2009

Analysis & ED October 2009

Response date March 31, 2010

Analysis of ED responses May/June 2010

Present and Approve Final IPSAS or Guidance as required

October 2010

c) Project output

The nature of the output will depend on the results of IPSASB process.

6. Resources Required

a) Task Force

A full Task Force is unlikely to be required; however, members may need to assist the Technical Staff with a broad understanding of current practices in both English and non-English speaking countries.


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This project has significant interplay with the current IASB project on Management Commentary and other projects by National Standard Setters in both the Public and Private Sectors.

The project would benefit from input from government agencies that set form and content of existing NR reports. Staff will reach out to groups like (FReM – FRAC, European Commission, US Office of Management and Budget, etc) for input.

b) Staff

One staff member will be required on this project for the period of the review (March 2008 – October 2010). It is anticipated that approximately one-third of an FTE would be needed.

c) Factors that might add to complexity or length

� Nature of Product;

� Interaction with other projects at the IPSASB (Conceptual Framework, Fiscal Sustainability, etc);

� Developments/Decisions with the IASB Management Commentary project;

� The IPSASB position of prospective forward looking information; and

� Implication to the Audit and Assurance community. Verifiability of NR.


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7. Important Sources of Information that Address the Matter being Proposed

IASB MC Project:

IASB Project Page Management Commentary Click here for MC Project Page

IPSAS Standards & Projects:

IPSAS 01 Presentation of Financial Statements Click here for IPSAS 01

IPSAS 24 Presentation of Budget information in Financial Statements

Click here for IPSAS 24

Fiscal Sustainability (current project)

Click here for FISCAL SUSTAINABILITY project page

IPSAS Conceptual Framework (current project)

Click here for CONCEPTUAL FRAMEWORK project page

IPSAS 18 - Segment Reporting Ctrl + Click here for IPSAS 18

IPSAS 22 - Disclosure of Financial Information General Government Sector

Click here for IPSAS 22

IPSAS Glossary of Defined Terms (as of December 31, 2006)

Click here for GLOSSARY

Public Sector Standard Setters:

Canada PSAB http://www.cica.ca//index.cfm/ci_id/225/la_id/1.htm

FReM - Financial Reporting Manual with consultation with the Financial Reporting Advisory Board and is issued by the relevant authorities in England and Wales, Scotland and Northern Ireland http://www.financial-reporting.gov.uk/default.htm

French websites www.comptes-publics.gouv.fr or Conseil National de la comptabilite

USA GASB http://www.gasb.org/

USA FASAB http://www.fasab.gov/


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Private Sector Standard Setters:

Prepared by Date

(Technical Manager IPSASB)

The following should be completed after board or committee approval and after revising the project proposal form to reflect any changes by the board or committee.

Approved by Date

(Chair IPSASB)


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COMMENTS BY TECHNICAL MANAGERS The comments of Technical Manager from each technical area are required before this Project Proposal is considered by the board or committee proposing to undertake the project.

Technical Manager to the Compliance Advisory Panel

[Insert comments (prompts – views on importance of project, other matters wished to be communicated)]

Signed Date Technical Manager to the DNC


Signed Date Technical Manager to the SMPC


Signed Date Technical Manager to the IESBA


Signed Date


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Technical Manager to the IAASB


Signed Date Technical Manager to the PAIB Committee


Signed Date Technical Manager to the IAESB


Signed Date

Technical Manager to the Transnational Auditors Committee


Signed Date


Agenda Paper 7.0

IFAC IPSASB Meeting Agenda Paper 7.0 March 2011 – Paris, France

MJK February 2011

Appendix 2 – Excerpt from Minutes on Narrative Reporting session from March 2008 IPSASB meeting

7. NARRATIVE REPORTING

A draft project brief was presented in preparation for the initiation of a project on Narrative Reporting in 2009. Staff had undertaken an initial analysis of issues to be considered, including considering the project in the context of “Rules of the Road”.

Members expressed initial agreement with the scope of the coverage proposed by Staff. They agreed that the project should be initiated only once responses to the Consultation Paper on Conceptual Framework (CF) have been considered. In addition they discussed using an incremental approach towards the evolution of this project with the initial step being focused on financial statement discussion and analysis and further steps going beyond to other aspects of performance reporting.

Staff was also directed to update the Project Brief and draft Issues Paper as follows: � Emphasis that this will not necessarily be an IPSAS but may be in the form of guidance; � Revise the project scope to start to draw a boundary/distinction between performance

reporting, budgetary reporting and narrative reporting, recognizing that there will be overlap and crossover issues that will need to be dealt with;

� Revise the brief to indicate a step-by-step approach to implementation, starting with NR on financial statements but leading to other steps that will correlate with the CF and more public sector specific focus (actual performance against budget, accountability in government, budget modifications, etc);

� Review and revise the public sector justification by further strengthening the accountability to stakeholders;

� Revise language such as “likelihood,” and consider more appropriate terms such as “risk.” � Recognize the need to explore forward looking information, in a fact based way; � Review and enhance the discussion of the whole-of-government versus entity level-of-

government, as well as consideration of a wide variety of other public sector entities, such as the United Nations;

� Explain the need to define “management” in a public sector context, including avoiding political connotations;

� Highlight a number of factors such as the relevance of qualitative characteristics, the need to avoid “boiler plating,” and concerns over the length of NR.

� Recognize that this project will consider the IASB Management Commentary project. However, the IASB project is not the driving force behind IPSASB’s NR project. NR should not be viewed as a convergence project because the different user base in the public sector makes the public sector specific needs quite clear. It is anticipated that there will be fewer correlations to private sector standards as the project moves beyond the financial statement phase; and

� Various editorial suggestions to improve the general readability.

A further version of the project brief will be distributed to Members for comment out of session.

IFAC IPSASB Meeting Agenda Paper 7.1 March 2011 – Paris, France Page 1 of 19 �

Prepared by: MJK February 2011

NARRATIVE REPORTING – ISSUES PAPER

Introduction

Background

1. At present, there is no internationally generally accepted form or content for narrative reports and the practice of narrative reporting varies across jurisdictions. For example, in some jurisdictions, the requirement to provide such reports is in legislation or regulation, while in others it is strictly voluntary. In some jurisdictions, there is a standard for narrative reporting issued by a standard-setting body specifically for public sector entities, while in other jurisdictions, the form and content of such reports may be left to management’s discretion. See agenda papers 6.2 and 6.3 for the research results.

2. This project was initiated to provide a framework for providing narrative reports. It is recognized that the form and content of such reports may, and should, vary among entities and across jurisdictions. Narrative reports are intended to provide insight into an entity’s specific circumstances, including the legal and economic circumstances of the jurisdiction in which an entity operates. A flexible approach, such as that adopted in the jurisdictions that have either issued standards on, or have a legal or regulatory requirement for, narrative reporting, will permit entities to discuss and analyze the trends, events, and factors that are most relevant to their particular circumstances. March 2008 Approved Project Brief

3. The Project Brief identified the scope of the project as follows:

The scope of the project is to determine how a narrative explanation by management in the public sector should be used to enhance the usefulness of financial information within general purpose financial statements (GPFSs) and how it should be included within general purpose financial reports (GPFRs). The guidance developed would apply to all public sector entities other than Government Business Enterprises.

4. The Project Brief identified the main issues to be considered in the narrative reporting

project as follows: • What are the objectives of narrative reporting? • What are the main attributes of high quality narrative explanations? • Are there essential content elements to include in narrative reporting?



• What type of guidance is appropriate? This paper will explore these issues as well as others identified by the TBG.

5. This project has linkages with the following active IPSASB projects: • The Conceptual Framework (especially Phase 1 and Phase 4); • Reporting on the Long-Term Sustainability of Public Finances (“long-term fiscal

sustainability”); and • Service Performance Reporting.

6. These other IPSASB projects will be considered as this project is developed. As discussed below, the objectives and users of general purpose financial reports (GPFRs) set out in the Conceptual Framework Phase 1 exposure draft are considered to be an appropriate basis for narrative reporting. In addition, the Phase 4 project on presentation may also contain guidance relevant to narrative reporting.

7. For example, as discussed below, some jurisdictions consider both long-term fiscal sustainability reporting and service performance reporting to be included in narrative reporting. In addition, the IPSASB may determine that those two projects, as well as narrative reporting, should have the same level of authoritative status.

8. In addition, the IASB issued the IFRS Practice Statement, Management Commentary: A Framework for Presentation in December 2010, which will also be considered to the extent that the Practice Statement is relevant to the public sector. Note that the approved Project Brief indicated this is not a convergence project.

Questions for the IPSASB: � Do you agree that the project should provide a definition of “narrative reporting”? � Are there any other issues this project should address in addition to those identified in

the approved Project Brief?

Definition of Narrative Reporting

9. The March 2008 Project Brief did not discuss a definition of narrative reporting. The IPSASB had decided to use the term instead of one involving the term “management”. Many of the existing standards refer to management`s involvement.

10. The TBG is of the view that a definition is required to clearly distinguish the scope of this project from others that might be considered to fall under the umbrella of “narrative



reporting” in some jurisdictions. Accordingly, this paper contains a discussion of elements of such a definition.

11. However, additional research on legislation and regulation governing such reports in the public sector and the development of other guidance and proposed pronouncements since the time the Project Brief was prepared have tended to use the term “narrative reporting” in a broader sense. For example, certain jurisdictions include service performance reporting and comparisons with budget within the scope or understanding of narrative reporting (e.g., FASAB, South African Treasury and Municipal Finance Act, New Zealand Public Finance Act 1989 and Local Government Act 2002 Schedule 10 Part 3). These are the subject of existing IPSASs or projects under way. There may also be requirements to report on compliance (e.g., New Zealand Local Government Act 2002 Schedule 10 Part 3).

12. In addition, the December 2010 Exposure Draft, Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities: Role, Authority and Scope; Objectives and Users; Qualitative Characteristics; and Reporting Entity (Conceptual Framework ED 1), notes under the caption of “Narrative Reports”:

2.25 In some cases, quantitative measures of the outputs and outcomes of the entity’s service delivery activities during the period and anticipated activities in future periods will provide relevant information about the achievement of these service delivery objectives�for example, information about the cost, volume, and frequency of service delivery, and the relationship of services provided to the resource base of the entity. In other cases, the achievement of service delivery objectives may need to be communicated by an explanation of the quality of particular services provided or the outcome of certain programs.

This reference to the communication of an explanation of service delivery quality could imply that such an explanation would be part of the narrative report. However, the approved project brief excludes service performance reporting from the scope of this project.

13. The Israel Government Accounting Standards Board has issued draft guidance, Narrative Information Attached to the Financial Statements of a Public Sector Entity, which “… defines the preparation and presentation requirements of narrative information attached to financial statements of a public sector entity (here and after - "a management report"), which shall be attached to the annual financial statements of a public sector entity (here and after – "the entity") and be prepared by the entity's management.” It clearly links the term “narrative information” to the GPFS.



14. On the other hand, the December 2010 IFRS Practice Statement defines management commentary as follows:

IN3. Management commentary is a narrative report that provides a context within which to interpret the financial position, financial performance and cash flows of an entity. It also provides management with an opportunity to explain its objectives and its strategies for achieving those objectives. Users routinely use the type of information provided in management commentary to help them evaluate an entity’s prospects and its general risks, as well as the success of management’s strategies for achieving its stated objectives. …

This definition implies there are other types of narrative reports than those specifically related to the financial statements, and clearly distinguishes such reports from other types of narrative reports.

