State-owned enterprises should observe high standards of transparency, accountability and integrity and be subject to the same high-quality accounting, disclosure, compliance and auditing standards as listed companies.
Transparency around all material matters regarding the enterprise is key for strengthening the accountability of SOE boards and management and for enabling the state to act as an informed owner. When deciding on reporting and disclosure requirements for SOEs, some consideration should be given to enterprise size and commercial orientation. For example, for SOEs of a small size not engaged in public policy objectives, disclosure requirements should not confer a competitive disadvantage. Conversely, where SOEs are large or where state ownership is motivated primarily by public policy objectives, the enterprises concerned should implement particularly high standards of transparency and disclosure in areas that may materially affect the performance of the enterprise.
V.A. SOEs should report and disclose all material matters regarding the enterprise, in line with high-quality, internationally recognised accounting and disclosure standards, which may include areas of significant concern for the state as an owner and the general public. Channels for disseminating information should provide for free and timely public access.
All SOEs should at least annually disclose all material matters regarding the enterprise, and large and listed ones should do so according to high-quality internationally recognised accounting and disclosure standards, or national accounting standards consistent with these standards. All other SOEs should apply these standards to the extent possible. Material information can be defined as information whose omission or misstatement can reasonably be expected to influence an investor’s assessment of a company’s value. Material information can also be defined as information that a reasonable investor would consider important in making an investment or voting decision. While corporate disclosure should thus focus on what is material to investors’ decisions and may include an assessment of a company’s value, it may also help improve public understanding of the structure and activities of enterprises, corporate policies and performance with respect to environmental, social and governance matters.
Easily accessible and user-friendly company websites also provide the opportunity for improving information dissemination, and most jurisdictions now require or recommend companies to have a website that provides relevant and significant information about the company itself. SOE board members should sign financial reports, and the CEOs and CFOs should certify that these reports appropriately and fairly present the operations and financial condition of the SOE.
To the extent possible, relevant authorities should carry out a cost-benefit analysis to determine which SOEs should be submitted to high-quality internationally recognised standards. This will promote consistency and comparability across the entire portfolio. High-quality domestic standards can be achieved by making them consistent with one of the internationally recognised accounting standards. This analysis should consider that demanding disclosure requirements are both an incentive and a means for the board and management to perform their duties professionally.
The annual and interim reports will be an important source of information to help interpret the financial and operating results as enumerated in the audited financial statements of an SOE. All SOEs should produce annual financial statements, including a balance sheet, cash flow statement, profit and loss statement, statement of changes to owners’ equity, and notes. These annual financial statements should generally be finalised three to six months after the end of the financial year. Reporting should be complete, concise, reliable and comparable.
While all SOEs, even those pursuing purely commercial activities, fulfill their activities in the public interest, a high level of disclosure is especially valuable for SOEs pursuing important public policy objectives. It is particularly important when they have a significant impact on the state budget, on the risks carried by the state, or when they have impact on sustainability-related matters or the global marketplace.
With due regard to enterprise capacity and size, SOEs should be subject to the same disclosure requirements as listed companies. Disclosure requirements should not compromise essential corporate confidentiality, and should not put SOEs at a disadvantage in relation to private competitors. SOEs should report on all material matters regarding the enterprise, such as their financial and operating results, non-financial information, remuneration policies and actual remuneration of board members and key executives, related party transactions including those with the government and related entities, governance structures and governance policies. SOEs should disclose whether they follow any code of corporate governance and, if so, indicate which one. In the disclosure of performance, it is considered good practice to adhere to internationally accepted reporting standards.
With due regard to enterprise capacity and size, examples of such information include:
V.A.1. A clear statement to the public of enterprise objectives and their fulfilment, including any mandate expected by the state ownership entity.
It is important that each SOE is clear about its overall objectives. Regardless of the existing performance monitoring system, a limited set of basic overall objectives should be identified together with information about how the enterprise is dealing with trade-offs between objectives that could be conflicting.
When the state is a majority shareholder or effectively controls the SOE, state owners’ expectations should be made clear to all other investors, the market and the general public. Such disclosure obligations will encourage SOE officials to clarify the expectations to themselves, and could also increase management’s commitment to fulfilling them. It will provide a reference point for all shareholders, the market and the general public for considering the strategy adopted and decisions taken by the management.
SOEs should report on how they fulfilled their objectives by disclosing key performance indicators. When the SOE is also used for public policy objectives, it should also report on how these are being achieved.
