Presentation of financial reports and statements

(1)      Having been apprised of the hope of the Panel of External Auditors that CCAQ could work towards achieving greater consistency and comparability in the information presented in the financial statements of the organizations, CCAQ decided at its 51st session (September 1979) to establish a Working Party on the Harmonization of Financial Statements. The Committee approved terms of reference for the Working Party, specified its membership, and agreed on arrangements for its first session (ACC/1979/R.69, paras. 18-20).

(2)      At its 52nd session (March 1980) the Committee considered the first report of the Working Party. The Working Party had agreed that the presentation of financial reports and statements should be based on the general principles of clarity, simplicity, meaningfulness and full disclosure, and that the recommendations of the International Accounting Standards Committee could serve as useful guidelines for its work. It had recognized, however, that the possibilities of harmonization of the presentation of financial data depended to a notable extent on the financial policies and procedures followed by the organizations; the form, content and number of statements and schedules were affected in particular by the choice of fund accounting, under which separate self-balancing funds were established and maintained for various accounting entities and reported upon separately, or arrangements under which assets arising from some or all sources of funds were recorded and reported upon in a combined manner (ACC/1980/16, annex III, paras. 3 and 4).

(3)      The Working Party had studied the general presentation and structure both of the reports and statements prepared at the end of financial periods and of interim financial reports. Its recommendations on these subjects are set out in the extract from its report (CCAQ/FB/R.122) reproduced in Handbook Annex IX.

(4)      The Committee endorsed the Working Party's substantive recommendations subject to the following observations:

     (a)      It could not be expected that either fund accounting or the recording and reporting of all assets in a combined manner could be adopted as a system-wide practice;

     (b)      It would be helpful to drop comparative figures from financial statements;

     (c)      The adoption of biennial budgeting and accounting for programme and project activities financed by UNDP, UNFPA, etc., would depend on the views of the competent governing bodies (ACC/1980/16, para. 19).

(5)      At the 53rd session (September 1980) CCAQ agreed on an agenda for the next session of the Working Party. The Committee also considered other matters concerning that session, including the submission of views of the organizations' internal audit services (ACC/1980/32, paras. 21-23).

(6)      At the 54th session (March 1981) the Committee reviewed the second report of the Working Party. For its action regarding the recommendations put forward on objects of expenditure, accounting standards and financial terminology, see Sections 16.5, 17.2 and 21.1 respectively. As regards the presentation of financial reports and statements,

     (a)      organizations which had not yet done so were urged to include a statement of their significant accounting policies in one place in their published reports and statements. It was agreed in addition that each organization should determine its own policy on the inclusion of comparative figures in its financial statements (see para. 4(b) above);

     (b)      certain other observations of the Working Party, dealing notably with organizations' implementation of its previous recommendations, were noted.

It was agreed that a further meeting of the Working Party did not need to be envisaged at present.

(7)      At the 56th session (March 1982) the Committee endorsed, as minimum requirements, views put forward by the Panel of External Auditors concerning the information to be reported at the end of the first year of biennial financial periods. These views were that the financial report should consist of a descriptive text summarizing the significant financial aspects of the first year, supported by selected financial statements (status of appropriations, income and expenditure account, statement of assets and liabilities and, where appropriate, additional statements showing the status of, for example, contributions, the Working Capital Fund and trust funds). While the External Auditors would be free to issue a report on the first year if there were matters which they wished to bring to notice without delay, no opinion would be expressed on interim financial statements, which should be clearly labelled as such. The Committee thought that the unaudited nature of the statements could best be pointed out in an introductory text, which would make it clear that the accounts were subject to continuing audit (ACC/1982/6, paras. 11 and 12).

(8)      At the 59th session (September 1983) the Committee noted difficulties which had arisen in following these recommendations on minimum requirements. Given the diversity in the presentation of interim financial reports, it concluded that implementation of the recommendations should be left to the discretion of individual organizations (ACC/1983/21, paras. 17 and 18).

(9)      At the 62nd session (March 1985) CCAQ was informed of a request of the Panel of External Auditors concerning further inter-organization work on the harmonization of financial statements, possible reduction of the volume of information published in such statements, the provision of financial information to the constituents of the organizations in summary form and the further development of accounting principles applicable to the UN system as a whole. The Committee was willing to examine the possibilities of further progress in this area and, as a first step, requested its secretariat to submit an analysis showing how recent financial reports and statements differed and which of their features might be considered for common adoption by the organizations (ACC/1985/7, paras. 31 and 32). In considering this analysis at the sixty-third session (September 1985: ACC/1985/17, paras. 22 and 23), the Committee concerned itself principally with the question of accounting standards; see Section 17.2.

(10)      At the 65th session (March 1986) CCAQ considered a communication from the Executive Secretary of the Panel of External Auditors which reiterated the Panel's suggestion concerning reduction of the volume and the provision in summary form of information published in the organizations' financial statements. The Committee found merit in this suggestion, which it agreed that individual organizations should pursue in the light of the requirements of their governing bodies (ACC/1986/4, paras. 16 and 19).