15. The TBG is seeking the IPSASB’s confirmation that narrative reporting should not include or subsume service performance reporting, or other types of reports that may form part of the GPFR, but that it should deal strictly with the narrative analysis of the information contained in the GPFSs. This was the intended scope of the project as described in the March 2008 approved Project Brief.

16. The TBG is of the view that retaining the term used in the Project Brief will cause confusion, and that a more descriptive and specific term should be used. The covering memo accompanying the Project Brief indicated that “At this stage, staff proposes to use the term Narrative Reporting for operational purposes, with a view to determining the most appropriate title once the project has progressed.” The TBG seeks the IPSASB’s views on whether to use a different term to describe this specific type of financial reporting, and if so, what the term should be.

17. In doing so, it is necessary to consider whether to change the name from “narrative reporting” to avoid any potential confusion or overlap with the service performance reporting project. For example, the US public sector standards issued by the GASB and FASB term “management discussion and analysis”, and the private sector term “management commentary” are well understood. Canada’s public sector standard terms this type of reporting “financial statement discussion and analysis”. As noted above, Israel’s draft guidance uses the term “narrative information attached to financial statements” which is appealing because it clearly links to the financial statements without limiting the term “narrative reporting” which is used more broadly in some jurisdictions and pronouncements. The TBG suggests the term “narrative reporting on financial statements” to help reduce potential confusion on the scope of this project relative to the IPSASB project on service performance reporting. The remainder of this paper adopts that approach.



18. Based on existing elements of definitions of narrative reporting on financial statements, a

possible definition (subject to change, as noted above) follows:

A narrative report on financial statements is a report by management included in the GPFR of the entity that complements and supplements the GPFS of the entity. It includes qualitative as well as quantitative analysis and discussion that provides a context within which users can interpret the entity’s financial position, results of operations and cash flows for the period.

19. However, if the IPSASB prefers a term referring to “management” in the definition, as is done in certain existing pronouncements, it is proposed that the starting point would be “key management personnel” IPSAS 20, Related Party Disclosures. Key management personnel would generally be those responsible for preparing a narrative report on financial statements.

Key Management Personnel 6. Key management personnel include all directors or members of the governing body of

the reporting entity, where that body has the authority and responsibility for planning, directing, and controlling the activities of the entity. At the whole-of-government level, the governing body may consist of elected or appointed representatives (for example, a president or governor, ministers, councilors and aldermen or their nominees).

7. Where an entity is subject to the oversight of an elected or appointed representative of

the governing body of the government to which the entity belongs, that person is included in key management personnel, if the oversight function includes the authority and responsibility for planning, directing, and controlling the activities of the entity. In many jurisdictions, key advisors of that person may not possess sufficient authority, legal or otherwise, to satisfy the definition of key management personnel. In other jurisdictions, key advisors of that person may be deemed to be key management personnel because they have a special working relationship with an individual who has control over an entity. They therefore have access to privileged information, and may also be able to exercise control or significant influence over an entity. Judgment is required in assessing whether an individual is a key advisor, and whether that advisor satisfies the definition of key management personnel, or is a related party.

8. The governing body, together with the chief executive and senior management group,

has the authority and responsibility to plan and control the activities of the entity, to manage the resources of the entity and for the overall achievement of entity objectives. Therefore, key management personnel will include the chief executive and senior management group of the reporting entity. In some jurisdictions, civil servants will not have sufficient authority and responsibility to qualify as key management personnel (as defined by this Standard) of the whole-of-government reporting entity. In these cases, key management personnel will consist only of those elected members of the governing body who have the greatest responsibility for the government; often these persons are referred to as Cabinet Ministers.



9. The senior management group of an economic entity may comprise individuals from

both the controlling entity and other entities that collectively make up the economic entity.

20. The definition will be supplemented by identifying qualitative characteristics of such

reports that will best meet users’ needs (discussed later in this paper).

Questions for the IPSASB: � Do you agree that the scope of the project should be limited to information reported in

the GPFS? � Should the term used for such reports be changed to something more reflective of the

specific type of information presented (e.g., “narrative report on financial statements” as indicated above)?

� Are there any other elements that need to be included in the definition?

Objectives and Users of Narrative Reports on Financial Statements

21. This project will assume the same direction as the project on service performance reporting to be consistent with the users, user needs, and qualitative characteristics identified in the Conceptual Framework ED 1. Objectives of GPFRs

22. The objectives of narrative reporting on financial statements derive from those of GPFRs. Conceptual Framework ED 1 states:

2.1 The objectives of financial reporting by public sector entities are to provide information about the entity that is useful to users of GPFRs for accountability purposes and for decision-making purposes (hereafter referred to as “useful for accountability and decision-making purposes”).

2.2 Financial reporting is not an end in itself. Its purpose is to provide information useful to users of GPFRs. The objectives of financial reporting are therefore determined by reference to the users of GPFRs, and their information needs.

23. Accountability and decision making are the primary objectives of GPFRs of public sector entities. Information provided in GPFRs for accountability purposes will contribute to, and inform, decision making.

24. Accountability and decision making are likewise the overarching objectives of narrative reporting on financial statements. Accountability is the relationship between those who



control or manage an entity and those who possess formal power over them. Financial reporting is intended to provide information that helps a public sector entity fulfill its duty to be publicly accountable. However, public sector entities’ financial statements alone do not provide all of the information users of those statements need to make informed decisions. Additional quantitative and qualitative information may be required to provide a better context for understanding, interpreting, and assessing public sector GPFS. Objectives of Narrative Reporting on Financial Statements

25. Transactions entered into by public sector entities are increasingly complex and the GPFSs that report on such transactions are consequently increasingly complex and detailed. Narrative reporting on financial statements assists users in understanding and interpreting GPFS by providing more user-friendly descriptions of the entity’s financial operations than the financial statements alone, and in ways that users can readily understand. It may also demonstrate linkages and dependencies among financial statement items that users may not otherwise be able to discern.

26. Narrative reporting on financial statements may encourage better analysis of an entity’s current operations. For example, identification of the main events, trends, and factors influencing the current reporting period, provides useful information for decision making regarding the use of scarce resources. It may also help identify potential impacts on future reporting periods. Some pronouncements on narrative reporting require a forward-looking point of view (see Agenda Paper 7.2).

27. Frameworks for pronouncements (standards or guidance) developed by standard setters generally adopt an approach of linking the objectives pertaining to narrative reporting on financial statements to their financial reporting frameworks. Agenda Paper 7.2 summarizes the main objectives contained the various existing standards.

28. For example, the Israel Government Accounting Standards Board’s proposed guidance indicates the objective of such information is to “…provide to the users information about the entity's objectives and activities, including information about factors that affect the entity.” This is consistent with Conceptual Framework ED 1.

29. In jurisdictions for which narrative reporting on financial statements is required by

legislation or regulation, the objectives may not be specifically stated or may be stated in more general terms. Most legislation or regulation pertaining to narrative reporting on financial statements sets out requirements only. Agenda Paper 7.2.1 includes the summaries of legislative and regulatory requirements provided to staff by Members and TAs to date.



30. For example, the South African Municipal Finance Act indicates the following purpose of

the annual report (of which the narrative report on financial statements is a part): (a) To provide a record of the activities of the municipality or municipal entity during

the financial year to which the report relates;

(b) To provide a report on performance against the budget of the municipality or municipal entity for that year; and

(c) To promote accountability to the local community for the decisions made throughout the year by the municipality or municipal entity.

Item (c) relates directly to the IPSASB GPFR objective of accountability.

31. The New Zealand annual report must provide the information that is necessary to enable an informed assessment to be made of the department’s performance during the financial year (including an assessment against the intentions, measures and standards set out at the start of the financial year in the information on the department’s future operating intentions in accordance with sections 40 and 41). This objective is consistent with the IPSASB GPFR objective of decision making.

32. In addition to the overall objectives of GPFRs, the main specific objectives of narrative reports on financial statements, identified from existing and proposed pronouncements and legislative and regulatory requirements (see agenda paper 7.2), include: (a) Enhance user understanding and usefulness of GPFRs;

(b) Expand and explain financial statement information (e.g., what has happened, why,

and implications);

(c) Provide context for the related financial statements; and

(d) Aid in understanding operations, successes, and challenges in present and future.

Questions for the IPSASB: � Do you agree with the identified objectives of narrative reporting on financial

statements identified in paragraph 32 above? � Are there objectives that should be added, deleted, or amended?



Users and their Needs

33. Conceptual Framework ED 1 identifies two groups primary users of GPFRs of public sector entities: (a) Service recipients (taxpayers and other members of the community that benefit from

the services provided by the government or other public sector entity, whether as a result of exchange or non-exchange transactions); and

(b) Resource providers (“involuntary resource providers” such as taxpayers, and

“voluntary resource providers” such as lenders, donors, suppliers, fee-for-service consumers and employees).

These two groups of users are also the identified users of narrative reports on financial statements. Narrative reporting on financial statements assists these users by providing information beyond that contained in the financial statements. It complements and supplements the financial statements by expanding on and explaining information contained in the financial statements.

34. As noted in Conceptual Framework ED 1, for accountability and decision-making

purposes, service recipients and their representatives require information as input to assessments of such matters as whether the range, volume and cost of services provided during the reporting period, and the amounts and sources of their cost recoveries, are appropriate and whether current levels of taxes or other charges are sufficient to maintain the volume and quality of services currently provided. They will also require information about the entity’s anticipated future objectives, and the amounts and sources of cost recoveries necessary to support those activities.

35. Resource providers require information as input to assessments of such matters as whether the entity is achieving the objectives established as the justification for the resources raised during the reporting period; funded current operations from funds raised in the current period from taxpayers or from borrowings or other sources; and is likely to need additional (or less) resources in the future, and the likely sources of those resources. Lenders and creditors require information as input to assessments of the liquidity of the entity and to confirm that the amount and timing of repayment will be as agreed.

36. Conceptual Framework ED 1 specifically discusses the usefulness of narrative reports in providing the information required by service recipients and their representatives and resource providers and their representatives:



2.24 Narrative reports can provide additional information about the major factors underlying the financial and service delivery performance of the entity during the reporting period. They can also outline the assumptions that underpin expectations about, and factors that are likely to influence, the entity’s future performance. This will assist users to better understand and place in context the financial and non-financial information included in GPFRs, and enhance the role of GPFRs in providing information useful for accountability and decision-making purposes.

37. Narrative reporting on financial statements may include quantitative analysis of significant

variances between the prior year and current year, including assets, liabilities, revenues, and expenses. This allows users to assess the results of past events, and identify future prospects. It also assists in understanding and assessing trends in the entity’s financial position and changes in financial position.

38. In some cases, a significant change may have occurred during the reporting period, but the financial statements and quantitative analyses my not illustrate a significant variance because of offsetting factors. Narrative explanations may identify and explain significant variances between the current year and prior year such as variances due to changes in how a service is delivered, changes in programs and services provided, and changes due to the level of revenues raised or costs incurred. Some of these may be within the control of the entity (e.g., taxation rates, new or discontinued programs or services, restructuring operations, or changing the method of service delivery), while others may be due to external factors (e.g., a decreased tax base, wage contracts, and unexpected events such as a natural disaster). Such explanations may assist users in assessing future services and commitments of the entity.

39. An analysis of financial assets provides information regarding the amount of resources available to be converted to cash if necessary. In addition, specific ratios and analysis of cash flows may be useful to highlight liquidity.

40. Analyses of revenues by major source may indicate trends and dependencies on specific revenue sources (e.g., government business enterprises (GBEs), transfers, or royalties).

41. Analyses of expenses may demonstrate the entity’s allocation and use of resources, provide insight into the cost of programs and services, and assist in evaluating the cost of borrowing to finance spending.

