Consultation Paper 187 Effective disclosure in an operating and financial review (CP 187, link to ASIC website) sets out ASIC's proposed guidance on how to prepare an operating and financial review in a directors’ report for listed entities as is required under s299A of the Australian Corporations Act 2001.

The paper outlines ASIC's view that the OFR should contain an analysis and narrative to supplement and complement the information in the entity’s annual financial report. The paper explains that a high-quality OFR is important in meeting the information needs of current and prospective investors in the entity.

ASIC's view is the OFR should provide additional information to that in an entity's financial report, to allow users to assess the underlying drivers of the entity’s financial performance and to properly understand the reasons for the entity’s results, and also about expected future performance.

The draft guidelines indicates the OFR should present information in a single section, and in a manner that is complementary to and consistent with the annual financial report, balanced and unambiguous, and clear, concise and effective.

These are some examples of the items the guidance suggests the OFR should include:

• the total income and income for major operating segments
• the significant components of overall expenses and expenses for major operating segments
• disclosing the underlying drivers of the financial position of the entity
• disclosing exposures that are not reflected in the financial report (e.g. off-balance sheet arrangements)
• explaining the accounting information and other detail contained in the financial report (rather than simply repeating it).
• an outline of the entity’s key business strategies, and its plans that
  are a significant part of those strategies
• disclosure of the main risks that could adversely affect the successful fulfilment of the business strategies of the entity.

Click for ASIC press release (link to ASIC website).