Management Commentary

Question 1

What is management commentary (IMPORTANT)

Answer 1

-provides users with contact through which to interpret the financial position, financial performance, and cash flows of an entity
-not mandatory

Question 2

IFRS practice statement 1 management commentary

Answer 2

-> provides a broad, non binding framework for the presentation of management commentary that relates to financial statements that have been prepared n accordance with internal financing reporting standards (IFRSs)

Scope
- not required to comply
- non compliance will not prevent entity’s financial statements from complying with IFRSs if they don’t

Principles
-sets out the principles, qualitative characteristics and elements of management commentary that are necessary to provide users of financial reports with useful information
-the form and content of management commentary may vary by entity
-adapt to info they provide to particular circumstances of their business
-flexible approach will generate more meaningful disclosure by encouraging entities that choose to present management commentary to discuss those matters that are most relevant to their individual circumstances

Materiality
-should include info that is material to the entity in management commentary
-materiality will be different fro each entity

Question 3

Main principles of the practice statement are (IMPORTANT)

Answer 3

Management should present commentary that is consistent with the following principles
1. To provide managements view of the entity’s performance, position, and progress
2. To supplement and complement info presented in the financial statements. In aligning with those principles, management commentary should include
-forward looking information
-information tho possess the qualitative characteristics described on the conceptual framework for financial reporting

Question 4

Elements of management commentary

Answer 4

Should nit be generic but should include info that is essential to an understanding of:
1. The nature of the business
2. Managements objectives and its strategies for meeting them
3. The entity’s resources, risks, and relationships
4. The result of operations and prospects
5. Key performance measures used by management to evaluate the entity’s performance

-> reported in a consistent manner to enable the comparability of the management commentary over time

Question 5

Exposure draft on management commentary may 2021

Answer 5

-investors increasingly concerned about ‘reporting gaps’ between the info provided in management commentaries and the information that they need
-board embarked upon project to revise the contents of Practice statement 1, first issued in 2010, their review is still ongoing (nov 22)
-proposal builds on innovations in narrative reporting and aim to bring together in one place the info that investors need to assess the company’s long term prospects (sustainability, intangible resources, key relationships)
-designed to provide insight into factors that
1. Have affected the company’s financial performance and position reported in its financial statements
2. Could affect the company’s ability to create value and generate cash flows in the future

Question 6

Proposals would require info to be provided on matters that are fundamental to the company’s prospects covering six content areas

Answer 6

1. Business model
2. Strategy
3. Resources and relationships (intangibles)
4. Risks
5. External environment
   6, financial performance and position