42. Discussion of significant commitments, contingencies, and subsequent events assists users in assessing future revenue requirements of the entity.

Questions for the IPSASB:



� Do you agree that the user needs identified above related to narrative reports on financial statements are also appropriate for narrative reporting?

Qualitative Characteristics of, and Constraints on, Information included in Narrative Reports

Qualitative Characteristics of Information Contained in GPFRs

43. Narrative reports on financial statements are part of GPFRs because they are intended to complement and supplement the GPFSs. Conceptual Framework ED 1 notes that “…the qualitative characteristics of information included in GPFRs are the attributes that make that information useful to users and support the achievement of the objectives of financial reporting.” As noted earlier, the objectives of financial reporting are to provide information useful for accountability and decision-making purposes.

44. Conceptual Framework ED 1 proposes the qualitative characteristics of information

contained in GPFRs are: � Relevance; � Faithful representation; � Understandability; � Timeliness; � Comparability; and � Verifiability.

45. Conceptual Framework ED 1 proposes the constraints are: � Materiality; � Cost-benefit; and � Balance between the qualitative characteristics.

46. These qualitative characteristics are discussed below in relation to narrative reporting. In addition, specific attributes of narrative reports on financial statements identified from the research, will be considered. Relevance

47. Conceptual Framework ED 1 proposes that financial and nonfinancial information is relevant if it is capable of making a difference in achieving the objectives of financial reporting. For narrative reports on financial information to be relevant they must pertain to the specific circumstances of the entity and add management’s insights. Management of an entity has the detailed knowledge of the transactions, events, and conditions reflected in the entity’s financial report and of the policies that govern the entity’s operations.



Management also possess informed expectations regarding the future based on that knowledge. For example, some pronouncements on narrative reporting require a summary or overview of the entity’s objectives, significant events and conditions that affected the financial statements (e.g., significant changes, unplanned events), which provides the starting point for assessing the entity’s financial performance and trends.

48. Generic disclosures that do not relate to the specific operations, practices and circumstances of the entity would not be relevant. Likewise, information that simply repeats financial statement information or note disclosures in the financial statements without analysis or presenting discussions that do not provide insight into the entity’s past performance or prospects is unlikely to be relevant to users and may make it more difficult for them to understand the most significant matters the entity faces. For example, a discussion of the risks the entity faces would provide relevant information to users about exposure or vulnerability to concentrations (e.g., significant loans to particular regions or industries) or dependence on a particular source of revenue as noted above. �

Faithful representation 49. Conceptual Framework ED 1 proposes that faithful representation is attained when the

depiction of the phenomenon is complete, neutral, and free from material error. Narrative reports on financial information that faithfully represent the information would be: (a) based on currently-known facts, decisions, or conditions;

(b) consistent with the financial statements; and (c) balanced in discussing both positive and negative facts and views of management. Information that excludes certain facts (e.g., negative) is incomplete and thus could be biased (not neutral). In cases when a narrative report on financial information presents ratios, tables, or charts, they should not distort the information in the financial statements by, for example, using a scale that exaggerates a positive or negative trend.

50. Although some jurisdictions require or permit future-looking information to be presented, such information must also meet the conditions noted above. Understandability

51. Conceptual Framework ED 1 proposes that understandability is the quality of information that enables users to comprehend its meaning. Narrative reports on financial statements complement and supplement the financial statements. They are intended to help users of the financial statements by explaining the complex events and transactions in the financial



statements in a readable, clear, and simple manner. Reports are not understandable when they use descriptions that are too technical, or provide excessive detail or are too vague in describing those events and transactions. Timeliness

52. Conceptual Framework ED 1 proposes that timeliness means having information available for users before it loses its capacity to be useful for accountability and decision-making purposes. Narrative reports on financial statements discuss and analyze the current financial statements. In doing so, they may be useful in predicting future results by explaining significant changes and highlighting trends. They may, for example, include an analysis of trends in financial performance that provides information that is useful beyond the date of the narrative report. Comparability

53. Conceptual Framework ED 1 proposes that comparability is the quality of information that enables users to identify similarities in, and differences between, two sets of phenomena. It is not a quality of an individual item of information, but rather a quality of the relationship between two or more items of information. In some jurisdictions, comparisons with prior years’ results are required. Comparability would be enhanced when the same principles and practices are used for each period for such items as determining ratios and preparation of tables and charts included in a narrative report on financial statements. In addition, disclosure of those principles and practices, including underlying assumptions and formulae, may be useful in interpreting the analyses. Verifiability

54. Conceptual Framework ED 1 proposes that verifiability is the quality of information that helps assure users that information in GPRFs faithfully represents the phenomena that it purports to represent. In some cases it may not be possible to verify the accuracy of all qualitative and quantitative explanations of such information until a future period, if at all. For example, if the entity’s strategy (long-term and risk management) are included in a narrative report on financial statements, such information would be less verifiable than, for example, a ratio calculated from information provided in the financial statements. Verifiability is enhanced when the underlying assumptions and formulae used in the analyses are disclosed. In addition, the methodologies adopted in compiling it, and the factors and circumstances that support any opinions expressed or disclosures made, should be transparent. Materiality

55. Conceptual Framework ED 1 proposes that information is material if its omission or misstatement could influence the discharge of accountability by the entity, or the decisions



that users make on the basis of the entity’s GPFRs prepared for that reporting period. Narrative reports on financial statements must be concise to be useful, therefore management must select the most important matters to discuss. This means that some items that are material to the financial statements, notes, and other sections of the GPFFR may not be discussed in the narrative report on financial statements. For example, a line-by-line analysis of the financial statements is not generally appropriate. Instead, MD&A should summarize the most important items, explain the relevant causes and effects, and place them in context. Inclusion of immaterial disclosures could make the more important information difficult to find.

56. When dealing with qualitative or future-looking information (e.g., expectations about financial results in the future), it is not generally possible to specify a uniform quantitative threshold above which a particular type of information becomes material. Cost-benefit

57. Conceptual Framework ED 1 notes that the benefits of financial reporting should justify the costs it imposes. The benefit to users of a narrative report on financial statements that presents a clear and understandable analysis of the complex information contained in the financial statements must be weighed against such costs as collecting and processing the information used in the analysis, and presenting underlying assumptions and methodologies that support such analysis.

Balance between the qualitative characteristics

58. Conceptual Framework ED 1 notes that in some cases, a balancing or trade-off between qualitative characteristics may be necessary to achieve the objectives of financial reporting. For example, there is often a trade-off between the timeliness of information and its reliability. Narrative reports on financial statements should aim to achieve a balance among the qualitative characteristics to meet the objectives of providing the information. In some cases, depending on the circumstances of the entity, the relative importance of a particular qualitative characteristic may be greater than in others.

Questions for the IPSASB: � Are there additional factors that should be considered in discussing the qualitative

characteristics of narrative reports on financial information to those identified above? Main Attributes of High-quality Narrative Explanations

59. In addition to the overall objectives of GPFRs, the specific attributes of narrative reports on financial statements, identified from existing and proposed pronouncements and legislative and regulatory requirements (see agenda paper 6.2), include:



(a) Provide management perspective and insights, which is linked to relevance;

(b) Complement and supplement financial statements, which is linked to

understandability;

(c) Describe positive and negative circumstances (“balance”), which is linked to faithful representation;

(d) Interpret and assess financial statement information (e.g., whether the entity’s financial position has improved or deteriorated during the period), which is linked to relevance and faithful representation; and

(e) Identify main trends, events, and factors (both for current financial reporting period and likely to affect future performance, position and progress), which is linked to relevance and timeliness.

Questions for the IPSASB: � Do you agree with the specific attributes of narrative reports on financial statements

identified above? � Are there additional items that should be considered? � Should these specific attributes be considered as part of the qualitative characteristics?

Essential Content Elements of Narrative Reports on Financial Statements

Overview

60. There are a variety of approaches to the format and essential elements of narrative reports on financial statements in material issued by standard setters and regulators. It is important to consider the approach that will yield the highest quality narrative reports on financial statements that allow comparisons to other entities and periods.

Standards and Guidance issued by Standard Setters

61. Standard setters identified some similar elements of narrative reports on financial statements: a. Overview or summary;

b. Nature of the entity’s operations;



c. Risks and uncertainties;

d. Strategy (long-term and risk management); e. Changes from prior year; and

f. Analysis of significant trends. These elements were identified in the discussion of the qualitative characteristics, above, and are consistent with those underlying characteristics.

62. In addition to containing similar elements to those noted above, the Israel draft guidance contains the following essential elements for the Management Report (the term used for narrative information attached to financial statements of a public sector entity), which are more specific to that country:

A Management Report shall include an overview of the data from the entity's financial statements, in accordance with its operations, as follows:

(a) The financial position of the entity; (b) The operating results; (c) Special events; (d) Contingent liabilities; (e) Critical accounting estimates.

In addition, significant detailed guidance is provided for each of these items. These requirements are similar to those found in legislative or regulatory requirements for narrative reporting on financial statements in other jurisdictions (see below). Legislative and Regulatory Requirements

63. Legislative or regulatory requirements tend to reflect the specific needs of the jurisdiction, and may not, therefore, provide relevant information to users in other jurisdictions.

64. Article 58(1) of the Central Government of the Netherlands Government Accounting Act 2001 requires that: (a) The financial information includes information on obligations, expenditures, income,

revenues, expenses, capital expenditures, capital income and balance sheet items, as stated in the accounting records and the accompanying notes.



(b) The financial information presented in the annual report can be clearly distinguished from the non-financial information.

65. The Netherlands’�Besluit begroting en verantwoording provincies en gemeenten for local

governments requires the budget1 to at least contain the following paragraphs, unless the aspect concerned is irrelevant for the respective province or municipality: (a) local taxes;(b) financial strength;(c) maintenance of capital assets;(d) financing;(e) management;(f) related parties; and(g) land use policy. Certain of these aspects would be within the scope of narrative reports on financial statements, while others are specific requirements of the jurisdiction`s regulatory framework.

66. Japanese agencies of central government, which are called “Incorporated Administrative Agencies”, and national universities must prepare for their annual reports including “business report”, which is considered similar to “narrative reporting”. The annual report is required to include:

Financial Information (1) Overview of Financial Statements; (2) Overview of Investments (e.g., facilities); (3) Overview of Budgeted Amounts and Actual Amounts; and (4) The Relationship between Reduction of Expenses and the Target of Efficiency.

There are also some practices in Japan where national and local governments prepare narrative explanations regarding particularly changes in financial statements items. There are no prescribed standards or guidelines.

Questions for the IPSASB: � Do you agree with the main common elements of narrative reports on financial

statements identified in paragraph 61? ��1�� The annual report should contain the paragraphs that are included in the budget in accordance with Article 9.

These contain the justification of that which is included in the respective paragraphs in the budget.

�



� Should guidance be provided at the level of detailed requirements in legislation and regulation identified above (paragraphs 63–66), or should it be more broadly based?

� Are there additional items that should be considered as essential content elements (e.g., the entity’s objectives, specific financial statement items such as contingencies and estimates), or should the essential content elements be limited to identification of “significant financial statement items” and examples of such items be provided (e.g., assets, liabilities, revenues, expenses, contingent liabilities, accounting estimates)?

Type of Guidance

67. While the IPSASB supports the need for narrative reports on financial statements as a means of improving public sector entities’ accountability and decision making, it acknowledges that the current state of such reporting is still in its early stages of its evolution and development, and that the form and content of narrative reports on financial statements are expected to develop in the future. For example based on the research done, it was found that in some jurisdictions, narrative reporting: g. is required with detailed requirements set out in legislation or regulation;

h. is required with detailed requirements set out in standards (e.g., GASB and FASAB in

the US, and the UK FReM);

i. is voluntary, and there may or may not be standards in place; or j. is not required.

