Management Commentary – International Accounting Standards Board

Date recorded:

At its meeting on November 20, 2019, the IASB met to discuss how the revised IFRS Practice Statement should explain what an entity’s business model is. The Board tentatively decided that the Practice Statement should, in explaining ‘business model’, refer to:

  1. value the entity creates for itself. The Practice Statement should also make clear that the notion of value created for an entity is related to the entity’s ability to generate cash flows;
  2. the link between an entity’s business model and the entity’s stated purpose;
  3. the elements of the business model—that is, its inputs, processes and outputs; and
  4. a business model being a matter of fact and observable through an entity’s actions.

The Board also tentatively decided that the Practice Statement should require an entity’s management to discuss indirect wider consequences or impacts of the operation of the entity’s business model if those impacts could affect the entity’s ability to generate cash flows in the future. At a future meeting the Board will discuss the objective of describing an entity’s business model in management commentary and possible guidance on the types of information about the entity’s business model that should be included in management commentary.

Review the IASB Update and podcast on the Board's Web site.

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