IFRS Practice Statement 1 Management Commentary is set out in paragraphs 1.1–3.14 and Appendices A–B. Terms defined in Appendix A are in bold the first time they appear in the Practice Statement. Definitions of other terms are given in the Glossary for International Financial Reporting Standards. The Practice Statement should be read in the context of its purpose and the Basis for Conclusions, the Preface to IFRS Standards and the Conceptual Framework for Financial Reporting.
Chapter 1—Using this Practice Statement
Introduction
1.1 | IFRS Practice Statement 1 Management Commentary is set out in paragraphs 1.2–13.14 and appendices A and B. Terms defined in Appendix A are in bold the first time they appear in this Practice Statement. |
1.2 | Notes, illustrations and links are included to help entities apply the requirements in this Practice Statement.
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Purpose of this Practice Statement
1.3 | This Practice Statement applies to management commentary. It sets out requirements for management commentary and explains how those requirements can be met. |
1.4 | Management commentary accompanies general purpose financial statements (financial statements) prepared in accordance with IFRS Accounting Standards or on another basis. Management commentary might accompany the related financial statements as a distinguishable part of a larger report or as a stand-alone report. Management commentary might also accompany or include sustainability-related financial disclosures prepared in accordance with IFRS Sustainability Disclosure Standards or on another basis. Management commentary might be known under another name. |
1.5 | This Practice Statement does not specify which entities are required to prepare management commentary, how frequently entities should do so, who should authorise management commentary for issue or the level of external assurance to which management commentary should be subjected.
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1.6 | Some entities might be required by local law or regulation to publish management commentary that complies with this Practice Statement and other entities might choose to do so.
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Status of this Practice Statement
1.7 | This Practice Statement is not an IFRS Accounting Standard or an IFRS Sustainability Disclosure Standard. Financial statements can comply with IFRS Accounting Standards even if they are not accompanied by management commentary or if they are accompanied by management commentary that does not comply with this Practice Statement.
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Effective date
1.8 | This Practice Statement supersedes IFRS Practice Statement 1 Management Commentary (issued in December 2010) for annual reporting periods beginning on or after 23 June 2025. Earlier application is permitted. If an entity applies this Practice Statement for an earlier period, it shall disclose that fact. |
Overview of the content and structure of this Practice Statement
1.9 | In this Practice Statement:
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Part A—General requirements
1.10 | Chapter 2 sets out requirements relating to identifying management commentary, providing information about its authorisation for issue, and stating compliance with this Practice Statement. |
1.11 | Chapter 3 sets out the objective of management commentary, together with supporting explanations. For example, it explains that an entity’s management commentary:
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1.12 | Chapter 4 sets out requirements for providing material information in management commentary, together with supporting guidance. For example, Chapter 4:
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1.13 | Chapter 5 sets out requirements for management commentary to be complete, neutral and free from error. It also explains that information is more useful to users if it is also understandable, comparable and provided in a way that enhances verifiability. |
1.14 | Chapter 6 sets out requirements for information in management commentary to be presented as a well-integrated, coherent whole. |
1.15 | Chapter 7 explains that material information is likely to include metrics that management uses to monitor key matters and to measure progress in managing those matters. It also sets out requirements that apply to metrics.
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Part B—Areas of content
1.16 | Chapters 8–13 specify six areas of content to be included in management commentary:
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1.17 | Figure 1 illustrates the relationships between the six areas of content. 
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1.18 | Chapters 8–13 require management commentary to provide information that meets disclosure objectives specified for each area of content. The disclosure objectives in each chapter comprise:
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1.19 | To help management understand the information needs of users, Chapters 8–13 also describe the assessments that users make using the information provided for each area of content.