68. Paragraph BC 1.7 of Conceptual Framework ED 1 points out that a more comprehensive scope for financial reporting, such as narrative reports on financial statements, does not mean that it is inevitable that authoritative requirements will be developed.

69. The Project Brief indicated that the decision on the type of pronouncement to be issued by the IPSASB ranges from: k. Recognizing best practices;

l. Issuing specific non-mandatory guidance; m. Issuing a standard that applies when certain conditions exist (e.g., IPSAS 24,

Presentation of Budget Information in Financial Statements); and



n. Issuing a mandatory IPSAS.

70. Given the state of current practice, it is not expected that this project would mandate which entities should be required to publish narrative reports, how frequently an entity should do so, or the level of assurance to which narrative reports should be subjected. Accordingly, it is proposed that this project develop guidance that is non-authoritative. Such guidance would provide a framework for the preparation of high-quality narrative reports on financial statements in jurisdictions in which such reports are required, that helps achieve the objectives of GPFRs by improving accountability and decision making in the public sector. The guidance would be used by public sector entities that do present narrative reports that relates to financial statements prepared in accordance with IPSASs.

71. However, the nature of the guidance developed and its authoritative status will ultimately depend on the IPSASB’s decisions on this issue in the current IPSASB projects on service performance reporting and long-term fiscal sustainability.

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he

finan

cial

repo

rts to

as

sess

the

perf

orm

ance

of

the

entit

y an

d th

e ac

tions

of i

ts

man

agem

ent r

elat

ive

to

stat

ed st

rate

gies

and

sect

or e

ntity

's fin

anci

al

stat

emen

ts, t

hrou

gh

pres

enta

tion

of n

on-

mon

etar

y in

form

atio

n ab

out t

he e

ntity

's op

erat

ions

and

ana

lysi

s of

the

entit

y's o

pera

tion

from

poi

nt o

f m

anag

emen

t's v

iew

, and

th

roug

h re

fere

nce

to

fore

cast

s and

forw

ard-

look

ing

info

rmat

ion.

IFA

C IP

SASB

Mee

ting

Age

nda

Pape

r 7.

2 M

arch

201

1 –

Pari

s, Fr

ance

Page

3 o

f 7

MJK

Feb

ruar

y 20

11

Fe

dera

l Acc

ount

ing

Stan

dard

s A

dvis

ory

Boa

rd (U

nite

d St

ates

of

Am

eric

a)

Fina

ncia

l Rep

ortin

g M

anua

l (FR

eM) (

UK

–

HM

Tre

asur

y1

Gov

ernm

enta

l A

ccou

ntin

g St

anda

rds

Boa

rd

(Uni

ted

Stat

es o

f A

mer

ica)

Inte

rnat

iona

l A

ccou

ntin

g St

anda

rds

Boa

rd

(Priv

ate

Sect

or)

Isra

el G

over

nmen

t A

ccou

ntin

g St

anda

rds

Boa

rd

Publ

ic S

ecto

r A

ccou

ntin

g St

anda

rds

Boa

rd

(CIC

A, C

anad

a)

plan

s for

pro

gres

s. �

Inte

grat

ed in

form

atio

n th

at p

rovi

des a

con

text

fo

r the

rela

ted

finan

cial

st

atem

ents

Spec

ific

Attr

ibut

es

�Su

pple

men

t &

com

plem

ent G

PFS

�M

gmt i

nsig

hts

�B

alan

ced

(pos

itive

and

ne

gativ

e)

�“V

ital f

ew”

mat

ters

ad

dres

sed

(mat

eria

lity)

�

Forw

ard-

look

ing

info

rmat

ion

rega

rdin

g th

e po

ssib

le fu

ture

ef

fect

s of t

he m

ost

impo

rtant

exi

stin

g,cu

rren

tly-k

now

n de

man

ds, r

isks

, un

certa

intie

s, ev

ents

, co

nditi

ons a

nd tr

ends

�

May

als

o in

clud

e fo

rwar

d-lo

okin

g in

form

atio

n ab

out

the

poss

ible

effe

cts

of a

ntici

pate

d fu

ture

dem

ands

, ev

ents

, con

ditio

ns,

and

tren

ds

�In

trodu

ce th

e fin

anci

al

stat

emen

ts a

nd p

rovi

de

an a

naly

tical

ove

rvie

w

of th

e go

vern

men

t’s

finan

cial

act

iviti

es

�Su

pple

men

t &

com

plem

ent

�O

bjec

tive

�Ea

sily

read

able

�

Bas

ed o

n cu

rren

tly-

know

n fa

cts,

deci

sion

s, or

con

ditio

ns th

at a

re

expe

cted

to h

ave

a si

gnifi

cant

eff

ect o

n fin

anci

al p

ositi

on a

nd

resu

lts o

f ope

ratio

ns

(fw

d-lo

okin

g)

�Pr

ovid

e an

ana

lysi

s of

the

entit

y’s o

vera

ll fin

anci

al p

ositi

on a

nd

resu

lts o

f ope

ratio

ns

�Fa

ct b

ased

�

Focu

s on

prim

ary

gove

rnm

ent n

ot

com

pone

nt u

nits

�

Dis

cuss

cur

rent

yea

r re

sults

com

pare

d w

ith

prio

r yea

r (fo

cus o

n

�M

anag

emen

t’s v

iew

�

Man

agem

ent s

houl

d de

term

ine

the

info

rmat

ion

to in

clud

e in

Man

agem

ent

com

men

tary

cons

ider

ing

the

need

s of

the

prim

ary

user

s of

finan

cial

repo

rts. T

hose

us

ers a

re e

xist

ing

and

pote

ntia

l inv

esto

rs,

lend

ers a

nd o

ther

cr

edito

rs.

�Ex

plai

ns

man

agem

ent’s

vie

w

not o

nly

abou

t wha

t ha

s hap

pene

d,

incl

udin

g bo

th p

ositi

ve

and

nega

tive

circ

umst

ance

s, bu

t als

o w

hy it

has

hap

pene

d an

d w

hat t

he

impl

icat

ions

are

for t

he

entit

y’s f

utur

e �

Com

plem

ents

and

su

pple

men

ts th

e fin

anci

al st

atem

ents

by

com

mun

icat

ing

�D

ata

incl

uded

in th

e M

anag

emen

t Rep

ort

in a

ccor

danc

e w

ith

the

man

agem

ent's

ju

dgm

ent a

bout

the

impo

rtanc

e of

thos

e da

ta to

the

unde

rsta

ndin

g of

the

entit

y's f

inan

cial

po

sitio

n an

d op

erat

ions

by

a re

ason

able

use

r �

Supp

lem

ent &

co

mpl

emen

t GPF

S �

Man

agem

ent’s

vie

w

�Fo

rwar

d lo

okin

g �

Obj

ectiv

e an

alys

is o

f th

e en

tity’

s op

erat

ions

, inc

ludi

ng

a di

scus

sion

of t

he

posi

tive

and

nega

tive

view

s of i

ts

oper

atio

ns a

nd th

e ef

fect

s of v

ario

us

even

ts

IFA

C IP

SASB

Mee

ting

Age

nda

Pape

r 7.

2 M

arch

201

1 –

Pari

s, Fr

ance

Page

4 o

f 7

MJK

Feb

ruar

y 20

11

Fe

dera

l Acc

ount

ing

Stan

dard

s A

dvis

ory

Boa

rd (U

nite

d St

ates

of

Am

eric

a)

Fina

ncia

l Rep

ortin

g M

anua

l (FR

eM) (

UK

–

HM

Tre

asur

y1

Gov

ernm

enta

l A

ccou

ntin

g St

anda

rds

Boa

rd

(Uni

ted

Stat

es o

f A

mer

ica)

Inte

rnat

iona

l A

ccou

ntin

g St

anda

rds

Boa

rd

(Priv

ate

Sect

or)

Isra

el G

over

nmen

t A

ccou

ntin

g St

anda

rds

Boa

rd

Publ

ic S

ecto

r A

ccou

ntin

g St

anda

rds

Boa

rd

(CIC

A, C

anad

a)

curr

ent y

ear)

�

Posi

tive

and

nega

tive

aspe

cts

�U

se o

f cha

rts, g

raph

s, an

d ta

bles

is e

ncou

rage

d to

enh

ance

un

ders

tand

abili

ty

�Fi

nanc

ial m

anag

ers

enco

urag

ed to

repo

rt

only

the

mos

t rel

evan

t in

form

atio

n (a

void

“b

oile

rpla

te”)

�

At a

min

imum

, MD

&A

sh

ould

incl

ude:

a.

A b

rief d

iscu

ssio

n of

the

basi

c f/s

b.

Con

dens

ed

finan

cial

in

form

atio

n de

rived

fr

om g

ov’t-

wid

e f/s

inte

grat

ed in

form

atio

n ab

out t

he e

ntity

’s

reso

urce

s and

the

clai

ms a

gain

st th

e en

tity

and

its re

sour

ces,

and

the

trans

actio

ns

and

othe

r eve

nts t

hat

chan

ge th

em. e

xpla

in

the

mai

n tre

nds a

nd

fact

ors t

hat a

re li

kely

to

aff

ect t

he e

ntity

’s

futu

re p

erfo

rman

ce,

posi

tion

and

prog

ress

�C

omm

enta

ry sh

ould

be

cons

iste

nt w

ith th

e fo

llow

ing

prin

cipl

es:

(a)

to p

rovi

de

man

agem

ent’s

vi

ew o

f the

en

tity’

s pe

rfor

man

ce,

posi

tion

and

prog

ress

; and

(b

) to

supp

lem

ent a

nd

com

plem

ent

info

rmat

ion

pres

ente

d in

the

finan

cial

st

atem

ents

. M

C sh

ould

be

cons

iste

nt

with

the

rela

ted

f/s b

ut

avoi

d du

plic

atio

n w

ith

note

dis

clos

ures

M

C sh

ould

avo

id g

ener

ic

disc

losu

res a

nd ta

ke in

to

IFA

C IP

SASB

Mee

ting

Age

nda

Pape

r 7.

2 M

arch

201

1 –

Pari

s, Fr

ance

Page

5 o

f 7

MJK

Feb

ruar

y 20

11

Fe

dera

l Acc

ount

ing

Stan

dard

s A

dvis

ory

Boa

rd (U

nite

d St

ates

of

Am

eric

a)

Fina

ncia

l Rep

ortin

g M

anua

l (FR

eM) (

UK

–

HM

Tre

asur

y1

Gov

ernm

enta

l A

ccou

ntin

g St

anda

rds

Boa

rd

(Uni

ted

Stat

es o

f A

mer

ica)

Inte

rnat

iona

l A

ccou

ntin

g St

anda

rds

Boa

rd

(Priv

ate

Sect

or)

Isra

el G

over

nmen

t A

ccou

ntin

g St

anda

rds

Boa

rd

Publ

ic S

ecto

r A

ccou

ntin

g St

anda

rds

Boa

rd

(CIC

A, C

anad

a)

acco

unt m

ater

ialit

y Sh

ould

take

n in

to

acco

unt q

ualit

ativ

e ch

arac

teris

tics o

f re

leva

nce

and

faith

ful

repr

esen

tatio

n,co

mpa

rabi

lity,

ve

rifia

bilit

y, ti

mel

ines

s an

dun

ders

tand

abili

tyFo

rwar

d lo

okin

g

Esse

ntia

l Con

tent

M

D&

A sh

ould

add

ress

: �

the

entit

y’s m

issi

on

and

orga

niza

tiona

l st

ruct

ure;

�

the

entit

y’s

perf

orm

ance

goa

ls

and

resu

lts;

�th

e en

tity’

s fin

anci

al

stat

emen

ts;

�th

e en

tity’

s sys

tem

s, co

ntro

ls, a

nd le

gal

com

plia

nce;

and

�

the

poss

ible

futu

re

effe

cts o

n th

e en

tity

of e

xist

ing,

cur

rent

ly-

know

n de

man

ds,

risks

, unc

erta

intie

s, ev

ents

, con

ditio

ns

and

trend

s. M

D&

A sh

ould

als

o ad

dres

s the

repo

rting

en

tity’

s act

ions

take

n or

pl

anne

d to

add

ress

pr

oble

ms a

nd si

gnifi

cant

Sh

ould

pro

vide

an

anal

ysis

of s

igni

fican

t ch

ange

s tha

t occ

ur in

fu

nds a

nd si

gnifi

cant

bu

dget

var

ianc

es.

