Comparison between Management Commentary Exposure Draft and the Integrated Reporting Framework (Agenda Paper 15A)

In this session, the IASB received an education session on the staff’s analysis of similarities and differences between the Management Commentary Exposure Draft (MC ED) and the Integrated Reporting Framework (IR Framework).

IASB discussion

The staff introduced the agenda paper, which was in the form of a presentation.

IASB members were pleased to see that there is a significant overlap between the MC ED and the IR Framework and that there are not too many differences. However, some IASB members suggested to add a section on governance to the Management Commentary Practice Statement (MC PS) as this has been reported as a shortcoming by respondents to the MC ED. It is also one of the main differences compared to the IR Framework.

One IASB member said that he often hears from practitioners that there are major differences between the MC PS and the IR Framework and how this could be explained given the staff’s presentation. The staff responded that many compare the original MC PS, not considering the changes proposed in the MC ED. The MC ED goes far in proposing to eliminate many of the differences that practitioners see. But even on comparison with the MC ED, there are differences which can be perceived as larger than they actually are. For example, the IR Framework refers to the entity’s ability to create value while the MC ED refers to the ability to create value and generate cash flows. In the staff’s view, that is not a major difference. The MC ED is also perceived as less flexible than the IR Framework, which is due to the different nature of the two documents. There are also jurisdictional differences that can make the gap between the two documents seem larger than it is.

Another IASB member asked whether staff are still observing that management commentary is used as a marketing instrument produced by the communication departments of companies. The staff replied that this is declining. Many corporate governance codes require board involvement in producing management commentary. However, it is still often used as a tool to engage with the market.

No decisions were made.