V.A.2. Enterprise financial and operating results, including where relevant the costs and funding arrangements pertaining to public service obligations.
Like private corporations, SOEs should disclose information on their financial, operational and non-financial performance. For example, this could include the main financial statements, such as those contained in the balance sheet, profit and loss statement, cash flow statement and notes to the financial statements, as well as other key financial information that the company deems relevant, such as dividend and debt values (including information on outstanding debt, the maturity profile and the currency split), capital employed, EBITDA, return on equity, return on assets, equity ratio, investments, dividend pay-out, financial leverage, and other key figures such as number of employees and achievement on targets related to gender parity and other types of diversity, if applicable. The reporting standard (e.g. IFRS or other) applied to the financial reporting should be indicated. Such disclosures should enable the reader to gauge key financial information regarding commercial and non-commercial orientations. Sufficient information should also accompany key financial figures to provide shareholders with an understanding of the messages that the figures are intended to convey, how the figures are calculated and how they relate to the financial statements they accompany. In addition, when SOEs are expected to fulfil specific public service obligations, information on the costs of related activities should be disclosed. Any compensation for the SOEs, including for public service obligations, through subsidies or other forms of in-kind benefits and advantages should be quantifiable and disclosed, together with their possible impact on the level playing field and a justification. It is also recommended as good practice that a report on internal control over financial reporting accompanies the financial statements. At the same time, care should be taken by the ownership entity to ensure that the additional reporting obligations placed on SOEs, beyond those placed on private enterprises, do not create an undue burden on their economic activities.
V.A.3. The governance, ownership, and legal and voting structure of the enterprise or group as well as any significant subsidiaries, including the content of any corporate governance code or policy and implementation processes.
It is important that the ownership and voting structures of SOEs are transparent so that all shareholders have a clear understanding of their share of cash-flow and voting rights. It should also be clear who retains legal ownership of the state’s shares and where the responsibility for exercising the state’s ownership rights is located. Any special rights or agreements that diverge from generally applicable corporate governance rules, and that may distort the ownership or control structure of the SOE, such as golden shares and power of veto, should be disclosed. The existence of any control arrangements such as shareholder agreements should be disclosed, whereas some of their contents may be subject to conditions of confidentiality.
SOEs should publish any other relevant information on their organisational structure, such as on any significant subsidiaries and affiliates and any other entity in which they have participation, representation and intervention. This should include the percentage owned in each such subsidiary or holding, as well as the countries of their incorporation and operation. Complicated group structures may increase the opaqueness inherent in related party transactions and the possibility of circumventing disclosure requirements. Special consideration should be given to identifying all related parties in jurisdictions with complex group structures involving publicly traded companies.
V.A.4. The remuneration of board members and key executives.
It is important that SOEs ensure high levels of transparency regarding the remuneration of board members and key executives preferably on an individual basis. Failure to provide adequate information to the public could result in negative perceptions and fuel risks of a backlash against the ownership entity and individual SOEs. SOEs are generally expected to disclose timely information including material changes on the remuneration policies applied to board members and key executives as well as remuneration levels or amounts on a standardised and comparable basis. The information should, where applicable, include inter alia termination and retirement provisions, and any specific benefits, incentive schemes or in-kind remuneration provided to board members and key executives. The use of sustainability indicators in remuneration may also warrant disclosure that allows shareholders to assess whether indicators are linked to material sustainability risks and incentivise a long-term view.
V.A.5. Composition of the board and its members, including board member qualifications, selection process board diversity policies, roles on other company boards or in the state and, if applicable, classification as independent.
Full transparency surrounding board member qualifications is especially important for SOEs and should be fully aligned with the OECD Guidelines on Anti-Corruption and Integrity in State-Owned Enterprises. In fully-owned SOEs, SOE board member nomination and appointment is often the direct responsibility of the government and as such, there is a risk that board members be perceived as acting on behalf of the state or specific political constituencies, rather than in the long-term interest of the enterprise and its shareholders. Requiring high levels of transparency on board member qualifications, and nomination and appointment processes can play a part in increasing the professionalism of SOE boards. It also allows investors to evaluate board member qualifications and identify any potential conflicts of interest.
Many jurisdictions require or recommend the disclosure of the composition of boards, including on gender diversity. Such disclosure may also extend to other criteria such as age and other demographic characteristics, in addition to professional experience and expertise. Some jurisdictions that have established such requirements or recommendations in codes also request disclosure on a “comply or explain” basis. In some cases, this includes the disclosure of key executive and other senior management positions. Relevant policies to promote diversity in board and executive-level positions should also be disclosed.