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1.20 | To identify the information needed to meet the disclosure objectives for an area of content, management:
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1.21 | Management evaluates whether the information needed to meet the disclosure objectives for the areas of content is sufficient to meet the objective of management commentary set out in paragraph 3.1. If the information is insufficient, management identifies additional information needed to meet that objective. |
1.22 | To help management to identify material information to meet the disclosure objectives, Chapters 8–13 also set out, for each area of content:
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Long-term prospects, intangible resources and relationships, and environmental, social and governance matters
1.23 | Users need information about factors, including sustainability-related factors, that have already affected an entity’s financial performance or financial position as well as information about factors that could affect the entity’s ability to create value and generate cash flows in the future, including in the long term. Such factors could include matters relating to the entity’s intangible resources and relationships—including resources not recognised as assets in the entity’s financial statements—and environmental, social and governance matters. |
1.24 | Management commentary provides material information about such matters as necessary to meet its objective set out in Chapter 3 and the disclosure objectives set out in Chapters 8–13. For example, management commentary provides material information about governance matters as necessary to meet those objectives. |
1.25 | Appendix B provides an overview of requirements and guidance in this Practice Statement that management is likely to need to consider in deciding what information to provide about factors that could affect the entity's ability to create value and generate cash flows in the long term (long-term prospects), matters relating to the entity's intangible resources and relationships, and environmental, social and governance matters. |
Interaction with other reporting requirements or guidelines
1.26 | Entities can apply this Practice Statement alongside local law or regulation. If local law or regulation specifies only general requirements, an entity can apply the Practice Statement requirements and guidance to help it comply with that law or regulation. Conversely, if local law or regulation is detailed and prescribes disclosure of specific information, an entity is permitted to include all of that information in its management commentary even if some of the information is not required by the Practice Statement, as long it does not obscure material information (see paragraph 5.17). |
1.27 | Entities can also apply this Practice Statement together with narrative reporting requirements or guidelines published by another standard-setting body or other organisations, including requirements or guidelines for use by entities in specific industries or on specific topics, such as sustainability reporting. Such requirements or guidelines could help management identify information it might need to provide to meet the requirements of this Practice Statement. That is more likely to be the case if the requirements or guidelines have a reporting objective that focuses on the information needs of the primary users of general purpose financial reports, such as IFRS Sustainability Disclosure Standards (see paragraph 4.14).
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Chapter 2—Identification, authorisation and statement of compliance
Identifying management commentary and other related general purpose financial reports
2.1 | An entity may provide management commentary as a stand-alone report or with other information as part of a larger report. An entity shall identify the management commentary clearly and distinguish it from other information provided in the same larger report or in other reports published by the entity. |
2.2 | Management commentary shall identify the financial statements to which it relates. If the management commentary is not part of the same larger report as the related financial statements, it shall explain how to access those financial statements. If the related financial statements are not prepared in accordance with IFRS Accounting Standards, the management commentary shall disclose the basis on which the financial statements are prepared. |
2.3 | Management commentary shall identify the reporting period that it and the related financial statements cover.
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2.4 | If an entity prepares sustainability-related financial disclosures, the management commentary shall disclose the basis on which those disclosures are prepared. If those disclosures are not part of the same larger report as management commentary, the management commentary shall identify those disclosures and explain how to access them.
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Authorisation of management commentary
2.5 | An entity shall state the date on which the management commentary was authorised for issue and identify the body(s) or individual(s) who gave that authorisation.
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Statement of compliance
2.6 | Management commentary that complies with all of the requirements of this Practice Statement shall include an explicit and unqualified statement of compliance. |
2.7 | Management commentary that complies with some, but not all, of the requirements of this Practice Statement may include a statement of compliance. However, that statement shall be qualified, identifying the departures from the requirements of this Practice Statement and giving the reasons for those departures. |
Chapter 3—Objective of management commentary
The objective of management commentary
3.1 | An entity’s management commentary shall provide information that:
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3.2 |
3.3 | Management evaluates whether the information needed to meet the disclosure objectives for the areas of content is sufficient to meet the objective of management commentary. If the information is insufficient, management identifies additional information needed to meet that objective.
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Supporting explanations
Focus on the information needs of the primary users of general purpose financial reports
3.4 | An entity’s management commentary is prepared for its existing and potential investors, lenders and other creditors, who are the primary users of its general purpose financial reports. Such users can be assumed to have a reasonable knowledge of business and economic activities. However, they might not have knowledge of the entity’s specific business and activities. |
3.5 | The objective of management commentary focuses on the information needs of the users described in paragraph 3.4. Other parties—for example, the entity’s employees, government agencies or members of the public—might also find management commentary useful. However, those other parties might have additional information needs and meeting such needs is not an objective of management commentary. |
3.6 | The objective is to provide information that meets the common information needs of the primary users of general purpose financial reports, not the specialised information needs unique to particular users.
