Which standard-setting bodies require a management's discussion and analysis as part of the financial report?

• A. GASB and FASAB
• B. GASB only
• C. FASAB only
• D. Neither GASB nor FASAB

Answer: (A)

Both GASB and FASAB require a management's discussion and analysis as part of the financial report. MD&A is a narrative section that helps users understand the numbers by providing management’s perspective on financial position, results of operations, and factors affecting performance. For GASB, this applies to state and local governments' annual financial reports, giving context to the financial statements and highlighting trends, budget-to-actual results, debt and capital asset issues, and other significant events. For FASAB, the federal government’s annual financial report also includes MD&A to explain financial conditions and performance from management’s view. Because both bodies mandate this section, the correct understanding is that both GASB and FASAB require MD&A.