V.A.6. Any material foreseeable risk factors and measures taken to manage such risks.
Severe difficulties arise when SOEs do not clearly identify, assess, control for or report on risks. Without adequate reporting of material risk factors, SOEs may give a false representation of their financial situation, overall performance or potential for long-term value creation. This in turn may lead to inappropriate strategic decisions and unexpected financial losses. Material risk factors should be reported in a timely fashion and with sufficient frequency.
Appropriate disclosure by SOEs of the nature and extent of risk incurred in their operations depends on the soundness of the SOEs’ risk management system. SOEs should report according to new and evolving standards. When appropriate, such reporting could cover risk management strategies as well as systems put in place to implement them. The Guidelines envision the disclosure of sufficient and comprehensive information to fully inform shareholders and other users of the reasonably foreseeable material risks of the SOE. Disclosure of risk is most effective when it is tailored to the particular company and industry in question. Disclosure about the system for monitoring and managing risk is increasingly regarded as good practice, including the nature and effectiveness of related due diligence processes.
All shareholders – including both state and non-state shareholders – need information on reasonably foreseeable material risks for SOEs that may include: risks that are specific to the industry or the geographical areas in which the SOE operates; dependence on commodities and supply chains; financial market risks including interest rate or currency risk; risks related to derivatives and off-balance sheet transactions; business conduct risks including corruption, human rights and labour risks; digital security and other technology related risks; tax-related risks; sustainability risks, notably climate-related risks. Risk-related disclosures may additionally cover other major geopolitical events such as pandemics, innovation, links to national development plans, and gender equality and diversity. Companies in extractive industries should disclose their reserves according to best practices in this regard, as this may be a key element of their value and risk profile.
Disclosed information on material foreseeable risk factors may be particularly useful for shareholders and stakeholders when SOEs operate in newly de-regulated and increasingly internationalised industries, new jurisdictions or high-risk sectors, where they may face new or different risks, including those mentioned above.
V.A.7. Any direct or indirect financial assistance, including guarantees, received from the state and commitments made on behalf of the SOE, including contractual commitments and liabilities arising from public-private partnerships or participation in joint ventures.
To give a fair and complete picture of an SOE’s financial situation, it is necessary that mutual obligations, financial assistance or risk sharing mechanisms between the state and SOEs are appropriately disclosed. Disclosure should include details on any financial targets set by the government for the SOE, such as on the capital structure, profitability and dividends, and any state grant or subsidy received by the SOE, budget loans or any guarantee granted by the state or another SOE to the SOE for its operations, as well as any commitment that the state undertakes on behalf of an SOE. Payments made by SOEs to the state budget should also be disclosed as part of such reporting on transactions with the government, covering taxes, dividends, royalties, and other payments. For loan guarantees and on-lent credit, SOEs should disclose the terms and conditions embedded in the contracts (including regarding the starting and maturity dates, original currency, committed values, disbursed and outstanding debt, amortisation schedule, interest rate value and type). Disclosure standards should be in line with existing legal obligations, for example those governing state aid. Disclosure of guarantees could be done by SOEs themselves or by the state. It is considered good practice that the legislature monitors budget loans and state guarantees in order to respect budgetary procedures.
Public-private partnerships and joint ventures should also be adequately disclosed. Such ventures are often characterised by transfers of risks, resources and rewards between public and private partners for the provision of public services or public infrastructure and may consequently induce new and specific material risks.
V.A.8. Any material transactions with the state and other related entities.
Material transactions between SOEs and related entities, such as an equity investment of one SOE in another, might be a source of potential abuse and should be disclosed. Reporting on transactions with related entities should provide all information that is necessary for assessing the fairness and appropriateness of these transactions. Related parties should at least include entities that control or are under common control with the company, significant shareholders including members of their families and key management personnel. While the definition of related parties in internationally accepted accounting standards provides a useful reference, the corporate governance framework of SOEs should ensure that all related parties are properly identified and that in cases where specific interests of related parties are present, material transactions with consolidated subsidiaries are also disclosed. It is also considered good practice, even in the absence of material transactions, to clearly identify SOEs’ organisational and corporate links with other related entities. SOEs should also report on any material contractual relations and transactions with state-owned financial institutions, since these have a high risk of conflict of interest.
V.A.9. Information on material liabilities such as debt contracts, including the risk of non-compliance with covenants.