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Management’s perspective
3.7 | An entity’s management commentary provides management’s perspective of the factors—including sustainability-related factors—that have affected the entity’s financial performance or financial position, or that could affect the entity’s ability to create value and generate cash flows in the future:
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3.8 | By providing management’s perspective, information in management commentary helps users assess both the entity’s prospects for future cash flows and management’s stewardship of the entity’s resources. |
Complementary information in management commentary
3.9 | An entity’s management commentary provides information that complements information in the entity’s financial statements, thus enhancing users’ understanding of the entity’s financial performance and financial position reported in those financial statements. Management commentary also provides information that complements other information in general purpose financial reports, including information in sustainability-related financial disclosures, if the entity provides that information outside management commentary. |
3.10 | Management commentary provides a single, concise and coherent narrative setting out management’s perspective of the factors—including sustainability-related factors—that have affected the entity’s financial performance or financial position or that could affect the entity’s ability to create value and generate cash flows in the future.
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Future cash flows and value creation
Prospects for future cash flows
3.11 | An entity’s management commentary provides information that helps users assess the entity’s prospects for future cash flows. In making their assessment, users estimate the present value of the entity’s future cash flows. This estimate involves assessing whether the net cash inflows are likely to provide the entity with a return that compensates it sufficiently for both the time that elapses before those cash flows occur (the time value of money) and the uncertainty in the amount and timing of the cash flows (risk). To support that assessment, management commentary provides information that helps users understand:
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Ability to create value
3.12 | In this Practice Statement, ‘ability to create value’ refers to an entity’s ability to create or preserve value for itself and hence for its investors and creditors. |
3.13 | An entity’s activities create value for the entity if they enhance or preserve the net present value of the entity’s future cash flows. Conversely, an entity’s activities erode value for the entity if they reduce the net present value of the entity’s future cash flows.
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3.14 | In this Practice Statement, ‘value’ refers to the value an entity creates for itself and hence for its investors and creditors. The term does not refer to the value an entity’s activities might create, preserve or erode for other parties (for example, customers, suppliers, employees or society at large), the economy or the natural environment. However, an entity’s ability to create value for itself—and hence to generate cash flows across all time horizons, including in the long term—is closely related to the value the entity’s activities create, preserve or erode for those other parties, the economy or the natural environment. Therefore, management commentary includes material information about the impacts of an entity’s activities on other parties, the economy and the natural environment if those impacts could affect the entity’s ability to create value for itself.
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Long-term time horizon
3.15 | In assessing an entity’s prospects for future cash flows, users consider both the present value of the cash flows they estimate the entity will generate over a selected forecast period, and the present value of the cash flows they estimate the entity will generate after that period (the terminal value). Accordingly, users need information that provides insights into factors that could affect their assessment of the entity’s ability to create value and generate cash flows across all time horizons, including in the long term.
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Chapter 4—Material information and key matters
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Material information
4.1 | Information required by the objective of management commentary set out in paragraph 3.1 and the disclosure objectives for the areas of content set out in Part B of this Practice Statement shall be provided if it is material. In the context of management commentary, information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial reports make on the basis of those reports, which include the management commentary and the related financial statements and which provide financial information about a specific reporting entity.
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4.2 | Information in management commentary influences users’ decisions by influencing their assessments of:
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4.3 | It is likely that much of the material information needed to meet the objective of management commentary and the disclosure objectives for the areas of content will relate to key matters—that is, matters that are fundamental to the entity’s ability to create value and generate cash flows, including in the long term. If a matter is fundamental to the entity’s ability to create value and generate cash flows, users are likely to need more information about that matter than about matters that are not fundamental to that ability. Accordingly, Part B of this Practice Statement includes requirements for management commentary to focus on key matters. |
4.4 | However, material information does not necessarily relate to a key matter. Material information is included in management commentary even if it does not relate to a key matter.
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Key matters
4.5 | Part B requires management commentary to focus on key matters—matters that are fundamental to an entity’s ability to create value and generate cash flows, including in the long term:
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4.6 | Key matters are likely to be interrelated. Therefore, the effects of related key matters on the entity’s ability to create value and generate cash flows are likely to be pervasive and to relate to more than one area of content.
