CHAPTER SIX
Presentation of Budget Information in
Financial Statements [IPSAS 24]
1. Introduction
• IPSAS generally requires organizations to account for all of its
transactions on an accrual basis, many organizations prepare their
budgets on a cash basis.
• In order to link the information provided in the financial statements
on an accrual basis to the budget information and consequently
allow readers of the financial statements to assess whether the
resources allocated in the budget have been used in line with any
requirements or stipulations, the IPSAS Board issued IPSAS 24
Presentation of budget information in financial statements.
• This standard requires organizations to reconcile its publicly
available budgets to its cash flows reported in the statement of cash
flows, which is part of the financial statements.
2. Definitions
• Accounting basis means the accrual or cash basis of accounting as
defined in the accrual basis IPSASs and the Cash Basis IPSAS.
• Annual budget means an approved budget for one year. It does not
include published forward estimates or projections for periods
beyond the budget period.
• Multi-year budget is an approved budget for more than one year. It
does not include published forward estimates or projections for
periods beyond the budget period.
• Appropriation is an authorization granted by a legislative body to
allocate funds for purposes specified by the legislature or similar
authority.
Definitions…
• Approved budget means the expenditure
authority derived from laws, appropriation
bills, government ordinances, and other
decisions related to the anticipated revenue or
receipts for the budgetary period.
• Original budget is the initial approved budget
for the budget period
• Final budget is the original budget, adjusted for all reserves, carry-
over amounts, transfers, allocations, supplemental appropriations,
and other authorized legislative or similar authority, changes
applicable to the budget period.
• Budgetary basis means the accrual, cash, or other basis of
accounting adopted in the budget that has been approved by
the legislative body.
• Comparable basis means the actual amounts presented on the
same accounting basis, same classification basis, for the same
entities, and for the same period as the approved budget
Presentation of a Comparison of
Budget and Actual Amount
• An entity shall present a comparison of the budget amounts
for which it is held publicly accountable and actual amounts,
either as a separate additional financial statement or as
additional budget columns in the financial statements currently
presented in accordance with IPSASs.
Cont’d
• The comparison of budget and actual amounts
shall present separately for each level of
legislative oversight:
a. The original and final budget amounts;
b. The actual amounts on a comparable basis; and
c. By way of note disclosure, an explanation of material
differences between the budget for which the entity is held
publicly accountable and actual amounts, unless such
explanation is included in other public documents issued in
conjunction with the financial statements, and a cross
reference to those documents is made in the notes
Cont’d
• Presentation in the financial statements of the original
and final budget amounts and actual amounts on a
comparable basis with the budget that is made publicly
available will complete the accountability cycle by
enabling users of the financial statements to identify
whether resources were obtained and used in accordance
with the approved budget.
• Differences between the actual amounts and the budget
amounts, whether original or final budget (often referred
to as the variance in accounting), may also be presented
in the financial statements for completeness.
Cont’d
• An explanation of the material differences between actual
amounts and the budget amounts will assist users in
understanding the reasons for material departures from the
approved budget for which the entity is held publicly
accountable.
• An entity may be required, or may elect, to make publicly
available its original budget, its final budget, or both its
original and final budge
Cont’d
• In circumstances where both the original and final budget are
required to be made publicly available, the legislation, regulation,
or other authority will often provide guidance on whether
explanation of material differences between the actual and the
original budget amounts, or actual and the final budget amounts, is
required in accordance with paragraph 14(c) of IPSAS 24.
• In the absence of any such guidance, material differences may be
determined by reference to, for example,
(a) differences between actual and original budget to focus on
performance against original budget, or
(b) differences between actual and final budget to focus on compliance
with the final budget.
Cont’d
• In many cases, the final budget and the actual amount will be
the same.
• This is because budget execution is monitored over the
reporting period, and the original budget progressively revised
to reflect changing conditions, changing circumstances, and
experiences during the reporting period
Presentation and Disclosure
• An entity shall present a comparison of budget and actual
amounts as additional budget columns in the primary financial
statements only where the financial statements and the budget are
prepared on a comparable basis.
• Comparisons of budget and actual amounts may be presented
in a separate financial statement, (Statement of Comparison of
Budget and Actual Amounts or a similarly titled statement)
included in the complete set of financial statements as
specified in IPSAS 1
Cont’d
• Alternatively, where the financial statements and the budget are
prepared on a comparable basis – that is, on the same basis of
accounting for the same entity and reporting period, and adopt the
same classification structure – additional columns may be added to
the existing primary financial statements presented in accordance
with IPSASs.
• These additional columns will identify original and final budget
amounts and, if the entity so chooses, differences between the
budget and actual amounts
Changes from Original to Final Budget
• An entity shall present an explanation of whether changes
between the original and final budget are a consequence of
reallocations within the budget, or of other factors:
(a) By way of note disclosure in the financial statements; or
(b) In a report issued before, at the same time as, or in
conjunction with, the financial statements, and shall include a
cross reference to the report in the notes to the financial
statements
Comparable Basis
• All comparisons of budget and actual amounts shall be
presented on a comparable basis to the budget
• The comparison of budget and actual amounts will be
presented on the same accounting basis (accrual, cash, or other
basis), same classification basis, and for the same entities and
period as for the approved budget
Multi-year Budgets
• Some governments and other entities approve and make
publicly available multi-year budgets, rather than separate
annual budgets.
• Conventionally, multi-year budgets comprise a series of annual
budgets or annual budget targets. The approved budget for
each component annual period reflects the application of the
budgetary policies associated with the multi-year budget for
that component period. In some cases, the multi-year budget
provides for a roll forward of unused appropriations in any
single year.
Reconciliation of Actual Amounts on a
Comparable Basis and Actual Amounts in the
Financial Statements
• The actual amounts presented on a comparable basis to the budget in
accordance with paragraph 31 of IPSAS 24 shall, where the
financial statements and the budget are not prepared on a
comparable basis, be reconciled to the following actual amounts
presented in the financial statements, identifying separately any
basis, timing, and entity differences:
Cont’d
• Where the financial statements and the budget are not prepared on a
comparable basis (e.g. where the financial statements are on the
accrual basis and the budget on the cash basis), the actual amounts
presented on a comparable basis to the budget should be reconciled
to the following actual amounts presented in the financial statements
identifying separately any basis, timing and entity differences:
If an accrual basis is adopted for the budget, the total revenues, total
expenses and net cash flows from operating activities, investing
activities and financing activities to the actual amounts on the
financial statements; or
If a basis other than the accrual basis is adopted for the budget, the
net cash flows from operating activities, investing activities and
financing activities.
Basis, timing and entity differences
• Basis difference is differences due to budget and actual amounts
being on a different bases. This includes where the budget is on a
cash basis and the financial statements are on accrual basis. In
addition, a difference exists when the information in the budget is
estimated in a different manner to the accounting thereof in the
financial statements.
• Timing differences are differences due to budget and actual
amounts not prepared for the same period.
• Entity differences are differences due to entities included in the
financial statements but not in the budget e.g. controlled entities
END OF CHAPTER SIX