With due regard to commercial confidentiality, SOEs should moreover disclose information on material liabilities such as debt contracts, including the risk of non-compliance with covenants, in accordance with applicable standards. Under normal circumstances, shareholders and directors control the major decisions taken by the SOE. However, certain provisions in corporate bonds and other debt contracts that significantly limit the discretion of management and shareholders, such as covenants that restrict dividend payouts, require creditors’ approval for the divestment of major assets or penalise debtors if financial leverage exceeds a predetermined threshold. Moreover, under financial stress but before bankruptcy, SOEs may choose to negotiate a waiver of compliance with a covenant, when existing creditors may require changes in the business. As a consequence, the timely disclosure of material information on debt contracts, including the impact of material risks related to a covenant breach and the likelihood of their occurrence, in accordance with applicable standards, is necessary for investors to understand an SOE’s business risks.
V.A.10. Sustainability-related information.
SOEs should disclose material information on policies, activities, risks, objectives and performance metrics related to sustainability matters in line with high-quality internationally recognised standards as elaborated in Chapter VII.C.
V.B. SOEs should have risk management systems to identify, manage, control and report on risks. Risk management systems should be treated as integral to the achievement of objectives and thus embody a coherent and comprehensive set of internal controls, ethics and compliance programmes or measures.
Risk management is a core component of corporate governance and is closely related to the corporate strategy. The risk management system is established to allow SOEs to identify, manage and report on risks to the achievement of an SOEs’ operational and financial objectives. Risk management processes inform how an SOE can use internal controls to manage risks and mitigate their potential impact, promote integrity within the SOE and encourage compliance with relevant laws or regulations.
The risk management system should be regularly monitored by the board, reassessed and adapted to the SOEs’ circumstances, with a view to establishing and maintaining the relevance and performance of internal controls, policies and procedures. Though it may receive support from specialised committees – most commonly the audit committee or equivalent body and sometimes the risk committee – the board retains the collective responsibility for the effectiveness of the risk management system and the internal controls therein. There should be a segregation of duties between board oversight, those that manage risks and those that provide independent assurance within the SOE (e.g. internal audit). SOE representatives responsible for risk assessments within the company should have sufficient authority to fulfil their role.
With regard for capacity and size of an SOE, the risk management system should include regular, tailored risk assessments in line with the good practices presented in relevant provisions of the Guidelines on Anti-Corruption and Integrity in State-Owned Enterprises. An SOE’s risk management system should deal with significant external company-relevant risks, such as health crises, supply chain disruptions and geopolitical tensions. These frameworks should work ex ante (as companies should foster their resilience in the event of a crisis) and ex post (as companies should be able to set up crisis management processes at the onset of a sudden negative event). It should moreover entail risk-based due diligence to identify, prevent and mitigate actual and potential adverse impacts of the business and account for how these impacts are addressed, in accordance with the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct.
Risk processes inform the establishment and maintenance of internal controls, ethics and compliance programmes or measures. Pursuant to the relevant details on internal control in the Guidelines on Anti-Corruption and Integrity in State-Owned Enterprises, such compliance programmes or measures should be applicable to all levels of the corporate hierarchy and all entities over which an SOE has effective control, including subsidiaries. These programmes or measures may include inter alia establishing codes of conduct or similar and integrating them into human resource or other relevant corporate policies, and establishing clear rules and procedures, such as whistleblower protection, to encourage reporting concerns to the board without fear of retribution. They should extend, where possible, to third parties. The incentive structure of the business needs to be aligned with its ethical and professional standards so that adherence to the SOE’s values is rewarded and breaches of law are met with dissuasive consequences or penalties.
The risk management system and related set of internal controls will moreover help the SOE to be compliant with applicable laws, including those related to responsible business conduct including human rights and labour, digital security, tax, competition, data privacy and personal data protection, health and safety and sustainability. This includes compliance with statutes criminalising the bribery of foreign public officials, as required under the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions [OECD/LEGAL/0293], and other forms of bribery and corruption.
Internal controls, ethics and compliance programmes or measures should also extend to subsidiaries and where possible to third parties, such as agents and other intermediaries, consultants, representatives, distributors, contractors and suppliers, consortia, and joint venture partners.
V.C. SOEs should establish an internal audit function that has the capacity, autonomy and professionalism needed to duly fulfil its function. It should be monitored by and report directly to the board and to the audit committee or equivalent corporate organ where existing.
The role and functions of internal audit vary across jurisdictions, but they most often include assessment and evaluation of an SOE’s governance, risk management and internal control processes. As in large, listed companies, large SOEs should normally put in place an internal audit function. Depending on their size, structure, complexity and risk profile, other SOEs are encouraged to establish an internal audit function to the extent possible.