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4.7 | Identifying key matters requires management to apply judgement. Because key matters are fundamental to the entity’s ability to create value and generate cash flows, they are likely to be matters that management monitors and manages. |
4.8 | Other indications that a matter might be key include that the matter has been:
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4.9 | Key matters are specific to the entity. Some matters might not be key for the entity even though users would generally expect them to be key for entities operating in the industry or jurisdiction in which the entity operates. In such cases, management considers whether any information about the matter is material. Material information could include an explanation of why the matter is not key for the entity.
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4.10 | Figure 2 provides an overview of the descriptions and characteristics of key matters.  |
Making materiality judgements
Identifying information that might be material
4.11 | Identifying material information needed to meet the objective of management commentary and the disclosure objectives for the areas of content requires management to apply judgement. In judging whether a piece of information is material, management considers the entity’s specific circumstances, as well as whether users need that information and why they need it.
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4.12 | Indications that information might be material include that it:
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4.13 | If management has a type of information it knows entities with similar activities commonly provide to users, it considers whether that information would be material in the context of the entity’s management commentary. However, because materiality judgements depend on an entity’s circumstances, information is not material solely because other entities provide that type of information, and information may be material even if other entities do not provide that type of information. |
4.14 | Narrative reporting requirements or guidelines published by another standard-setting body or other organisations, including requirements or guidelines for use by entities in specific industries or on specific topics, such as sustainability reporting, could help management identify information that might be material. That is more likely to be the case if the requirements or guidelines have a reporting objective that focuses on the information needs of the primary users of general purpose financial reports, such as IFRS Sustainability Disclosure Standards. If the requirements or guidelines have a different reporting objective, they might not specify all information about a matter that is material to these users or, conversely, might specify some information that is not material to these users.
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Assessing whether information is material
4.15 | Information about a matter may be material because of the nature or magnitude of that matter, or a combination of both, judged in relation to the entity’s circumstances. Accordingly, making materiality judgements involves considering both quantitative and qualitative factors.
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4.16 | Some matters discussed in management commentary relate to possible future events that have not affected the entity’s financial performance or financial position, are not reported in the entity’s financial statements and have uncertain outcomes. In judging whether information about such possible future events is material, management considers:
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4.17 | Materiality judgements need to be reassessed each reporting period. Because of changes in the entity’s individual circumstances, or in the wider environment, some types of information included in previous periods’ management commentary might no longer be material, and some types of information not previously included might have become material. |
Aggregation
4.18 | Information in management commentary generally aggregates more detailed information available to management. If that information is aggregated too much, material information might be omitted. If it is not aggregated enough, material information might be obscured by immaterial information. |
4.19 | Factors to consider in judging how much to aggregate information include:
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Chapter 5—Completeness, neutrality, freedom from error and other attributes
Introduction
5.1 | For management commentary to meet its objective, the information it provides needs to be complete, neutral and free from error. |
5.2 | That information is more useful to users if it is also:
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Completeness
5.3 | Management commentary shall provide a complete depiction of the matters it addresses. Providing a complete depiction of a matter means providing all material information about the matter—not necessarily all information about the matter that is available to management. A complete depiction of a matter includes all material information necessary for users to understand the matter, including all material descriptions and explanations.
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5.4 | If information is material, it shall be included in management commentary even if it was provided in a previous period’s management commentary or is available in another report published by the entity.
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5.5 | Information in management commentary shall reflect events that occur between the end of the reporting period and the date on which the management commentary is authorised for issue.
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Neutrality
5.6 | Information in management commentary shall be neutral. Information is neutral when it is balanced, so is not slanted, weighted, emphasised, de‑emphasised or otherwise manipulated to make it more likely that users will receive that information favourably or unfavourably. |
5.7 | Achieving overall balance requires balance in the selection of matters to discuss in management commentary.
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5.8 | Achieving overall balance also requires balance in the selection of information to provide about the matters discussed, and in the presentation of that information.
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5.9 | Some matters discussed in management commentary—for example, some management targets or plans—are aspirational. A balanced discussion of such matters covers both management’s aspirations and factors that could prevent management from achieving those aspirations. |
Freedom from error
5.10 | Information in management commentary shall be free from error. |
5.11 | Information can be free from error without being perfectly precise or perfectly accurate in all respects. The degree of precision needed and attainable, and factors that make information accurate, depend on the nature of the information and the nature of the matters it addresses. For example, freedom from error requires that:
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Understandability
5.12 | Information in management commentary shall be understandable. Information is understandable when it is clear and concise. |
5.13 | For management commentary to be clear, it needs to use plain language, and avoid jargon and unnecessary technical terminology.
