The members of the panel were all members of the IASB's Management Commentary Consultative Group (MCCG): Kris Peach, Chair of the Australian standard-setter AASB; Ryoko Ueda, Mizuho International; and Andreas Barckow, President of the German standard-setter ASCG.

Given that all panelists are members of the MCCG, which had its first meeting last Friday, the discussion opened with the question why the panelists had put their name forward to be a member of the Board’s consultative group on the management commentary project and what perspective and insights they hoped to bring to the debate. Ms Peach explained that she believed the project to be a crucial one for the IASB and that standard-setters needed to be part of the wider debate to ensure a common approach. Ms Ueda noted management commentary as the bridge between investors and companies. And Mr Barckow explained that Germany has had a mature standard on management commentary in place for 15 years and that he hoped to help develop an international standard by sharing experiences, insights, and lessons learned.

As the most pressing issues that the Board should address in revising the practice statement, the panelists noted that in order to be able to tell their story consistently, companies need a framework that allows for comprehensive and complete reporting that connects financial and non-financial information. It was also noted that what is currently missing is reporting on risks beyond the risk of financial instruments. In this context and in connection with the question of whether standard-setters have a mandate to venture into non-financial reporting it was also noted that much of the non-financial information is in fact not non-financial but pre-financial as it will have an impact and will appear in a company's financial statements at a later point of time, so the question of what to report was more of a timing issue.

The discussion then turned to two crucial questions. Should the approach of the project focus on comparability, which in the end might lead to very comparable statements that are, however, mostly boiler-plate and therefore useless, or should a management approach be favoured that would come at the price of less comparability? Panelists agreed that a fine balance between the two positions needed to be observed. And should the practice statement be made mandatory to foster consistent application and comparability? Panelists noted that all other IASB pronouncements are mandatory and that the practice statements are odd animals in the IFRS literature. It was noted that the practice statement should become mandatory in the long run, however, it was also agreed that this could only be achieved in stages.

As the quality of management commentaries varies enormously across the corporate world panelists were asked what can be done to raise the bar for everyone. Suggestions included the recommendation to beef up the compliance statement in IAS 1 so that companies would have to state whether the practice statement had been applied and companies would be made aware that there is good guidance is out there. And the suggestion was made to collect examples of best practice and make them available. The user representative noted the importance of dialogue with users to understand what they want and need.

A question from the audience triggered a discussion around integrated reporting versus management commentary. The IIRC framework was referenced. It was noted in the panel that the IIRC framework was one of the sources the IASB can draw on but that there were many more sources available. In this context, the staff of the IASB also referred back to the scope of the project, which had been explained in introducing the panel discussion (see slide 3 of the agenda paper for the discussion). The same reference was made again when a question of ESG reporting versus management commentary came up. As regards ESG factors, it was also noted that you can look at them through two lenses: financial reporting and public policy. In this context, it was noted that the Conceptual Framework is the strong backbone of the IASB's project in that it will help to determine the degree that ESG factors need to be considered in management commentary to make sure that the statement provides consistent, concise, comparable, relevant, neutral, and useful information about whether the company and its business model are sustainable in the long run. 

Returning to the questions prepared for the discussion, panelists were asked on the style of presentation of management commentary. Ms Ueda made an ardent statement stating that while narrative reporting is very different from financial reporting, the connecting aspect needed to be quality: that both forms of reporting need to be clear and concise and need to fill users' needs. Mr Barckow noted that the approach of thinking about management commentary and somehow making reporting in that format more similar to financial reporting, i.e. thinking about financials first and then supplementing it with a management commentary was maybe thinking about things the wrong way round. Maybe the management commentary should come first and then the thinking about how the general report on the company's strategy and long-term goal is supported by and reflected in financials should follow.

Lastly, the standard-setters on the panel were asked whether they were not afraid of duplicating requirements that already existed in their jurisdiction. Ms Peach stated that while there were requirements in place in Australia the overarching framework that would make sure that all of the reported information is material, important, verifiable, reliable, neutral, and balanced was still missing. So far, she said, she had not seen anything that would duplicate or even be in conflict with the local requirements. Mr Barckow, who noted that he was happy to license the German standard internationally, noted that it was much easier for national standard-setters to develop standards and frameworks as they are working against one legal background only, a comment that was supported by the IASB staff who said that one of the big challenges of the project was to develop a framework that can be applied rigorously and consistently around the world.

In his speech, Mr Prada looked back over the long success story of IFRSs that he had been closely involved with over twenty years. As he explained, the birth of the IFRS movement began, as many other movements do, with a crisis. In the late nineties, the Asian financial crisis hit a deeply fragmented accounting world, and in May 2000 IOSCO endorsed international financial reporting standards — in a meeting chaired by Michel Prada at that time. And while the SEC realised that it needed to protect investors that were increasingly investing abroad, the Enron scandal shook belief in US GAAP, and the international community came to the conclusion that „international accounting standards could not be drafted in Connecticut“.

Mr Prada explained how the European Union decided to adopt IFRSs from 2005 and how the EU, Hong Kong, South Africa, and others led the way in global adoption. Today, Mr Prada stated, nine out of ten jurisdictions apply IFRSs, and many large jurisdictions that have not joined fully (yet) have either standards that are close to IFRSs or permit IFRSs — sometimes for certain groups only. (Mr Prada detailed the situation in China, India, Japan, and the US.) He also touched upon the topic of consistent application. While there was still much to do and while, as Mr Prada commented on one of the first adopters of IFRSs, „in Europe not everything is always easy“ these days, he concluded that IFRSs have come of age.

Looking to the future of IFRSs, Mr Prada talked about the relevance of accounting in an age of digital disruption and how IFRSs need to adapt and evolve. He also discussed broader corporate reporting and the need to cooperate globally to provide investors with a tool to assess companies performance across many fields. In this world, he maintained, IFRSs need looking after and sometimes even protection but he did not doubt their relevance.

Taking leave of the standard-setters community, he urged his audience to deepen their cooperation, to develop standards together and to solve problems together. He ended with two strong messages: „IFRSs is not merely about standards, but also about people,“ he said, and „IFRS remains a shining example of what can be achieved when people work together.“

Mr Prada's term as Chair of the Trustee's ended in December 2017 but he agreed to stay on until a successor could be found. He will hand over to the designated Chair of the Trustees, Mr Erkki Liikanen, at the Trustees' meeting in Johannesburg later this month.

In three volumes, the Handbook contains all IPSASB pronouncements published as of 31 January 2018, including the Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities. It can be downloaded free of charge in PDF format from the IPSASB website. Please not that the standards can also be accessed individually at the bottom of the page.