According to the GASB, information essential to placing financial information in the correct context should be reported as which?

• A. Basic financial statements
• B. Notes to the financial statements
• C. Auditor's report
• D. Required supplementary information

Answer: (D)

Information essential to placing financial information in the correct context is provided as required supplementary information. This is the material GASB requires beyond the basic financial statements to help users interpret the numbers and understand how to evaluate them, such as budget-to-actual comparisons and certain actuarial or funding schedules for pensions and other postemployment benefits. The notes to the financial statements, while providing important details about accounting policies and contingencies, serve different purposes, and the auditor's report is the independent opinion on the financial statements themselves. Hence, the best answer is required supplementary information.