Shou

ld d

escr

ibe

capi

tal

asse

t and

l-t d

ebt a

ctiv

ity

durin

g th

e ye

ar.

Shou

ld c

oncl

ude

with

a

desc

riptio

n of

cur

rent

ly

know

n fa

cts,

deci

sion

s, or

co

nditi

ons t

hat a

re

expe

cted

to h

ave

a si

gnifi

cant

eff

ect o

n fin

anci

al p

ositi

on o

r re

sults

of o

pera

tions

.

Alth

ough

the

parti

cula

r fo

cus o

f man

agem

ent

com

men

tary

will

dep

end

on th

e fa

cts a

nd

circ

umst

ance

s of t

he

entit

y, m

anag

emen

t co

mm

enta

rysh

ould

incl

ude

info

rmat

ion

that

is

esse

ntia

l to

an

unde

rsta

ndin

g of

: (a

) th

e na

ture

of t

he

busi

ness

; (b

) m

anag

emen

t’s

obje

ctiv

es a

nd it

s st

rate

gies

for

mee

ting

thos

e ob

ject

ives

; (c

) th

e en

tity’

s mos

t si

gnifi

cant

reso

urce

s, ris

ks a

nd

rela

tions

hips

; (d

) th

e re

sults

of

oper

atio

ns a

nd

pros

pect

s; a

nd

The

Man

agem

ent R

epor

t sh

all r

efer

and

pro

vide

ex

plan

atio

ns a

bout

the

key

data

in th

e fin

anci

al

stat

emen

ts w

ithin

a

desc

riptio

n of

ent

ity's

segm

ents

. The

M

anag

emen

t Rep

ort

shal

l als

o in

clud

e in

form

atio

n ab

out n

on-

mon

etar

y da

ta, i

nclu

ding

da

ta u

sed

by th

e en

tity

for i

ts se

gmen

t ana

lysi

s an

d go

als a

chie

vem

ent.

A

Man

agem

ent R

epor

t sh

all i

nclu

de a

n ov

ervi

ew o

f the

dat

a fr

om th

e en

tity'

s fin

anci

al st

atem

ents

, in

acco

rdan

ce w

ith it

s op

erat

ions

, as f

ollo

ws:

(a

)Th

e fin

anci

al

posi

tion

of th

e

IFA

C IP

SASB

Mee

ting

Age

nda

Pape

r 7.

2 M

arch

201

1 –

Pari

s, Fr

ance

Page

6 o

f 7

MJK

Feb

ruar

y 20

11

Fe

dera

l Acc

ount

ing

Stan

dard

s A

dvis

ory

Boa

rd (U

nite

d St

ates

of

Am

eric

a)

Fina

ncia

l Rep

ortin

g M

anua

l (FR

eM) (

UK

–

HM

Tre

asur

y1

Gov

ernm

enta

l A

ccou

ntin

g St

anda

rds

Boa

rd

(Uni

ted

Stat

es o

f A

mer

ica)

Inte

rnat

iona

l A

ccou

ntin

g St

anda

rds

Boa

rd

(Priv

ate

Sect

or)

Isra

el G

over

nmen

t A

ccou

ntin

g St

anda

rds

Boa

rd

Publ

ic S

ecto

r A

ccou

ntin

g St

anda

rds

Boa

rd

(CIC

A, C

anad

a)

even

ts, c

ondi

tions

, tre

nds a

nd c

ontin

genc

ies

that

may

aff

ect f

utur

e op

erat

ions

.

(e)

the

criti

cal

perf

orm

ance

m

easu

res a

nd

indi

cato

rs th

at

man

agem

ent u

ses

entit

y;

(b)

The

oper

atin

gre

sults

; (c

)Sp

ecia

l eve

nts;

(d

)C

ontin

gent

lia

bilit

ies;

(e

)C

ritic

al a

ccou

ntin

g es

timat

es.

Man

agem

ent R

epor

t sh

all i

nclu

de th

e fo

llow

ing

info

rmat

ion

abou

t the

pub

lic se

ctor

en

tity'

s ope

ratio

ns:

(a)

Con

dens

ed

desc

riptio

n of

the

entit

y an

d th

e en

viro

nmen

t in

whi

ch it

ope

rate

s;

(b)

The

entit

y's s

trate

gy

for

the

long

-term

an

d fo

r th

e sh

ort-

term

; (c

)Th

e en

tity'

s co

nduc

ting;

(d

)Th

e en

tity'

s in

tern

atio

nal

activ

ity

An

entit

y sh

all s

peci

fy

the

chan

ges i

t mad

e du

ring

the

last

yea

r and

th

eir i

nflu

ence

in

acco

rdan

ce w

ith th

e de

tails

men

tione

d

IFA

C IP

SASB

Mee

ting

Age

nda

Pape

r 7.

2 M

arch

201

1 –

Pari

s, Fr

ance

Page

7 o

f 7

MJK

Feb

ruar

y 20

11

Fe

dera

l Acc

ount

ing

Stan

dard

s A

dvis

ory

Boa

rd (U

nite

d St

ates

of

Am

eric

a)

Fina

ncia

l Rep

ortin

g M

anua

l (FR

eM) (

UK

–

HM

Tre

asur

y1

Gov

ernm

enta

l A

ccou

ntin

g St

anda

rds

Boa

rd

(Uni

ted

Stat

es o

f A

mer

ica)

Inte

rnat

iona

l A

ccou

ntin

g St

anda

rds

Boa

rd

(Priv

ate

Sect

or)

Isra

el G

over

nmen

t A

ccou

ntin

g St

anda

rds

Boa

rd

Publ

ic S

ecto

r A

ccou

ntin

g St

anda

rds

Boa

rd

(CIC

A, C

anad

a)

abov

e.Su

bjec

t to

Aud

it?

Yes

– re

quire

d su

pple

men

tal

info

rmat

ion

(RSI

)

Y

es –

requ

ired

supp

lem

enta

l inf

orm

atio

n (R

SI)

Y

es –

an

inte

gral

par

t of

the

finan

cial

stat

emen

ts

No

– no

t par

t of G

PFS

IFA

C IP

SASB

Mee

ting

A

gend

a Pa

per

7.3

M

arch

201

1 –

Pari

s, Fr

ance

Page

1 o

f 27

Nar

rativ

e R

epor

ting

– R

esea

rch

Sum

mar

y

MJK

MJK

Feb

ruar

y 20

11

Juris

dict

ion

Japa

nB

ody

issu

ing

pron

ounc

emen

t M

inis

try o

f Int

erna

l Aff

airs

and

Com

mun

icat

ions

(see

bel

ow)

Nat

ure

and

desc

riptio

n of

Pr

onou

ncem

ent

Min

istry

of I

nter

nal A

ffai

rs a

nd C

omm

unic

atio

ns d

evel

oped

the

man

dato

ry g

uide

line

for a

nnua

l rep

orts

pr

epar

ed b

y ag

enci

es o

f cen

tral g

over

nmen

t. Th

ere

are

no p

resc

ribed

stan

dard

s or g

uide

lines

for l

ocal

gov

ernm

ents

. Th

ere

are

no p

resc

ribed

stan

dard

s or g

uide

lines

for n

arra

tive

repo

rting

issu

ed b

y a

stan

dard

-set

ting

body

. Ty

pe o

f org

aniz

atio

ns in

sc

ope

Japa

nese

age

ncie

s of c

entra

l gov

ernm

ent,

whi

ch is

cal

led

“Inc

orpo

rate

d A

dmin

istra

tive

Age

ncie

s “, a

nd

natio

nal u

nive

rsiti

es m

ust p

repa

re fo

r the

ir an

nual

repo

rts in

clud

ing

“bus

ines

s rep

ort”

, whi

ch is

con

side

red

sim

ilar t

o “N

arra

tive

Rep

ortin

g”.

Mai

n re

quire

men

ts o

f St

anda

rd

For c

entra

l gov

ernm

ent a

nnua

l rep

orts

, the

gui

delin

e st

ates

the

min

imum

requ

irem

ents

of a

nnua

l rep

orts

as

follo

ws:

1.

Exec

utiv

e Su

mm

ary

2.

Bas

ic In

form

atio

n 3.

Th

e Su

mm

ary

of F

inan

cial

Sta

tem

ents

4.

Fi

nanc

ial I

nfor

mat

ion

(a)

Ove

rvie

w o

f Fin

anci

al S

tate

men

ts

(b)

Ove

rvie

w o

f Inv

estm

ents

(e.g

. fac

ilitie

s)

(c)

Ove

rvie

w o

f Bud

gete

d A

mou

nts a

nd A

ctua

l Am

ount

s (d

)Th

e R

elat

ions

hip

betw

een

Red

uctio

n of

Exp

ense

s and

the

Targ

et o

f Eff

icie

ncy

5.

Th

e Ex

plan

atio

n of

Out

puts

and

Out

com

es

(a)

The

stru

ctur

e of

Rev

enue

s (b

)Th

e Ex

plan

atio

n of

Out

puts

and

Out

com

es re

late

d to

the

Fina

ncia

l Dat

a O

ther

info

rmat

ion

Ther

e ar

e so

me

prac

tices

whe

re n

atio

nal a

nd lo

cal g

over

nmen

ts p

repa

re n

arra

tive

expl

anat

ion

rega

rdin

g pa

rticu

larly

cha

nge

in fi

nanc

ial s

tate

men

ts it

ems.

Ther

e ar

e no

pre

scrib

ed st

anda

rds o

r gui

delin

es. T

here

fore

, pr

actic

es o

f loc

al g

over

nmen

ts v

ary.

IFA

C IP

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ting

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7.3

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Pari

s, Fr

ance

Page

2 o

f 27

Nar

rativ

e R

epor

ting

– R

esea

rch

Sum

mar

y

MJK

MJK

Feb

ruar

y 20

11

Juris

dict

ion

The

Net

herla

nds

Bod

y is

suin

g pr

onou

ncem

ent

Gov

ernm

ent

Nat

ure

and

desc

riptio

n of

pr

onou

ncem

ent

Prov

ince

s and

Mun

icip

aliti

es B

udge

ts a

nd A

ccou

nts D

ecre

e1 – S

ectio

n ab

out n

arra

tive

repo

rting

Type

of o

rgan

izat

ions

in sc

ope

Prov

ince

s and

mun

icip

aliti

esM

ain

requ

irem

ents

of S

tand

ard

Arti

cle

9 1.

Sep

arat

e pa

ragr

aphs

of t

he b

udge

t sho

uld

lay

dow

n th

e po

licie

s rel

atin

g to

rele

vant

adm

inis

trativ

e as

pect

s and

loca

l tax

es.

2.

