Wider corporate reporting

Date recorded:

Cover note – Agenda paper 28

In this meeting, the Staff:

  • a) asked the Board for approval to update the Management Commentary Practice Statement (AP 28A); and
  • b) updated the Board on developments in wider corporate reporting since March 2017, which was when the Board last discussed this topic (AP 28B). This paper is for information purpose only.

Wider corporate reportingAgenda proposal to revise and update the Management Commentary Practice Statement - Agenda paper 28A


At its March 2017 meeting, the Board tentatively decided to consider updating the December 2010 Management Commentary Practice Statement (MCPS). However, it asked the Staff to perform further research to identify what the problems are that it would be trying to resolve by updating the MCPS, and the extent of the use and influence of the MCPS.

Staff analysis

Through extensive literature review, the Staff observed that the major problems currently faced by entities with regard to wider corporate reporting relate to:

  • a) the lack of a generally accepted framework and standards for wider corporate reporting; and
  • b) the lack of alignment and integration between wider corporate reporting and financial reporting.

With regard to the use of the MCPS, the Staff could only find three companies that made explicit reference in their financial reports to the MCPS. Apart from that, the Staff observed that the MCPS is mainly used by academics as a benchmark to assess the quality of companies’ narrative reporting outside the financial statements. Nevertheless, the Staff believed that the MCPS has been influential in the development of a number of key frameworks and pronouncements, both globally and in individual jurisdictions.

The Staff have also held discussions with the IFRS Advisory Council, the Accounting Standards Advisory Forum and the International Forum of Accounting Standard-Setters. Feedback from these meetings highlighted a range of views, from those in favour of the Board taking no action to calls for the Board to do more than just updating the MCPS.

Based on research performed, the Staff believed that there is a case for revising the MCPS for the following reasons:

  • a) the MCPS needs to be updated to reflect the many developments that have taken place since 2010 in order to remain relevant;
  • b) updating the MCPS would answer the calls from those for the Board to play a more active role in wider corporate reporting. Such calls reflect a market expectation that the Board is the body that is best placed to address the link between ‘narrow’ and ‘other’ financial reporting;
  • c) continuing to take a principles-based, framework approach to the MCPS will allow it to be used in conjunction with other frameworks and codes and to build on the best practices currently available;
  • d) continuing the MCPS as a non-mandatory pronouncement reduces the risk of creating conflicts with other frameworks and codes and can give the Board scope to work with other bodies, e.g. regulators, to encourage more formal adoption at jurisdictional levels.

Staff recommendation

The Staff recommended that the Board take on a project to update the MCPS.


The Board approved the Staff recommendation.

Being the specialists in financial reporting, the Board believed that they are best placed to provide the link between financial and non-financial information. They acknowledged that there is a practical limit as to the extent to which the revised MCPS could remove confusion from the multitudes of competing guidance out there, but they believed that revising the MCPS and making it current would allow it to serve as an anchoring point for other frameworks. One of the key points to address would be to promote alignment between financial and ‘other’ information disclosed by an entity.

The Board also raised some preliminary points about the approach to considering revisions to the MCPS, such as whether they would set up an advisory group for this project and if so, who the members would be; and to which frameworks/codes the Board should make reference when updating the MCPS. One Board member cautioned against creating the impression of picking winners from the population of extent frameworks/codes, and emphasised that the project should be undertaken with establishing the MCPS as an anchoring point in mind. 

Another Board member was not enthusiastic about the project as he doubted whether the Board or the Staff have the knowledge and competence to provide guidance in this area. Speaking from experience, he observed that it is very difficult to link non-financial indicators with financial results and provide meaningful commentary thereon, e.g. how the level of customer and employee satisfaction would affect the amount of provisions. If the guidance were to be issued at a high level in a non-mandatory context, he questioned whether this would add any real value to the users of the financial statements.

Wider corporate reporting – An update on developments - Agenda paper 28B

Developments since March 2017

Several committees and organisations have issued guidelines generally on disclosures of non-financial information since March 2017. The Staff believed that the findings and recommendations in these reports would not affect the Board’s current work plan on wider corporate reporting. Instead, their implications could be considered should the Board decide to take forward any work in this area.


There was no discussion on this paper.

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