Financial Statement Discussion and Analysis

  • Financial Statement Discussion and Analysis

    Project Status

    An Exposure Draft (ED 47), Financial Statement Discussion and Analysis, was approved in March 2012 with a response date of July 31, 2012. 


    John Stanford

    Task Force

    A TBG was formed to assist staff in developing the ED. The TBG members were:
    Hong Lou
    Bharti Prasad
    Ron Salole
    Frans van Schaik

    Objective(s) of project

    The objective of the project is to develop financial reporting guidance on financial statement discussion and analysis.


    The project applies to all public sector entities, other than Government Business Enterprises (GBEs), preparing and presenting financial statements under the accrual basis of accounting.

    GBEs are required to apply International Financial Reporting Standards (IFRSs) which are issued by the International Accounting Standards Board (IASB).


    March 2008: The IPSASB approved a Project Brief.


    Issues the project will consider include (but are not necessarily limited to):

    • What are the objectives of narrative reporting on financial statements?
    • What are the main attributes of high quality narrative explanations?
    • Are there essential content elements to include in narrative reporting on financial statements?
    • What type of guidance is appropriate?

    Task Force progress / Board discussions to date

    December 2012: The IPSASB discussed whether or not to continue to develop the draft IPSAS, Financial Statement Discussion and Analysis (FSDA), which has been developed from ED 47, into an authoritative standard. There were two main areas of discussion: (a) audit and assurance issues and (b) the need for criteria to be developed for the determination of the status of a document, i.e., should a document become an authoritative standard or non-authoritative guidance.

    Several members expressed concerns that entities will have problems asserting compliance with IPSASs applicable to the general purpose financial statements (GPFSs) if they do not follow the proposed requirements in the draft IPSAS even though FSDA, as defined in ED 47, is not a component of the GPFSs. The IPSASB directed staff to contact both the International Auditing and Assurance Standards Board (IAASB) and the International Organisation of Supreme Audit Institutions (INTOSAI) about this issue.

    Several members commented that that the decision as to whether or not FSDA is audited will be determined by the framework under which the entity’s financial statements are audited.  For example, if the draft FSDA standard is considered to be a part of the IPSAS framework then it will be considered to be a part of the financial statements for audit purposes.

    Several members consider that the draft FSDA IPSAS should continue to be developed into an authoritative standard.  It was suggested that this is consistent with the IPSASB’s decision to develop its Conceptual Framework to apply to general purpose financial reports (GPFRs) rather than the more limited scope GPFSs, because FSDA is critical to an entity meeting the accountability objective of general purpose financial reporting.

    The IPSASB directed staff to continue to develop the draft FSDA standard into an authoritative standard.  The issue of the status of the draft FSDA IPSAS will be considered when criteria have been developed for the determination of the status of a document.

    The IPSASB reviewed the draft RPG and members made comments to improve the text.  The IPSASB agreed that a revised draft IPSAS will be considered at the March 2013 meeting.

     September 2012: The IPSASB considered responses to ED 47. The IPSASB agreed to continue to develop the guidance as an IPSAS and will consider detailed comments on the content of the guidance at future meetings.


    March 2012: The IPSASB approved an ED 47, Financial Statement Discussion and Analysis. ED 47 proposes that, because of the close link of financial statement discussion and analysis with the financial statements:

    • The authority of the pronouncement should be an IPSAS with the same authority as accrual-basis IPSASs;
    • Financial statement discussion and analysis should be required when IPSAS-based financial statements are prepared;
    • The reporting entity and time period in financial statement discussion and analysis should be the same as for the financial statements; and
    • The qualitative characteristics of financial reporting and constraints should be those addressed in IPSAS 1, Presentation of Financial Statements.

    The ED proposes minimum content requirements for the preparation and presentation of financial statement discussion and analysis, as follows:

    • An overview of the entity helps users to understand the entity and how the environment in which it operates affect its financial statements.
    • Information about the entity’s objectives and strategies enables users of the financial statements to understand the entity’s priorities and to identify the resources that must be managed to achieve its objectives.
    • An analysis of the entity’s financial statements includes:
      • Analysis of the current period financial statements which contains a description of the significant events, trends, conditions, and factors that affected the financial statements enhances users’ understanding of the financial statements.
      • Analyses of variances and trends includes those financial statement items that are important and significant to enhancing users’ understanding of an entity’s financial position and performance and changes in financial position and performance over a period of time.
    • Information about the entity’s risks and uncertainties helps users to evaluate the impact of risks in the current period (e.g., contingent liabilities disclosed in the financial statements) as well as expected outcomes. Information provided may include the entity’s main exposures to risk, its opportunities, along with its policies and strategies for mitigating the risks and capitalizing on opportunities.

    ED 47 includes implementation guidance and an illustrative example to assist in the preparation and presentation of financial statement discussion and analysis that complies with its requirements.

    The ED has a response date of July 31, 2012.

    December 2011: The IPSASB discussed a draft Exposure Draft (ED). The IPSASB tentatively agreed that the ED should propose a mandatory IPSAS, and that respondents’ views should be sought on the appropriateness of this proposal.

    The IPSASB also tentatively agreed that all references to qualitative characteristics and constraints of financial reporting should be to those currently set out in IPSAS 1, rather than those proposed in Conceptual Framework ED 1 (CF—ED1).

    The IPSASB supported the Illustrative Example, with certain changes suggested to the example and the text of the proposed IPSAS to improve its clarity.

    September 2011: The IPSASB discussed a draft ED and agreed to a number of changes to the draft, including the further development of an illustrative example to show how the required information could be presented in the financial statement discussion and analysis accompanying the financial statements.

    June 2011: The IPSASB agreed to change the title of such reports to “financial statement discussion and analysis” to clearly show the scope and close link to the financial statements.

    The IPSASB discussed the issues related to the project including whether to provide guidance on the financial statement items and how to address the issue of future-oriented information.

    The IPSASB agreed to develop a draft ED of a mandatory standard for financial statement discussion and analysis.

    March 2011: The IPSASB reconfirmed that the scope of the project identified in the project brief (i.e., narrative reporting to be addressed in this project would be only in relation to the financial statements) and agreed to develop a term that clearly describes that scope.
    The IPSASB also had a preliminary discussion of the issues the project will address in light of developments on the Conceptual Framework since the project brief was approved.


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