The

budg

et sh

ould

at l

east

con

tain

the

follo

win

g pa

ragr

aphs

, unl

ess t

he a

spec

t con

cern

ed is

irr

elev

ant f

or th

e re

spec

tive

prov

ince

or m

unic

ipal

ity:

(a)

loca

l tax

es;

(b)f

inan

cial

stre

ngth

;(c

)m

aint

enan

ce o

f cap

ital a

sset

s;(d

)fin

anci

ng;

(e)

man

agem

ent;

(f)

rela

ted

parti

es;

(g)

land

use

pol

icy.

Arti

cle

10

The

para

grap

h on

loca

l tax

es sh

ould

at l

east

con

tain

:(a

)th

e es

timat

ed in

com

e;(b

)the

pol

icy

with

resp

ect t

o lo

cal t

axes

;(c

)a

head

line

over

view

of t

he d

iffer

ent t

axes

;(d

)an

indi

catio

n of

the

loca

l tax

bur

den;

(e)

a de

scrip

tion

of th

e re

mis

sion

pol

icy.

Arti

cle

11

1.

The

finan

cial

stre

ngth

is d

eter

min

ed b

y th

e re

latio

nshi

p be

twee

n:(a

)th

e fin

anci

al st

reng

th, i

.e.,

the

asse

ts a

nd o

ppor

tuni

ties a

vaila

ble

to th

e re

spec

tive

prov

ince

or

mun

icip

ality

to c

over

ext

rabu

dget

ary

cost

s;

1 Bes

luit

begr

otin

g en

ver

antw

oord

ing

prov

inci

es e

n ge

mee

nten

IFA

C IP

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ting

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ance

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Nar

rativ

e R

epor

ting

– R

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rch

Sum

mar

y

MJK

MJK

Feb

ruar

y 20

11

(b)a

ll ris

ks th

at h

ave

not b

een

prov

ided

for a

nd th

at c

an b

e m

ater

ial i

n re

latio

n to

the

finan

cial

po

sitio

n.2.

Th

e pa

ragr

aph

on fi

nanc

ial s

treng

th sh

ould

at l

east

con

tain

:(a

)an

ass

essm

ent o

f the

fina

ncia

l stre

ngth

;(b

)an

asse

ssm

ent o

f the

risk

s;(c

)th

e po

licy

rega

rdin

g th

e fin

anci

al st

reng

th a

nd th

e ris

ks.

Arti

cle

12

1. T

he p

arag

raph

on

the

mai

nten

ance

of c

apita

l ass

ets s

houl

d at

leas

t cov

er th

e fo

llow

ing

capi

tal

asse

ts:

(a)

road

;(b

)sew

erag

e;(c

)w

ater

;(d

)gre

en sp

ace;

(e)

build

ings

.2.

The

follo

win

g sh

ould

be

desc

ribed

in re

spec

t of t

he c

apita

l ass

ets m

entio

ned

in th

e fir

st

para

grap

h:(a

)th

e po

licy

fram

ewor

k;(b

)the

fina

ncia

l con

sequ

ence

s res

ultin

g fr

om th

e po

licy

fram

ewor

k;(c

)th

e in

corp

orat

ion

of th

e fin

anci

al c

onse

quen

ces i

n th

e bu

dget

.

Arti

cle

13

The

para

grap

h on

fina

ncin

g sh

ould

at l

east

des

crib

e th

e po

licy

inte

ntio

ns re

gard

ing

risk

man

agem

ent

of th

e fin

anci

ng p

ortfo

lio.

Arti

cle

14

The

para

grap

h on

man

agem

ent s

houl

d at

leas

t pro

vide

an

insi

ght i

nto

the

curr

ent s

ituat

ion

and

the

polic

y in

tent

ions

rega

rdin

g th

e m

anag

emen

t.

Arti

cle

15

The

para

grap

h on

rela

ted

parti

es sh

ould

at l

east

con

tain

:(a

)th

e vi

sion

on

rela

ted

parti

es in

rela

tion

to th

e re

alis

atio

n of

the

obje

ctiv

es in

clud

ed in

the

budg

et;

IFA

C IP

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ting

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per

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ance

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Nar

rativ

e R

epor

ting

– R

esea

rch

Sum

mar

y

MJK

MJK

Feb

ruar

y 20

11

(b)t

he p

olic

y in

tent

ions

con

cern

ing

rela

ted

parti

es.

Arti

cle

16

The

para

grap

h on

the

land

pol

icy

shou

ld a

t lea

st c

onta

in:

(a)

a vi

sion

of t

he la

nd p

olic

y in

rela

tion

to th

e re

alis

atio

n of

the

obje

ctiv

es o

f the

pro

gram

s in

clud

ed in

the

budg

et;

(b)a

n in

dica

tion

of th

e m

anne

r in

whi

ch th

e re

spec

tive

prov

ince

or m

unic

ipal

ity is

im

plem

entin

g th

e la

nd u

se p

olic

y;(c

)a

curr

ent f

orec

ast o

f the

exp

ecte

d re

sults

of t

he to

tal l

and

expl

oita

tion;

(d)a

subs

tant

iatio

n of

the

estim

ated

pro

fit-ta

king

;(e

)th

e po

licy

prin

cipl

es re

gard

ing

the

rese

rves

for l

and

use

in re

latio

n to

the

risks

of t

he la

nd

use.

Arti

cle

26

The

annu

al re

port

shou

ld c

onta

in th

e pa

ragr

aphs

that

are

incl

uded

in th

e bu

dget

in a

ccor

danc

e w

ith

Arti

cle

9. T

hese

con

tain

the

just

ifica

tion

of th

at w

hich

is in

clud

ed in

the

resp

ectiv

e pa

ragr

aphs

in th

e bu

dget

.O

ther

info

rmat

ion

IFA

C IP

SASB

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ting

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gend

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per

7.3

M

arch

201

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s, Fr

ance

Page

5 o

f 27

Nar

rativ

e R

epor

ting

– R

esea

rch

Sum

mar

y

MJK

MJK

Feb

ruar

y 20

11

Juris

dict

ion

The

Net

herla

nds

Bod

y is

suin

g pr

onou

ncem

ent

Gov

ernm

ent

Nat

ure

and

desc

riptio

n of

pr

onou

ncem

ent

Gov

ernm

ent A

ccou

ntin

g A

ct 2

001

– C

entra

l gov

ernm

ent (

the

Net

herla

nds)

Type

of o

rgan

izat

ions

in sc

ope

Cen

tral G

over

nmen

tM

ain

requ

irem

ents

of S

tand

ard

Cha

pter

V: T

he a

ccou

ntab

ility

of t

he S

tate

Arti

cle

54

1.

The

note

s to

the

acco

unta

bilit

y st

atem

ent i

n an

y ca

se o

ffer

insi

ght i

nto

the

follo

win

g po

licy

rela

ted

issu

es, f

or e

ach

of th

e po

licy

artic

les:

a. g

ener

al a

nd if

app

licab

le m

ore

deta

iled

oper

atio

nalis

ed g

oals

that

hav

e be

en e

ndea

vour

ed a

nd th

e ex

tent

to w

hich

they

hav

e be

en re

alis

ed;

b. in

stru

men

ts u

sed

to a

chie

ve th

e go

als;

… 3. …

An

annu

al re

port

incl

udes

the

achi

evem

ent d

ata,

for e

ach

of th

e po

licy

artic

les,

whi

ch in

clud

es

data

on

effe

ctiv

enes

s, da

ta o

n th

e po

licy

effic

ienc

y, b

oth

obta

ined

from

pol

icy

eval

uatio

n su

rvey

s or

not

, and

the

effic

ienc

y da

ta o

n th

e sy

stem

exp

endi

ture

s, co

mpa

ring

this

dat

a w

ith th

e es

timat

es

incl

uded

in th

e dr

aft b

udge

t. R

emar

kabl

e di

ffer

ence

s are

exp

lain

ed.

... Arti

cle

56

1.

The

not

es to

the

acco

unta

bilit

y st

atem

ent i

n a

depa

rtmen

tal a

nnua

l rep

ort c

onta

in in

form

atio

n on

th

e op

erat

ing

proc

edur

es in

the

finan

cial

yea

r of t

he m

inis

try in

volv

ed.

… Arti

cle

58

1.

An

annu

al re

port

othe

rwis

e fu

lfils

the

follo

win

g re

quire

men

ts:

(a)

the

incl

uded

fina

ncia

l inf

orm

atio

n is

relia

bly

refle

cted

and

law

fully

obt

aine

d;(b

)the

incl

uded

info

rmat

ion

on th

e po

licy

impl

emen

ted

and

the

oper

atin

g pr

oced

ures

is re

liabl

y ob

tain

ed;

(c)

the

incl

uded

info

rmat

ion

on th

e po

licy

impl

emen

ted

and

the

oper

atin

g pr

oced

ures

fulfi

ls th

e re

late

d qu

ality

stan

dard

s.2.

Th

e fin

anci

al in

form

atio

n in

clud

es in

form

atio

n on

obl

igat

ions

, exp

endi

ture

s, in

com

e, re

venu

es,

IFA

C IP

SASB

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ting

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per

7.3

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arch

201

1 –

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s, Fr

ance

Page

6 o

f 27

Nar

rativ

e R

epor

ting

– R

esea

rch

Sum

mar

y

MJK

MJK

Feb

ruar

y 20

11

expe

nses

, cap

ital e

xpen

ditu

res,

capi

tal i

ncom

e an

d ba

lanc

e sh

eet i

tem

s, as

stat

ed in

the

acco

untin

g re

cord

s and

the

acco

mpa

nyin

g no

tes.

3.

The

fina

ncia

l inf

orm

atio

n pr

esen

ted

in th

e an

nual

repo

rt ca

n be

cle

arly

dis

tingu

ishe

d fr

om th

e no

n-fin

anci

al in

form

atio

n.... A

rticl

e 61

... 2.

In

any

cas

e, th

e Fi

nanc

ial a

nnua

l rep

ort o

f the

Sta

te in

clud

es:

(a)c

onsi

dera

tions

abo

ut th

e bu

dget

ary

sign

ifica

nce

of th

e po

licy

impl

emen

ted

for t

he S

tate

and

fo

r oth

er p

arts

of t

he c

olle

ctiv

e se

ctor

, whi

ch is

con

side

red

to fo

rm th

e bu

dget

dis

cipl

ine

sect

or;

(b)a

con

side

ratio

n ab

out t

he o

pera

ting

proc

edur

es o

f the

Sta

te;

Oth

er in

form

atio

n

IFA

C IP

SASB

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ting

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gend

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per

7.3

M

arch

201

1 –

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s, Fr

ance

Page

7 o

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Nar

rativ

e R

epor

ting

– R

esea

rch

Sum

mar

y

MJK

MJK

Feb

ruar

y 20

11

Sect

ions

of N

ew Z

eala

nd A

cts w

hich

con

tain

req

uire

men

ts w

hich

may

be

cons

ider

ed n

arra

tive

repo

rtin

g re

quir

emen

ts:

Cen

tral G

over

nmen

t – P

ublic

Fin

ance

Act

198

9: S

ectio

ns 3

2A, 3

8 an

d 40

and

45

Loca

l Gov

ernm

ent –

Loc

al G

over

nmen

t Act

200

2: S

ched

ule

10, P

art 3

, Sec

tions

15,

16

and

21

Educ

atio

n se

ctor

– E

duca

tion

Act

198

9: S

ectio

ns 8

7 an

d 22

0

Cro

wn

Entit

ies A

ct 2

004:

Sec

tion

151

Ener

gy C

ompa

nies

Act

199

2: S

ectio

n 44

Port

Com

pani

es A

ct 1

988:

Sec

tion

16

Als

o: P

arag

raph

s 38

and

40 o

f NZ

IAS

1 (w

hich

app

lies t

o bo

th p

ublic

and

priv

ate

sect

or e

ntiti

es)

The

wor

ding

of t

hese

sect

ions

and

a li

nk to

the

rele

vant

doc

umen

t is i

nclu

ded

in th

e ta

ble

belo

w.