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5.14 | The clearest form of presentation depends on the nature of the information, and might sometimes include tables, graphs or diagrams in addition to narrative text. If graphs or diagrams are used, additional text or tables might be necessary to avoid obscuring material detail.
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5.15 | Clarity might be further enhanced by distinguishing information about developments in the reporting period from ‘standing’ information that remains unchanged, or changes little, from one period to the next—for example, by separately highlighting features of the entity’s business model that have changed since the previous reporting period. |
5.16 | For management commentary to be concise, it needs to:
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5.17 | Perfectly concise management commentary would include only material information. Any immaterial information included in management commentary shall be provided in a way that avoids obscuring material information.
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Material information included by cross-reference
5.18 | Information required by this Practice Statement might be available in another report published by the entity. That information may be included in management commentary by cross-reference to the other report if including the information in this way rather than directly within the management commentary does not make the management commentary less clear.
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5.19 | If material information in another report is included in management commentary by cross-reference to that other report, that information becomes part of the management commentary. This means that, for example:
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5.20 | If management commentary includes information by cross-reference to another report:
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Comparability
5.21 | This Practice Statement requires management commentary to provide material information that is complete, neutral and free from error. That information is more useful to users if it is also comparable, that is if it can be compared with:
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5.22 | Accordingly, information in management commentary shall be provided in a way that enhances comparability without omitting material information.
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Verifiability
5.23 | Information is verifiable if it is possible to corroborate either the information itself or the inputs used to derive it. Verifiable information is more useful to users than information that is not verifiable. Verifiability helps give users confidence that the information is complete, neutral and free from error. |
5.24 | Information in management commentary shall be provided in a way that enhances its verifiability. Verifiability can be enhanced by, for example:
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5.25 | Some material information—for example, some explanations and forward-looking information—might not be verifiable. Material information is included in management commentary even if it is not verifiable. To help users decide whether to use such information, management commentary shall describe the underlying assumptions and methods of producing the information as well as other factors that help support it. |
Chapter 6—Coherence
Introduction
6.1 | As noted in paragraph 3.10, management commentary provides a single, concise and coherent narrative setting out management’s perspective of the factors—including sustainability-related factors—that have affected the entity’s financial performance or financial position or that could affect the entity’s ability to create value and generate cash flows in the future. |
6.2 | The completeness, understandability and comparability of information in management commentary all rely on that information being presented as a well‑integrated, coherent whole. |
6.3 | Coherence requires information in management commentary to be provided in a way that makes clear:
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Relationships between related matters
6.4 | For management commentary to be coherent, it needs to effectively depict the relationships between related matters, for example, the relationship between features of an entity’s business model and aspects of its financial performance and financial position. |
6.5 | If a matter discussed for one area of content in management commentary has implications for matters discussed for other areas of content, management commentary shall include the information necessary for users to assess those implications.
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Relationships between related pieces of information
6.6 | Some information in management commentary might be understood best in the context of information in another part of the management commentary, or in the context of information in the entity’s financial statements or another general purpose financial report. For management commentary to be coherent, such information shall be presented in a way that explains that context and the relationships between the related pieces of information.
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6.7 | Coherence also requires that:
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Chapter 7—Metrics
Introduction
7.1 | Metrics are measures used to monitor a quantitative or qualitative aspect of an entity’s financial or non-financial performance or position. |
7.2 | Examples of metrics are:
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7.3 | Material information is likely to include metrics. Those metrics could be derived from metrics that management uses to monitor key matters and to measure progress in managing those matters. They typically depend on the entity’s activities and the industry in which it operates. They could be derived from information generated by the entity or obtained from external sources, for example, providers of market share statistics or customer surveys. |
Requirements that apply to all metrics
Clarity and accuracy
7.4 | This Practice Statement requires information in management commentary to be understandable and free from error, including being clear and accurate. For information about a metric to be clear and accurate, the metric needs to be described clearly and precisely. |
7.5 | Consequently, if a metric included in management commentary is not presented or disclosed in the entity’s financial statements, management commentary shall:
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7.6 | If a metric of financial performance or financial position included in management commentary is derived by adjusting measures presented or disclosed in the entity’s financial statements, management commentary shall:
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Comparability
7.7 | An amount reported for a metric is more useful if users can compare that amount with amounts for previous periods, and with amounts reported by other entities, in particular those with similar activities or operating in the same industry. |
7.8 | To help users compare an amount reported for the current reporting period with amounts for previous reporting periods, management commentary shall:
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7.9 | If a comparative amount is not provided because obtaining it would require undue cost or effort, management commentary shall state that fact.