This function can play a critical role in providing ongoing support to the audit committee of the board or an equivalent body in its comprehensive oversight of the internal controls and operations of the company. Internal auditors are important to ensuring an efficient and robust disclosure process. Specifically, they may assess the completeness, integrity, accuracy, timeliness and frequency of reporting on all material information. They should have procedures in place to determine that the SOE's management has procedures to collect, compile, and present sufficiently detailed information in its disclosures. Good practice calls for establishing an internal audit charter that sets out the purpose, roles and responsibilities and procedures of the internal audit function.
It is a board’s responsibility to ensure that SOEs establish an internal audit function. To ensure their independence and authority, internal auditors should report directly to the board and its audit committee. Internal auditors should have full access to the SOEs’ records, and there should be no limitations to the scope of their activities. Internal auditors’ access to the chair and members of the entire board and its audit committee should be unrestricted. Their reporting is important for the board’s ability to evaluate actual company operations and performance. To enhance integrity and accountability, internal audit function’s stature, independence and resources, as well as performance should be made public by the audit committee.
The roles of both internal and external audit should be clearly articulated to ensure that the board receives the quality of assurance needed to oversee the risk management of the company. Consultation between external and internal auditors should be encouraged. Material findings from the internal audit should be reported to the board and, where applicable, its audit committee. It is considered good practice for the head of internal audit to affirm the objectivity of the internal audit function to the board on an annual basis. This includes communicating incidents where objectivity may have been impaired and the actions or safeguards employed to address the impairment.
V.D. An annual external audit should be conducted by an independent, competent and qualified auditor in accordance with internationally recognised auditing, ethical and independence standards in order to provide reasonable assurance to the board and shareholders on whether the SOEs’ financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework. Specific state and audit control procedures do not substitute for an independent external audit.
In the interest of the general public, SOEs should be as transparent as publicly traded corporations. Regardless of their legal status and even if they are not listed, all SOEs should report according to best practice accounting and auditing standards.
To reinforce trust in the information provided, the state should require that, in addition to special state audits, at least all large SOEs be subject to external audits that are carried out in accordance with internationally recognised auditing, ethical and independence standards.
The independent external auditor provides an opinion as to whether the SOE’s financial statements present fairly, in all material respects, the financial position and financial performance of an SOE in accordance with an applicable financial reporting framework. In some jurisdictions, the external auditors are also required to report on a company’s corporate governance or internal controls over financial reporting.
Adequate procedures should be developed for the selection of external auditors and it is crucial that they are independent from the SOE and its affiliates including its management as well as large shareholders (i.e. the state in the case of SOEs) if the applicable ethical and independence standards do not include them. Moreover, external auditors should be subject to the same criteria of independence as for private sector companies. This requires the close supervision of the audit committee or the board of directors and generally involves limiting the provision of non-audit services to the audited SOE as well as periodic rotation of auditors (either partners or in some cases the audit company), or tendering of the external audit assignment.
The practice that external auditors are recommended by an independent audit committee of the board or an equivalent body and are elected, appointed or approved either by that committee/body or by the shareholders’ meeting directly can be regarded as good practice since it clarifies that the external auditor should be accountable to the shareholders. Depending on the legislation, the ownership entity may thus be entitled, through the annual shareholders’ meeting, to nominate, elect and even appoint the external auditors. However, its direct reporting relationship and accountability should be to an independent audit committee or equivalent corporate organ, which oversees the overall relationship with the external auditor and may also play a role in the appointment, reappointment and compensation of external auditors. Additional guidance, including regarding auditor qualification, set out in the G20/OECD Principles of Corporate Governance should apply.
Moreover, the external audit should not be confused with or substituted by the activities of internal audit or internal controls. SOEs should strive to have their financial statements audited within the same timeframe as listed companies. The independent external auditor’s reports should accompany the SOE’s annual report and be publicly disclosed in their full extent and within a reasonable timeframe, in line with applicable reporting frameworks. Repeated qualified opinions should be considered a red flag.
Existing state auditing bodies and other intragovernmental control instances such as specialised state or “supreme” audit institutions, even if they inspect both SOEs and the ownership entity, are not sufficient to ensure the quality and comprehensiveness of accounting information and are designed to monitor the use of public funds and budget resources, rather than the operations of the SOE as a whole. The audit findings of the supreme audit institution should be deliberated by the legislature in a timely manner that accords with the budgetary cycle and be made public.
