CHAPTER FIVE

IFRS Practice Statement Management Commentary

Objective

The objective of the Practice Statement is to assist management in presenting useful management commentary that relates to financial statements that have been prepared in accordance with IFRS.

Scope

The Practice Statement applies only to management commentary and not to other information presented in either the financial statements of the broader financial reports. The Practice Statement should be applied by entities that present management commentary that relates to financial statements prepared in accordance with IFRS. The Practice Statement does not mandate which entities should be required to publish management commentary, how frequently an entity should do so or the level of assurance to which management commentary should be subjected.

Summary

In addition to the objective, scope and related introduction, a summary of the IFRS Practice Statement appears next:

• Identification of management commentary
• Users of management commentary
• Framework for the presentation of management commentary
  • Purpose
  • Principles
  • Presentation
• Elements of management commentary
  • Nature of the business
  • Objectives and strategies
  • Resources, risks and relationships
  • Results and prospects
  • Performance measures and indicators
• Application date
• Appendix:
  • Defined terms

Purpose of the Practice Statement

The IFRS Practice Statement Management Commentary provides a broad, non-binding framework for the presentation of management commentary that relates to financial statements that have been prepared in accordance with IFRS. The Practice Statement is not an IFRS. Consequently, entities applying IFRS are not required to comply with the Practice Statement unless specifically required by their jurisdiction. Furthermore, non-compliance will not prevent an entity's financial statements from complying with IFRS if they otherwise do so.

What is Management Commentary?

Management Commentary is a narrative report that provides a context within which to interpret the financial position, financial performance and cash flows of an entity. It also provides management with an opportunity to explain its objectives and its strategies for achieving those objectives. Users routinely use the type of information provided in management commentary to help them evaluate an entity's prospects and its general risks, as well as the success of management's strategies for achieving its stated objectives. For many entities, Management Commentary is already an important element of their communication with the capital markets, supplementing as well as complementing the financial statements.

How to apply the Practice Statement

The Practice Statement is prepared on the basis that management commentary lies within the boundaries of financial reporting because it meets the definition of other financial reporting in paragraph 7 of the Preface to International Financial Reporting Standards. Therefore Management Commentary is within the scope of the Conceptual Framework for Financial Reporting. Consequently, the Statement should be read in the context of the Conceptual Framework.

The Practice Statement sets out the principles, qualitative characteristics and elements of management commentary that are necessary to provide users of financial reports with useful information. However, the form and content of management commentary may vary by entity. Thus, the Statement also provides principles to enable entities to adapt the information they provide to the particular circumstances of their business, including the legal and economic circumstances of individual jurisdictions. This 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.

The Practice Statement refers to ‘management' as the persons responsible for the decision making and oversight of the entity. They may include executive employees, key management personnel and members of a governing body.

Last changed

December 2010

Interpretations

Not applicable

More information on the detailed text of the practice statement is available at www.iasb.org/IFRSs/IFRS.htm.