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7.10 | To help users compare an amount for a metric included in management commentary with amounts reported by other entities:
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Coherence
7.11 | A metric discussed in one context in management commentary might be similar to another measure discussed in another context within the management commentary, in the related financial statements, in another general purpose financial report or in the entity’s public communications—for example, in presentations to investors and creditors. For management commentary to be coherent, it shall explain how that metric relates to the other measure. |
Metrics and management compensation
7.12 | If a metric plays a role in determining management compensation, information about that metric is likely to be material. |
7.13 | If management commentary includes a metric similar to, but not the same as, a measure that plays a role in determining management compensation, it shall explain how the metric and that other measure relate to each other.
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Additional requirements that apply to forecasts and targets
Forecasts and targets in management commentary
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| This Practice Statement does not require management commentary to include forecasts or targets. However, sometimes management might determine that a forecast or target needs to be provided in management commentary, for example, if management judges that including the forecast or target is necessary to enable users to understand the aims of management’s strategy for sustaining and developing the entity’s business model. |
7.14 | If management commentary includes a forecast or target amount for a metric of the entity’s future financial or non-financial performance or position, it shall:
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Previously published forecasts or targets for the reporting period
7.15 | Management commentary shall provide information on how the current‑period amount for a metric of the entity’s financial or non‑financial performance or position compares with a forecast or target amount previously published by the entity if:
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7.16 | In both cases described in paragraph 7.15, management commentary shall:
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Previously published forecasts and targets for periods extending beyond the reporting period
7.17 | An entity might have previously published management’s forecast or target for a metric of the entity’s financial or non-financial performance or position for a period that extends beyond the reporting period. If the actual current-period amount for that metric is included in the current period’s management commentary, the management commentary shall explain how to access the forecast and whether it has been updated since its publication date. |
Chapter 8—Business model
Introduction
8.1 | An entity’s business model is the integrated set of processes by which the entity seeks to create value and generate cash flows, including in the long term. Information about an entity’s business model provides a context for understanding other information in management commentary, and information in other general purpose financial reports, including the related financial statements. |
8.2 | An entity’s business model is a matter of fact. It is observable through the entity’s actions. |
8.3 | An entity could have more than one business model, or various operations within a single business model.
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8.4 | An entity’s business model can evolve as management responds to internal and external factors and trends. Management commentary provides information about the entity’s business model that operated during the reporting period and explains whether, how and why that model has changed since the previous reporting period.
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Disclosure objectives
8.5 | Management commentary shall provide information that enables users to understand how the entity’s business model creates value and generates cash flows.
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8.6 | The information about the entity’s business model shall enable users to understand:
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8.7 | The information provided to meet the headline objective in paragraph 8.5 and the specific objectives in paragraph 8.6 is intended to help users assess:
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Key features of the entity’s business model
8.8 | In providing material information to meet the disclosure objectives in paragraphs 8.5–8.6, management commentary shall focus on key features of the entity’s business model. Key features are features that fundamentally underpin the entity’s ability to create value and generate cash flows. |
8.9 | Features of an entity’s business model that management identifies as key could include:
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Metrics
8.10 | Material information about the entity’s business model is likely to include metrics that management uses to monitor key features of the model and to measure progress in managing those features. Such metrics could include measures relating to:
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Examples of information that might be material
8.11 | Paragraphs 8.12–8.15 provide examples of information about the entity’s business model that might be material, depending on the entity and its circumstances, for each of the specific disclosure objectives in paragraph 8.6. The information described in the examples might not relate to a key matter but nonetheless might be material. |
The range, nature and scale of the entity’s operations
8.12 | Material information about the range, nature and scale of the entity’s operations (see paragraph 8.6(a)) could include:
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The entity’s cycle of creating value and generating cash flows
8.13 | Material information about the entity’s cycle of creating value and generating cash flows (see paragraph 8.6(b)) could include:
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The environmental and social impacts of the entity’s activities
8.14 | Material information about the environmental and social impacts of the entity’s activities that have affected or could affect the entity’s ability to create value and generate cash flows, including in the long term (see paragraph 8.6(c)) could include:
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Progress in managing the entity’s business model
8.15 | Material information about progress in managing the entity’s business model (see paragraph 8.6(d)) could include information about:
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Chapter 9—Strategy
Introduction
9.1 | Users need information not only about an entity’s business model, but also about management’s strategy for sustaining and developing that model in the short, medium and long term. Such a strategy can include:
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9.2 | A strategy might relate to other key matters discussed in management commentary. For example, it might relate to an emerging risk, developments in the entity’s regulatory environment or an opportunity to exploit a new resource. |
9.3 | A strategy is by its nature forward-looking. Nevertheless, information about past progress in implementing the strategy, or information about how the strategy has changed and why, is useful in assessing how likely management is to achieve its aims in the future. |
Disclosure objectives
9.4 | Management commentary shall provide information that enables users to understand management’s strategy for sustaining and developing the entity’s business model.