Item

R

equi

rem

ents

C

omm

ent

Link

Publ

ic F

inan

ce A

ct

1989

Stat

utor

y�Re

quir

emen

t:�S

ectio

n�38

�and

�40�

of�th

e�PF

A�

�38�

Dep

artm

ents

�mus

t�pro

vide

�info

rmat

ion�

on�fu

ture

�ope

rati

ng�

inte

ntio

ns�

�(1

)�A�d

epar

tmen

t�mus

t,�b

efor

e�th

e�st

art�o

f�eac

h�fin

anci

al�y

ear�

and�

not�l

ater

�than

�the�

date

�spe

cifie

d�by

�its�

Resp

onsi

ble�

Min

iste

r,�p

rovi

de�

info

rmat

ion�

on�th

e�de

part

men

t's�fu

ture

�ope

ratin

g�in

tent

ions

.�(2

)�The

�info

rmat

ion�

mus

t�rel

ate�

to�th

e�fo

rthc

omin

g�fin

anci

al�y

ear�

and,

�for�

the�

purp

oses

�of�s

ectio

n�40

,�to�

at�le

ast�t

he�n

ext�2

�fina

ncia

l�ye

ars.

Not

�a�fi

nanc

ial�

repo

rtin

g�re

quir

emen

t�but

�re

quir

es�a

�nar

rativ

e�of

�the�

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y's�

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23

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Nar

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– R

esea

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Sum

mar

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MJK

Feb

ruar

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11

NA

RR

ATI

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EPO

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IN T

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SOU

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FRIC

AN

PU

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R

Purp

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and

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purp

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his

docu

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outli

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he r

equi

rem

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and

pra

ctic

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f pu

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sec

tor

entit

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in S

outh

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ith r

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o na

rrativ

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porti

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“Pub

lic s

ecto

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titie

s” i

nclu

de n

atio

nal

and

prov

inci

al d

epar

tmen

ts,

gove

rnm

ent

entit

ies/

agen

cies

and

loc

al g

over

nmen

t (in

clud

ing

mun

icip

aliti

es a

nd m

unic

ipal

ent

ities

). G

over

nmen

t bus

ines

s en

terp

rises

hav

e be

en e

xclu

ded

from

this

doc

umen

t.

Bac

kgro

und

Nar

rativ

e re

ports

hav

e be

en p

repa

red

for a

num

ber o

f yea

rs e

ither

in a

ccor

danc

e w

ith:

� Le

gisl

atio

n (o

r sim

ilar)

suc

h as

the

Pub

lic F

inan

ce M

anag

emen

t Act

(and

its

acco

mpa

nyin

g R

egul

atio

ns) o

r Mun

icip

al F

inan

ce M

anag

emen

t A

ct (a

nd it

s ac

com

pany

ing

Reg

ulat

ions

and

Circ

ular

s) w

hich

requ

ires

the

prep

arat

ion

of s

peci

fic re

ports

; or

� A

“Cod

e”, s

uch

as th

e Ki

ng C

ode

on C

orpo

rate

Gov

erna

nce2 , o

r pra

ctic

e th

at h

as e

volv

ed o

ver t

ime

(for e

xam

ple,

dra

win

g on

bes

t pra

ctic

e re

porti

ng in

the

priv

ate

sect

or).

Whi

le n

o fo

rmal

sta

ndar

d or

gui

delin

e ex

ists

rega

rdin

g th

e fo

rm a

nd c

onte

nts

of n

arra

tive

repo

rts, t

he N

atio

nal T

reas

ury

has

issu

ed s

ome

liter

atur

e w

hich

bro

adly

out

lines

the

sug

gest

ed c

onte

nts

of s

uch

repo

rts a

t th

e va

rious

leve

ls o

f go

vern

men

t. Th

is d

ocum

ent

outli

nes

the

requ

irem

ent

to

prep

are

such

repo

rts a

t the

var

ious

leve

ls o

f gov

ernm

ent a

nd w

heth

er a

ny g

uida

nce

exis

ts.

Nat

iona

l and

pro

vinc

ial d

epar

tmen

ts

Nat

iona

l an

d pr

ovin

cial

dep

artm

ents

are

req

uire

d to

pre

pare

an

annu

al r

epor

t in

acc

orda

nce

with

sec

tion

40(1

)(d)

of

the

Pub

lic F

inan

ce

Man

agem

ent

Act

(P

FMA

) (s

ee a

ttach

men

t 1)

. F

urth

er t

o th

is,

sect

ion

18.3

of

the

Trea

sury

Reg

ulat

ions

(se

e at

tach

men

t 2)

req

uire

s th

at t

he

follo

win

g in

form

atio

n sh

ould

be

incl

uded

in th

e an

nual

repo

rt.

2 The

Kin

g C

ode

on C

orpo

rate

Gov

erna

nce

is is

sued

by

the

Inst

itute

of D

irect

ors

of S

outh

Afr

ica

(ww

w.io

dsa.

co.z

a).

The

Cod

e is

not

man

dato

ry f

or a

ny e

ntiti

es,

but

is w

idel

y ap

plie

d in

bot

h th

e pu

blic

and

priv

ate

sect

or.

In t

he p

ublic

sec

tor,

man

y go

vern

men

t en

titie

s/ag

enci

es h

ave

adop

ted

Kin

g II.

It is

exp

ecte

d th

at m

any

will

ado

pt th

e ne

w re

vise

d C

ode

(Kin

g III

) in

the

futu

re.

The

Cod

e de

als

with

, for

exa

mpl

e, th

e re

port

ing

on a

ssur

ance

, rem

uner

atio

n an

d su

stai

nabi

lity

(eco

nom

ic a

nd e

nviro

nmen

tal).

IFA

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Sum

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y

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MJK

Feb

ruar

y 20

11

S18

.3 o

f the

Tre

asur

y R

egul

atio

ns

In p

repa

ring

the

annu

al re

port

of a

n in

stitu

tion,

the

acco

untin

g of

ficer

mus

t –

a.

in t

he c

ase

of a

dep

artm

ent

or t

radi

ng e

ntity

, co

mpl

y w

ith t

he r

equi

rem

ents

pre

scrib

ed i

n C

hapt

er 1

, P

art

III J

of

the

Pub

lic S

ervi

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Reg

ulat

ions

, 200

1 (p

rovi

ded

as a

ttach

men

t 3);

b.

incl

ude

info

rmat

ion

abou

t the

inst

itutio

n’s

effic

ienc

y, e

cono

my

and

effe

ctiv

enes

s in

del

iver

ing

prog

ram

mes

and

ach

ievi

ng it

s ob

ject

ives

and

ou

tcom

es a

gain

st th

e m

easu

res

and

indi

cato

rs s

et o

ut in

any

stra

tegi

c pl

an fo

r the

yea

r und

er c

onsi

dera

tion;

c.

in

clud

e in

form

atio

n on

tran

sfer

s an

d su

bsid

ies

per

orga

nisa

tion

for

the

entir

e fin

anci

al y

ear

as w

ell a

s a

repo

rt on

com

plia

nce

with

sec

tion

38(1

)(j) o

f the

Act

; d.

in

clud

e al

l inf

orm

atio

n re

quire

d in

term

s of

the

annu

al D

ivis

ion

of R

even

ue A

ct;

e.

incl

ude

any

addi

tiona

l inf

orm

atio

n re

quire

d by

Par

liam

ent o

r the

pro

vinc

ial l

egis

latu

re;

f. re

port

on th

e us

e of

fore

ign

aid

assi

stan

ce, d

etai

ling

the

sour

ce a

nd in

tend

ed u

se o

f the

ass

ista

nce

(incl

udin

g th

e va

lue

of a

ny a

id-in

-kin

d in

ra

nd),

perfo

rman

ce in

form

atio

n on

the

inst

itutio

n’s

use

of th

e as

sist

ance

, and

any

pen

ding

app

licat

ions

for a

ssis

tanc

e;

g.

a re

port

from

the

audi

t com

mitt

ee a

s re

quire

d by

par

agra

ph 3

.1.1

3; a

nd

h.

incl

ude

info

rmat

ion

on th

e m

anag

emen

t of P

PP

agr

eem

ents

as

requ

ired

by p

arag

raph

16.

7.1(

f).

The

Offi

ce o

f th

e Ac

coun

tant

-Gen

eral

at

the

Nat

iona

l Tre

asur

y ha

s is

sued

spe

cific

gui

delin

es r

egar

ding

the

ann

ual r

epor

t an

d th

e ac

coun

ting

offic

er’s

re

port

(see

at

tach

men

ts

4 an

d 53 ).

The

guid

ance

is

sued

by

th

e N

atio

nal

Trea

sury

fo

rms

part

of

Dep

artm

enta

l R

epor

ting

Fram

ewor

k/G

uide

issu

ed a

nnua

lly.

In g

ener

al, t

he g

uida

nce

issu

ed b

y th

e N

atio

nal T

reas

ury

outli

nes

that

the

follo

win

g to

pics

sho

uld

be in

clud

ed in

the

Acco

untin

g O

ffice

r’s R

epor

t (m

any

of th

e re

quire

men

ts o

utlin

ed in

sec

tion

18.3

of t

he T

reas

ury

Reg

ulat

ions

are

dis

cuss

ed in

the

Acc

ount

ing

Offi

cer’s

Rep

ort,

with

add

ition

al

info

rmat

ion

bein

g pr

esen

ted

in s

epar

ate

repo

rts):

� G

ener

al re

view

of t

he s

tate

of f

inan

cial

affa

irs.

� S

ervi

ces

rend

ered

by

the

Dep

artm

ent.

�

Cap

acity

con

stra

ints

or c

onsi

dera

tions

. �

Util

isat

ion

of d

onor

fund

s.

� Tr

adin

g en

titie

s an

d pu

blic

ent

ities

that

hav

e be

en e

stab

lishe

d an

d re

port

to th

e D

epar

tmen

t.

� O

rgan

isat

ions

to w

hom

tran

sfer

pay

men

ts m

ade.

�

Pub

lic P

rivat

e P

artn

ersh

ip a

rran

gem

ents

. �

Cor

pora

te g

over

nanc

e ar

rang

emen

ts (f

urth

er in

form

atio

n of

ten

prov

ided

in a

sep

arat

e re

port,

e.g

. rep

ort f

rom

the

audi

t com

mitt

ee).

�

Dis

cont

inue

d or

new

act

iviti

es.

� A

sset

man

agem

ent (

incl

udin

g in

vent

ory

man

agem

ent).

3 The

se d

ocum

ents

are

ava

ilabl

e on

http

://oa

g.tr

easu

ry.g

ov.z

a (C

lick

on P

ublic

atio

ns –

Ann

ual F

inan

cial

Sta

tem

ents

)

IFA

C IP

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ting

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per

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s, Fr

ance

Page

25

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Nar

rativ

e R

epor

ting

– R

esea

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Sum

mar

y

MJK

MJK

Feb

ruar

y 20

11

� E

vent

s af

ter t

he re

porti

ng d

ate.

�

Rep

ortin

g ag

ains

t pre

-det

erm

ined

obj

ectiv

es (p

erfo

rman

ce re

porti

ng) (

addi

tiona

l inf

orm

atio

n pr

ovid

ed in

a s

epar

ate

repo

rt).

