IASB proposals on management commentary reflect broader approach to reporting
The International Accounting Standards Board (IASB) has published a proposed comprehensive framework for the preparation of management commentaries. The new framework is intended to reflect changes and innovations in the corporate reporting landscape, and better meet the information needs of today’s investors. IASB is seeking feedback by 23 November 2021.
The management commentary – known in some countries as the management discussion and analysis—is a narrative report that complements and discusses company’s financial statements. The proposals represent a major overhaul of current guidelines, IFRS Practice Statement 1: Management Commentary. Under the new approach, the management commentary would not limit itself to strictly financial matters, but would bring together a broader range of material needed by investors to assess a company’s prospects into the long term. It would include both financial and non-financial performance metrics, such as information about the company’s intangible resources and relationships and about sustainability matters that affect it.
The disclosure objectives set out are wide ranging and designed to be useful to investors, as well as to enable regulators and auditors to assess compliance with the framework. They cover a company’s business model, strategy, resources and relationships, risks, external environment and financial performance and position.
While IFRS Standards do not require companies to provide a management commentary, many do so. Individual regulators may also choose to deploy the framework, and, for example, it could be used alongside standards from the new International Sustainability Standards Board (ISSB). It also seems likely that this new approach to management commentary could both encourage and support further change, serving as an anchoring point for other updated standards and frameworks. We will next be interested to see it reflected in the IFRS Taxonomy, which enables XBRL tagging of information in the management commentary.