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9.5 | The information about management’s strategy for sustaining and developing the entity’s business model shall enable users to understand:
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9.6 | The information provided to meet the headline objective in paragraph 9.4 and the specific objectives in paragraph 9.5 is intended to help users assess:
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Key aspects of management’s strategy
9.7 | In providing material information to meet the disclosure objectives in paragraphs 9.4–9.5, management commentary shall focus on key aspects of management’s strategy. Key aspects are aspects that are fundamental to sustaining and developing the entity’s ability to create value and generate cash flows in the future, including in the long term. |
9.8 | Aspects of the strategy that management identifies as key could include those that relate to:
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Metrics
9.9 | Material information about management’s strategy for sustaining and developing the entity’s business model is likely to include metrics that management uses to monitor key aspects of that strategy and to measure progress in implementing the strategy. Such metrics could include measures relating to:
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Examples of information that might be material
9.10 | Paragraphs 9.11–9.16 provide examples of information about management’s strategy that might be material, depending on the entity and its circumstances, for each of the specific disclosure objectives in paragraph 9.5. The information described in the examples might not relate to a key matter but nonetheless might be material. |
The drivers of the strategy, including the opportunities management has chosen to pursue
9.11 | Material information about the drivers of the strategy, including the opportunities management has chosen to pursue (see paragraph 9.5(a)) could include:
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The aims of the strategy
9.12 | Material information about the aims of the strategy (see paragraph 9.5(b)) could include:
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Milestones on the path towards the aims
9.13 | Material information about milestones towards the aims (see paragraph 9.5(c)) could include:
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Plans for reaching the milestones and achieving the aims
9.14 | Material information about the plans for reaching the milestones and achieving the aims (see paragraph 9.5(d)) could include:
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The financial resources required to implement the strategy, and management’s approach to allocating financial resources
9.15 | Material information about the financial resources required to implement the strategy and about management’s approach to allocating financial resources (see paragraph 9.5(e)) could include:
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Progress in implementing the strategy
9.16 | Material information about progress in implementing the strategy (see paragraph 9.5(f)) could include:
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Chapter 10—Resources and relationships
Introduction
10.1 | The operation of an entity’s business model and the implementation of management’s strategy for sustaining and developing that model depend on the entity’s resources and relationships. |
10.2 | Examples of an entity’s resources are:
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10.3 | Resources include, but are not restricted to, those recognised as assets in the entity’s financial statements.
