Management Commentary (Wider corporate reporting) [ED]
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Comment period ended on November 23, 2021 |
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Proposed effective date: |
The exposure draft proposes that the Practice Statement would supersede IFRS Practice Statement 1 Management Commentary for annual reporting periods beginning on or after the date of its issue. The Practice Statement is not an IFRS and its application is not mandatory. Financial statements can comply with IFRSs even if they are not accompanied by management commentary or if they are accompanied by management commentary that does not comply with the Practice Statement.
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Next steps: |
The IASB has decided to finalize the management commentary project by issuing targeted improvements to the practice statement (expected in H1 2025). |
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Last updated: |
July 2024 |
Overview
In 2017, the International Accounting Standard Board decided to add a project to its standard-setting agenda to revise and update the IFRS Practice Statement Management Commentary, which was issued in 2010.
A management commentary complements the financial statements by providing other financial information—insight into the company’s strategy for creating business value over time, its progress in implementing its strategy, and the potential impact on financial performance not yet captured by the financial statements.
Investors can use this other financial information to inform their economic decisions. Without this information:
- management teams may prioritize short-term financial targets over long-term value creation not recognized in the financial statements;
- investment capital may be diverted from companies pursuing a long-term strategy in favour of those prioritizing short-term earnings.
The update to the IFRS Practice Statement 1 Management Commentary will include consideration of:
- developments from other narrative reporting initiatives—for example, the value of focusing on business-critical resources and long-term value creation;
- acknowledged gaps in narrative reporting practice indicating that the goals of the Management Commentary and other narrative reporting regimes are unmet. For example, the International Integrated Reporting Council in its recent review has acknowledged the need to revisit its guidance on reporting on the ‘resources and relationships’ that companies use to ‘create value’. Other narrative reporting gaps include challenges in reporting forward-looking information, inconsistent reporting on business models, and short-term reporting on strategies. Stronger guidance, whilst still maintaining the principles-based approach of the original MCPS (Management Commentary Practice Statement) should help to address this.
The Accounting Standards Board (AcSB) is participating in the International Accounting Standards Board’s (IASB) project to revise IFRS Practice Statement 1 Management Commentary (Practice Statement). This Practice Statement sets out a non-binding framework for preparing management commentary on financial statements prepared applying IFRS Standards.
For further details, see the project on the IASB’s website. To learn more about the AcSB’s role, see the AcSB’s website.
Other developments
September 2023
In September 2023, the IASB staff updated the work plan to indicate that the Board plans to decide on the project direction in H1 2024.
July 2023
In July 2023, the IASB staff updated the work plan to indicate that the Board plans to decide on the project direction in Q4 2023.
November 2022
On November 28, 2022, the IASB staff updated the work plan to indicate that the Board plans to decide on the project direction in H2 2023.
January 2022
On January 28, 2022, the IASB staff updated the Work Plan to indicate that the Board plans to review the Exposure Draft Feedback in March 2022.
September 2021
On September 27, 2021, the IASB staff updated the Work Plan to indicate that the Board plans to review the Exposure Draft feedback in Q1/2022.
May 2021
On May 27, 2021, the IASB published the exposure draft Management Commentary in an effort to update the 2010 IFRS Practice Statement 1 "Management Commentary". Comments are requested by November 23, 2021.
April 2021
On April 7, 2021, the IASB released a statement that the exposure draft (ED) for a revised Practice Statement 1 "Management Commentary" is now expected to be published in May 2021.
February 2021
On February 19, 2021, IASB staff updated the Work Plan to indicate that the Board plans to issue an Exposure Draft in April 2021.
October 2020
On October 30, 2020, IASB staff updated the Work Plan to indicate that the Board plans to issue an Exposure Draft in Q2/2021.
September 2020
On September 28, 2020, IASB staff updated the Work Plan to indicate that the Board plans to issue an Exposure Draft in Q1/2021.
July 2019
On July 23, 2020, IASB staff updated the Work Plan to indicate that the Board plans to issue an Exposure Draft in the first half of 2021.
On July 29, 2019, the IASB® staff updated the work plan to indicate that the Board expects to issue an Exposure Draft in the second half of 2020.
July 2018
On July 18, 2018, the IASB® staff updated the work plan to indicate that the Board plans to issue an Exposure Draft in the 1st half of 2020.
May 2018
On May 25, 2018, the IASB staff updated the work plan to indicate that the Board expects to issue an Exposure Draft in 2020.
November 2017
On November 16, 2017, the IASB staff updated the work plan to indicate that the IASB expects to issue an Exposure Draft in respect of this project at some date in the future.