V.E. The ownership entity should develop consistent reporting on SOEs and publish annually an aggregate report on SOEs, on material issues, including information related to sustainability, governance aspects, as well as on the achievement of public policy objectives. The information should give a full, clear and reliable picture of the SOE portfolio and be of high quality, comparable, concise and accessible publicly, including through digital communications.
The ownership entity should develop aggregate reporting that covers all economically significant SOEs and make it a key disclosure tool directed to the general public, the legislature and the media. This reporting should be developed in a way that allows all readers to obtain a clear view of the overall performance and evolution of the SOEs. In addition, aggregate reporting is also instrumental for the ownership entity in deepening its understanding of SOE performance and in clarifying its own policy. This improves setting metrics to better monitor and evaluate the achievement of the ownership policy, goals and expectations and can enhance performance management systems where reporting includes evaluating the fulfilment of individual SOEs’ expectations – including against targets set by the state-owner – and where applicable, disclosure of non-commercial assistance.
The reporting should result in an annual aggregate report of material information issued by the state. The report should give the full picture of the SOE portfolio’s size and sectoral distribution when appropriate and the portfolio’s and individual SOEs’ performance for the reporting period, in comparison with past performance. The report could also include “forward looking” elements that support value creation in the SOE sector. This aggregate report should moreover give an overview of the value of the sector when appropriate and cover financial performance and the value of individual SOEs, but should also include information on performance related to key relevant non-financial indicators. It should at least provide an indication of the total value of the state’s portfolio. It should also include a general statement on the state’s ownership policy and information on how the state has implemented this policy. Information on the organisation of the ownership function should also be provided including on the nomination and appointment, composition, qualifications and remuneration of state-owned governing bodies, as well as an overview of the evolution of SOEs, aggregate financial information and reporting on changes in SOEs’ boards. The aggregate report should provide key financial indicators including turnover, profit, cash flow from operating activities, gross investment, return on equity, equity/asset ratio and dividends, share of employment and other information bearing on environmental, social and governance practices. Disclosure of aggregate-level sustainability-related information regarding their SOE portfolios and a systematic analysis and disclosure of portfolio-level exposure to sustainability-related risks and opportunities can support a more informed understanding on sustainability expectations set for their SOE portfolio and how the overall portfolio aligns with broader national sustainability commitments. Annual aggregate reports should include key indicators that can be measured over time. If fiscal risks are material to understanding the broader portfolio performance, state ownership entities might consider identifying the main sources of fiscal risks of the portfolio and adding some analysis of the main risk elements of the portfolio by sector or by enterprise. The ownership entity should strengthen disclosure on stakeholder relations by having both a clear policy and developing aggregate disclosure to the general public. The report should also include updates on recent developments related to the portfolio such as relevant legislation.
Information should be provided on the methods used to aggregate data. The aggregate report could include individual reporting on the most significant SOEs. It is important to underline that aggregate reporting should not duplicate but should complement existing reporting requirements, for example, annual reports to the legislature. Some ownership entities could aim at publishing only “partial” aggregate reports, i.e. covering SOEs active in comparable sectors. It is important for the annual aggregate report to be transparent about the applied reporting standards applicable to individual SOEs and by the ownership entity when presenting aggregate information by the portfolio. Internationally recognised reporting standards, such as IFRS standards, can also be applied as feasible, when aggregating information for the SOE portfolio. If the accounting standards differ across the portfolio or if the level of the quality of disclosure varies across the portfolio, this should also be disclosed and explained, aiming at providing a fair, clear and unified picture, in financial terms, of the SOE portfolio.
Best practice would call for the aggregate report to take the form of an annual narrative report with information regarding the performance of the SOE portfolio. Some jurisdictions may produce an annual aggregate report as part of their regular reporting to the legislature or as a part of the annual budget process. Others may produce an online inventory of financial (and non-financial) indicators, which depending on the level of detail may fulfil the same function. Ad hoc reporting is generally not considered to fulfill the same accountability and transparency function as a “classic” aggregate report. The use of digital technologies may support features allowing users to interact with the aggregate data, making it searchable and downloadable in either aggregate or disaggregate format. The annual aggregate report should be made available to the public, which allows for easy access to information. Many ownership entities have websites that provide one-stop-shop information on the organisation of the ownership function, the general ownership policy, as well as the annual aggregate report.
Moreover, the annual aggregate report can be an important element of the overall accountability framework of an ownership entity when utilised as a mechanism to report back to the legislature or other representative bodies.