Management commentary

Date recorded:

Agenda Papers 15, 15A and 15B


The IASB, in November 2017, added a project to update IFRS Practice Statement 1 Management Commentary to its agenda. Staff anticipate breaking the project into three work streams

  • Objectives and principles of management commentary reporting (Stream 1)
  • Current-year financial analysis and forward-looking information (Stream 2)
  • Business model, strategy, risks, and operating environment and information about operational performance (Stream 3)

At the November meeting, staff presented their recommendations on the objective of management commentary. Recommendations relating to the remaining aspects of Stream 1 and the other streams will be presented in future meetings.

Based on research and outreach conducted by the staff (provided in Agenda Paper 15B), they identified two key considerations for revising the objective of management commentary: the detailed requirements of management commentary are being interpreted too narrowly over too short a time horizon and the existence of gaps in management commentary indicates preparer’s difficulty in operationalising the objective.

In setting the objective, a number of challenges will be faced including that management commentary can be prepared from a number of different perspectives and needs to be tailored to each specific entity.

The staff think that a concise overarching objective of Management Commentary be provided in the Practice Statement, similar in level of detail to that in the Conceptual Framework regarding general purpose financial reporting and general purpose financial statements. The overarching objective should be defined in terms of context for the financial statements but reference should be made to discussions in the Conceptual Framework of providing information to allow users to assess the entity’s future net cash flows and management’s stewardship of the entity’s economic resources. Further, it should be clarified that Management Commentary be based on historical financial and operational information and be prepared for the primary users of financial statements. 

In addition, the staff think that the overarching objective should be supported by a statement of the matters to be addressed in Management Commentary. This statement should adopt ‘management’s view’ and address the perceived short-term focus of narrative reporting. The staff provided the Board with illustrative drafting of the objective of Management Commentary as Appendix A to Agenda Paper 15A.

Staff recommendations

The staff recommended that the objective of management commentary should be to give context for the financial statements by providing primary users of the management commentary with historical financial and operational information and analysis that is useful in assessing the prospects for the entity’s future net cash inflows, and management’s stewardships of the entity’s economic resources (supported by guidance along the lines of the illustrative approach in Appendix A).


Overall, the approach taken by staff that of developing an overarching objective for management commentary along with supporting guidance, was supported by the Board. However, many Board members raised concerns regarding the wording of the proposed overarching objective of management commentary prepared by the staff.

As currently drafted, a number of Board members thought that the scope would appear too narrow and focus solely on historical information rather than also incorporating forward-looking information into management commentary. However, it was noted that forecasted information should not be included and any future drafts of the objective should ensure that this is clearly understood.  However, one Board member was concerned that the project seemed to be incorporating items beyond the scope of work to be conducted by the IASB, noting that the IASB is responsible for IFRS Standards, which are inherently based on historical data.

Many Board members also confirmed that the management commentary should provide context for the financial statements. Furthermore, staff should incorporate the notion that the management commentary should not be seen as stand-alone information and should complement and supplement the financial statements.

It was suggested that staff, based on the suggestions received from the Board, redraft the objective.


No decision was reached, but it was suggested that staff, based on the suggestions received from the Board, redraft the objective for discussion in a future meeting.

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