a. Disclosure requirements for investment in associates

Disclosures that should be made in the accounts of investments in associate are as follows:

(i) The fair value of investment in associate for which there are published price quotations;

(ii) Summarised financial information of associates;

(iii) The reasons why investor holds less than 20% of voting power in investee but concludes that it has significant influence;

(iv) The reasons why investor holds more than 20% of voting power in investee but concludes that it does not have significant influence;

(v) The reporting date of the financial statements of an associate, which such financial statements are used in applying the equity method and are as of a reporting date, or for a period that is different from that of the investor, and the reason for using a different reporting date or different period;

(vi) The nature and extent of any significant restrictions (e.g. resulting from borrowing arrangements or regulatory requirements) on the ability of associates to transfer funds to the investor in the form of cash dividends, or similar distributions, or repayment of loans or advances;

(vii) The unrecognised share of losses of an associate, both for the period and cumulatively, if an investor has discontinued recognition of its share of losses of an associate;

(viii) The fact that an associate is not accounted for using the equity method; and

(ix) Summarised financial information of associates, either individually or in groups that are not accounted for using the equity method, including the amounts of total assets, total liabilities, revenues and surplus or deficits.

b. Ways of comparison of figures in respect of two or more years

(i) Straight forward criticism or analytical review

Figures in respect of two or more years may be compared and percentage differences obtained. Comparison of figures may be undertaken in any of the following ways:

 Previous years‟ figures with those of the current year;

 The statistics of a period this year with those of a similar period last year;

 Figures within the year‟s 1st quarter with those of the fourth quarter of

the same year; and

 It may be percentage representation within the year. For example, salary expenses may be expressed as a ratio of total expenses.

The above stated methods are popular with public sector organisations. Other ways of analysing financial statements under this method are:

 Share of capital expenditure as a percentage of non-debt

expenditure;

 Share of capital expenditure as a percentage of total expenditure;

 Share of recurrent expenditure as a percentage of total expenditure;

 Share of statutory allocation as a percentage of total revenue; and

 Share of internally generated revenue as a percentage of total revenue.

(ii) Performance reports as per IPSAS 24

According to IPSAS 24, entities are required to present a comparison of the budgeted amount for which it is held publicly accountable and actual amount, either as a separate additional financial statement or as an additional budget column in the financial statements currently presented in accordance with IPSASs. The comparison of budgeted and actual amounts shall be presented separately for each level of legislative oversight:

 The original and final budget amounts;

 The actual amounts on a comparable basis; and

 By way of the note disclosure, an explanation of material differences (variances) 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.

(iii) Cash flow statements

Neither the statement of profit or loss account not statement of financial position gives a satisfactory explanation of how a business obtains and uses its cash. The cash flow statement is very revealing of the core operations of a Government, Parastatal or Board on the affordability or otherwise of adequate liquid resources.

This is the statement that shows the amount of cash generated by an organisation and the utilisation of such cash for that period. The major sources of cash inflows and outflows into the public sector according to IPSAS 2 are:

 Operating activities;

 Investing activities; and

 Financing activities

(iv) Ratio analysis

Financial ratio analysis is the process of calculating financial ratios, which are mathematical indicators calculated by comparing key financial information appearing in financial statements of a public sector entity and analysing them to find out reasons behind the entity‟s current financial position and its recent financial performance and develop expectation about its future outlook.

Ratio analysis involves expressing one figure as a ratio or percentage of another, to bring out the weakness or strength in an organisation‟s affairs.