� R

esol

utio

ns is

sued

by

the

Sta

ndin

g C

omm

ittee

on

Pub

lic A

ccou

nts

(SC

OP

A).

�

Mod

ified

aud

it op

inio

ns.

The

annu

al re

port

of th

e N

atio

nal T

reas

ury

has

been

incl

uded

as

an e

xam

ple

of th

e re

ports

pre

pare

d by

dep

artm

ents

(see

atta

chm

ent 6

).

Publ

ic e

ntiti

es

Sim

ilar

to d

epar

tmen

ts,

publ

ic e

ntiti

es a

re a

lso

requ

ired

by t

he P

FMA

to

prep

are

annu

al r

epor

ts (

see

sect

ion

55(1

)(d)

). Fu

rther

to

this

, se

ctio

n 28

.2.2

of t

he T

reas

ury

Reg

ulat

ions

out

lines

cer

tain

info

rmat

ion

that

sho

uld

be in

clud

ed in

the

annu

al re

port.

Sec

tion

28.2

.2 o

f the

Tre

asur

y R

egul

atio

ns

Par

ticul

ars

of th

e pu

blic

ent

ity’s

stra

tegi

c ob

ject

ives

and

out

com

es a

s id

entif

ied

and

agre

ed o

n by

the

exec

utiv

e au

thor

ity, t

he k

ey p

erfo

rman

ce

mea

sure

s an

d in

dica

tors

for

ass

essi

ng t

he e

ntity

’s p

erfo

rman

ce i

n de

liver

ing

the

desi

red

outc

omes

and

obj

ectiv

es a

nd t

he e

ntity

’s a

ctua

l pe

rform

ance

aga

inst

the

stra

tegi

c ob

ject

ives

and

out

com

es, m

ust b

e di

sclo

sed

in th

e an

nual

repo

rt of

the

publ

ic e

ntity

.

Unl

ike

with

the

dep

artm

ents

, th

e N

atio

nal T

reas

ury

does

not

issu

e an

y gu

idel

ines

on

wha

t in

form

atio

n sh

ould

be

incl

uded

in e

ither

the

ann

ual

repo

rt or

the

repo

rt of

the

Acc

ount

ing

Auth

ority

(gov

erni

ng b

ody,

cou

ncil

or s

imila

r of t

he e

ntity

). M

uch

of th

e re

porti

ng b

y pu

blic

ent

ities

is d

riven

by

goo

d pr

actic

e, a

nd is

ofte

n in

fluen

ced

by th

e re

porti

ng in

priv

ate

sect

or e

ntiti

es (

see

the

Kin

g C

ode

on C

orpo

rate

Gov

erna

nce

II an

d III

). A

s th

ere

is n

o cl

ear

guid

ance

pro

vide

d, th

e in

form

atio

n in

clud

ed in

the

annu

al r

epor

ts m

ay v

ary

from

ent

ity to

ent

ity. I

n ge

nera

l tho

ugh,

the

annu

al

repo

rt an

d/or

acc

ount

ing

auth

ority

’s re

port

incl

ude

a di

scus

sion

of:

� Fi

nanc

ial a

ffairs

�

Ach

ieve

men

t of o

bjec

tives

(mor

e sp

ecifi

c in

form

atio

n pr

ovid

ed in

a s

epar

ate

repo

rt)

� O

pera

tiona

l iss

ues

(fund

ing,

hum

an re

sour

ce is

sues

, com

plia

nce

with

legi

slat

ion,

incl

udin

g he

alth

and

saf

ety)

. �

Gov

erna

nce

(incl

udin

g a

repo

rt fro

m th

e au

dit c

omm

ittee

, env

ironm

enta

l iss

ues/

sust

aina

bilit

y w

hich

is re

lativ

ely

new

, if d

one

at a

ll).

The

annu

al re

port

of th

e A

SB

has

bee

n in

clud

ed a

s an

exa

mpl

e of

the

type

of i

nfor

mat

ion

that

is re

porte

d (s

ee a

ttach

men

t 7).

Loca

l gov

ernm

ent (

mun

icip

aliti

es)

Sec

tion

121

of th

e M

unic

ipal

Fin

ance

Man

agem

ent A

ct (s

ee a

ttach

men

t 8) r

equi

res

the

prep

arat

ion

of a

nnua

l rep

ort,

and

spec

ifies

the

info

rmat

ion

that

mus

t be

incl

uded

in th

e an

nual

repo

rt.

IFA

C IP

SASB

Mee

ting

A

gend

a Pa

per

7.3

M

arch

201

1 –

Pari

s, Fr

ance

Page

26

of 2

7

Nar

rativ

e R

epor

ting

– R

esea

rch

Sum

mar

y

MJK

MJK

Feb

ruar

y 20

11

Sec

tion

121

of th

e M

FMA

(1)

Eve

ry m

unic

ipal

ity a

nd e

very

mun

icip

al e

ntity

mus

t fo

r ea

ch f

inan

cial

yea

r pr

epar

e an

ann

ual r

epor

t in

acc

orda

nce

with

thi

s C

hapt

er.

The

coun

cil o

f a m

unic

ipal

ity m

ust w

ithin

nin

e m

onth

s af

ter

the

end

of a

fina

ncia

l yea

r de

al w

ith th

e an

nual

rep

ort o

f the

mun

icip

ality

and

of a

ny

mun

icip

al e

ntity

und

er th

e m

unic

ipal

ity’s

sol

e or

sha

red

cont

rol i

n ac

cord

ance

with

sec

tion

129.

(2

) Th

e pu

rpos

e of

an

annu

al re

port

is—

(a

) to

pro

vide

a re

cord

of t

he a

ctiv

ities

of t

he m

unic

ipal

ity o

r mun

icip

al e

ntity

dur

ing

the

finan

cial

yea

r to

whi

ch th

e re

port

rela

tes;

(b

) to

pro

vide

a re

port

on p

erfo

rman

ce a

gain

st th

e bu

dget

of t

he m

unic

ipal

ity o

r mun

icip

al e

ntity

for t

hat f

inan

cial

yea

r; an

d(c

) to

pro

mot

e ac

coun

tabi

lity

to th

e lo

cal c

omm

unity

for t

he d

ecis

ions

mad

e th

roug

hout

the

year

by

the

mun

icip

ality

or m

unic

ipal

ent

ity.

(3)

The

annu

al re

port

of a

mun

icip

ality

mus

t inc

lude

—

(a)

the

annu

al fi

nanc

ial s

tate

men

ts o

f the

mun

icip

ality

, and

in a

dditi

on, i

f sec

tion

122(

2) a

pplie

s, c

onso

lidat

ed a

nnua

l fin

anci

al s

tate

men

ts, a

s su

bmitt

ed to

the

Aud

itor-

Gen

eral

for a

udit

in te

rms

of s

ectio

n 12

6(1)

; (b

) th

e A

udito

r-G

ener

al’s

aud

it re

port

in te

rms

of s

ectio

n 12

6(3)

on

thos

e fin

anci

al s

tate

men

ts;

(c)

the

ann

ual p

erfo

rman

ce re

port

of th

e m

unic

ipal

ity p

repa

red

by th

e m

unic

ipal

ity in

term

s of

sec

tion

46 o

f the

Mun

icip

al S

yste

ms

Act

; (d

) th

e A

udito

r-G

ener

al’s

aud

it re

port

in te

rms

of s

ectio

n 45

(b) o

f the

Mun

icip

al S

yste

ms

Act

; (e

) an

ass

essm

ent b

y th

e m

unic

ipal

ity’s

acc

ount

ing

offic

er o

f any

arr

ears

on

mun

icip

al ta

xes

and

serv

ice

char

ges;

(f)

an

ass

essm

ent b

y th

e m

unic

ipal

ity’s

acc

ount

ing

offic

er o

f the

mun

icip

ality

’s p

erfo

rman

ce a

gain

st th

e m

easu

rabl

e pe

rform

ance

obj

ectiv

es

refe

rred

to in

sec

tion

17(3

)(b)

for

reve

nue

colle

ctio

n fro

m e

ach

reve

nue

sour

ce a

nd fo

r eac

h vo

te in

the

mun

icip

ality

’s a

ppro

ved

budg

et

for t

he re

leva

nt fi

nanc

ial y

ear;

(g)

parti

cula

rs o

f any

cor

rect

ive

actio

n ta

ken

or to

be

take

n in

resp

onse

to is

sues

rais

ed in

the

audi

t rep

orts

refe

rred

to in

par

agra

phs

(b) a

nd

(d);

(h)

any

expl

anat

ions

that

may

be

nece

ssar

y to

cla

rify

issu

es in

con

nect

ion

with

the

finan

cial

sta

tem

ents

; (i)

an

y in

form

atio

n as

det

erm

ined

by

the

mun

icip

ality

; (j)

an

y re

com

men

datio

ns o

f the

mun

icip

ality

’s a

udit

com

mitt

ee; a

nd

(k)

any

othe

r inf

orm

atio

n as

may

be

pres

crib

ed.

(4)

The

annu

al re

port

of a

mun

icip

al e

ntity

mus

t inc

lude

—

(a)

the

annu

al fi

nanc

ial s

tate

men

ts o

f the

ent

ity, a

s su

bmitt

ed to

the

Aud

itor-

Gen

eral

for a

udit

in te

rms

of s

ectio

n 12

6(2)

; (b

) th

e A

udito

r-G

ener

al’s

aud

it re

port

in te

rms

of s

ectio

n 12

6(3)

on

thos

e fin

anci

al s

tate

men

ts;

(c)

an a

sses

smen

t by

the

entit

y’s

acco

untin

g of

ficer

of a

ny a

rrea

rs o

n m

unic

ipal

taxe

s an

d se

rvic

e ch

arge

s;

(d)

an a

sses

smen

t by

the

entit

y’s

acco

untin

g of

ficer

of t

he e

ntity

’s p

erfo

rman

ce a

gain

st a

ny m

easu

rabl

e pe

rform

ance

obj

ectiv

es s

et in

term

s th

e se

rvic

e de

liver

y ag

reem

ent o

r oth

er a

gree

men

t bet

wee

n th

e en

tity

and

its p

aren

t mun

icip

ality

; (e

) pa

rticu

lars

of a

ny c

orre

ctiv

e ac

tion

take

n or

to b

e ta

ken

in re

spon

se to

issu

es ra

ised

in th

e au

dit r

epor

t ref

erre

d to

in p

arag

raph

(b);

(f)

any

info

rmat

ion

as d

eter

min

ed b

y th

e en

tity

or it

s pa

rent

mun

icip

ality

; (g

) an

y re

com

men

datio

ns o

f the

aud

it co

mm

ittee

of t

he e

ntity

or o

f its

par

ent m

unic

ipal

ity; a

nd

(h)

any

othe

r inf

orm

atio

n as

may

be

pres

crib

ed.

Gui

danc

e ha

s be

en is

sued

by

the

Nat

iona

l Tre

asur

y on

cer

tain

asp

ects

of t

he a

nnua

l rep

ort i

n M

FMA

Circ

ular

11

(see

atta

chm

ent 9

).

IFA

C IP

SASB

Mee

ting

A

gend

a Pa

per

7.3

M

arch

201

1 –

Pari

s, Fr

ance

Page

27

of 2

7

Nar

rativ

e R

epor

ting

– R

esea

rch

Sum

mar

y

MJK

MJK

Feb

ruar

y 20

11

A

link

has

been

pr

ovid

ed

to

the

annu

al

repo

rt of

th

e C

ity

of

Jobu

rg

for

an

exam

ple

of

the

type

of

re

ports

re

prod

uced

(h

ttp://

ww

w.jo

burg

.org

.za/

annu

al_r

epor

t).

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