(11)      At the 70th session (March 1989) the Committee considered a recommendation of the Panel of External Auditors that for the purposes of financial statements, cash and investments in currencies other than the US dollar should be valued at a rate of exchange closer to the market rate at the end of the financial period than the operational rate for December. Although the Committee saw merit in the recommendation it also foresaw problems of consistency; the Panel's concern might best be met by adding a footnote to financial statements indicating the value of the assets in question at the operational rate for January, whenever there was a material difference between that rate and the December rate (ACC/1989/7, paras. 37, 38). The Panel subsequently took note of this suggestion but considered that acceptance of the footnote was a matter for the external auditor concerned: report of the 72nd session of CCAQ(FB) (ACC/1990/5, para. 25).

(12)      Also at the 70th session, ICAO drew attention to a matter raised by its External Auditors, namely the disclosure in footnotes to financial statements of liabilities for benefits payable to staff on separation. In the Committee some organizations expressed the view that such disclosure was inconsistent with the "going concern" principle on which accounting practice was based in intergovernmental, national and most private institutions; others indicated that they already disclosed such liabilities in footnotes to their financial statements (ACC/1989/7, paras. 74-76). At the 72nd session (March 1990) the Committee noted that the Panel continued to call for full disclosure; several members reiterated their view in favour of the "going concern" accounting convention (ACC/1990/5, paras. 25, 26).

(13)      At the 79th session (August-September 1993) the Committee returned to the question of harmonization of the presentation of financial statements (see section 17.2, para. 15). It requested its secretariat to submit at the next session draft terms of reference for a Working Party on Financial Statements, open to all members of CCAQ(FB) which would be entrusted with the work foreseen. The Working Party was to hold its first meeting in mid-1994. The Committee also exchanged views on the question of disclosure in the financial statements of member organizations of UNJSPF of their contingent liability, under article 26(a) of the Regulations of the Fund, for any actuarial deficiency. The Committee requested UN to represent it during discussions of this subject which were scheduled to take place between representatives of the Committee of Actuaries of the Pension Board and members of the UN Board of Auditors (ACC/1993/23, paras. 36-37).

(14)      Draft terms of reference were presented to CCAQ(FB) at its 80th session (February - March 1994). It agreed that, in view of the need to present a report to the GA on the application and development of the accounting standards at the end of 1996, the Working Party on Financial Statements would need to complete its work at the end of 1995. It accordingly decided that the first meeting of the Working Party would be held in Geneva in June 1994 (ACC/1994/5, paras. 29 - 31).

(15)      At its 81st session (August - September 1994), CCAQ(FB) examined the first report of the Working Party which had made a number of initial recommendations including inter alia the proposed format and content of its final recommendations, the proposed dates, venue and work programme for its next meeting, and work which might be undertaken by organizations before its next meeting to identify problem areas in its initial draft proposals for the statements of income and expenditure and assets and liabilities. It had also requested guidance from CCAQ(FB) on a proposal by the Technical Group of the Panel of External Auditors that the standard financial statements should include a statement of Director-General=s responsibilities.

(16)      While agreeing in principle with the recommendations of the Working Party, members of CCAQ(FB) expressed concern about the principle of consolidated financial statements subject to audit. They believed that consolidated financial statements in the commercial sense would not be appropriate nor useful to readers, and that a columnar presentation of all funds managed by an organization might be initially considered as an information annex, not subject to audit. They were also of the opinion that organizations should have the opportunity to increase the number of statements which would be subject to audit, notably in the area of statements to be provided to donors of voluntary contributions. With these comments, CCAQ(FB) approved the recommendations of the Working Party, the dates and venue of its next meeting, and the work programme for the that meeting.

(17)      CCAQ(FB) decided to defer to its next session the issue of the statement of Director-General=s responsibilities so that organizations could discuss the principle with their external auditors (ACC/1994/15, paras. 21 - 24).

(18)      At its 82nd session (February 1995), CCAQ(FB) examined the report of the second meeting of its Working Party on Financial Statements, which further refined the draft formats of the financial statements and made proposals for the continuation of the work of the Working Party. The Committee approved these, subject to some comments on the description and definition of Miscellaneous Income. As regards the issue of the statement of Director-General=s responsibilities, CCAQ(FB) concluded that such a statement should not be regarded as obligatory and should be considered as a matter for individual organizations to resolve with their external auditors (ACC/1995/6, paras. 34 - 37).

(19)      At its 83rd session (August - September 1995), CCAQ(FB) examined the final report of its Working Party, which considered that its work was now finished. It had recommended the adoption of revised accounting standards to include the proposed formats of the financial statements and its general recommendations thereon. The Working Party had further recommended that organizations should be encouraged to apply the formats and revised standards to the presentation of their financial statements for financial periods ending in 1995.

(20)      In examining the revised standards, CCAQ(FB) suggested one change: that the obligatory Note 1 to the financial statements should encompass only an organization's objectives rather than a description of its objectives and activities since a description of its activities would be too voluminous to be included in such a Note if it were to be meaningful. With this change, the Committee adopted, on behalf of ACC, the revised accounting standards attached in Annex X. CCAQ(FB) also approved the Working Party's recommendation that organizations should be encouraged to apply the formats and revised standards to the presentation of their financial statements for financial periods ending in 1995 (ACC/1995/20, paras. 6 - 13).