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10.4 | Examples of an entity’s relationships are:
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Disclosure objectives
10.5 | Management commentary shall provide information that enables users to understand the resources and relationships on which the entity’s business model and management’s strategy for sustaining and developing that model depend. |
10.6 | The information about the entity’s resources and relationships shall enable users to understand:
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10.7 | The information provided to meet the headline objective in paragraph 10.5 and the specific objectives in paragraph 10.6 is intended to help users assess:
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Key resources and relationships
10.8 | In providing material information to meet the disclosure objectives in paragraphs 10.5–10.6, management commentary shall focus on the entity’s key resources and relationships. Key resources and relationships are those on which the entity’s ability to create value and generate cash flows fundamentally depends. |
10.9 | Resources or relationships that management identifies as key could include:
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10.10 | A key resource or relationship is not necessarily a single item or a relationship with one other party. It may be a type of resource or relationship, such as a workforce, or a category within a type, such as a group of employees with specialist skills within a workforce. If only a category of a resource or relationship is key, management commentary focuses on that category, not on the whole type. |
Metrics
10.11 | Material information about the entity’s resources and relationships is likely to include metrics that management uses to monitor key resources and relationships and to measure progress in managing them. Such metrics could include measures relating to:
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Examples of information that might be material
10.12 | Paragraphs 10.13–10.16 provide examples of information about the entity's resources and relationships that might be material, depending on the entity and its circumstances, for each of the specific disclosure objectives in paragraph 10.6. The information described in the examples might not relate to a key matter but nonetheless might be material. |
The nature of the entity’s resources and relationships and how the entity deploys them
10.13 | Material information about the nature of the entity’s resources and relationships and how the entity deploys them (see paragraph 10.6(a)) could include:
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How the entity obtains and maintains its resources and relationships
10.14 | Material information about how the entity obtains and maintains its resources and relationships (see paragraph 10.6(b)) could include:
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Factors that could affect the availability or the quality of the resources and relationships in the future, including in the long term
10.15 | Material information about factors that could affect the availability or the quality of resources and relationships in the future, including in the long term (see paragraph 10.6(c)) could include information about:
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Progress in managing the resources and relationships
10.16 | Material information about progress in managing resources and relationships (see paragraph 10.6(d)) could include:
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Chapter 11—Risks
Introduction
11.1 | To gain insight into factors that could affect an entity’s ability to create value and generate cash flows, users need to understand the risks of events or circumstances that could in the short, medium or long term disrupt the entity’s business model, management’s strategy for sustaining and developing that model, or the entity’s resources and relationships.
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11.2 | The sources of such risks could be external—for example, political instability—or internal—for example, the failure of a business process or an unintended consequence of a change in strategy. The source of a risk could be a one-off event, gradually changing circumstances or a group of events or circumstances that would cause disruption if they were all to occur. |
Disclosure objectives
11.3 | Management commentary shall provide information that enables users to understand the risks of events or circumstances that could disrupt:
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11.4 | The information about risks shall enable users to understand:
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11.5 | The information provided to meet the headline objective in paragraph 11.3 and the specific objectives in paragraph 11.4 is intended to help users assess:
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Key risks
11.6 | In providing material information to meet the disclosure objectives in paragraphs 11.3–11.4, management commentary shall focus on the key risks to which the entity is exposed. Key risks are risks of events or circumstances that could fundamentally disrupt the entity’s ability to create value and generate cash flows, including in the long term. |
11.7 | Risks that management identifies as key could include risks of events or circumstances that in the short, medium or long term might:
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11.8 | If a risk has the potential to cause fundamental disruption, that risk could be a key risk even if disruption is unlikely, or even if disruption could occur only in the long term.
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11.9 | Local law or regulation might require management commentary to include information about particular risks regardless of whether those risks are key risks for the entity and regardless of whether information about them is material. Paragraph 5.17 requires any immaterial information included in management commentary to be provided in a way that avoids obscuring material information. To meet this requirement, material information about key risks needs to be made prominent and distinguishable from immaterial information about other risks provided to satisfy local laws or regulations. |
Metrics
11.10 | Material information about risks is likely to include metrics that management uses to monitor key risks and to measure progress in managing them. Such metrics could include measures relating to:
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Examples of information that might be material
11.11 | Paragraphs 11.12–11.16 provide examples of information about risks that might be material, depending on the entity and its circumstances, for each of the specific disclosure objectives in paragraph 11.4. The information described in the examples might not relate to a key matter but nonetheless might be material. |
The nature of the risks to which the entity is exposed
11.12 | Material information about the nature of the risks to which the entity is exposed (see paragraph 11.4(a)) could include descriptions of:
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The entity’s exposure to risks
11.13 | Material information about the entity’s exposure to risks (see paragraph 11.4(b)) could include information about:
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How management monitors and manages risks
11.14 | Material information about how management monitors and manages risks (see paragraph 11.4(c)) could include:
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How management will mitigate disruption if it occurs
11.15 | Material information about how management will mitigate disruption if it occurs (see paragraph 11.4(d)) could include:
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Progress in managing risks
11.16 | Material information about progress in managing risks (see paragraph 11.4(e)) could include:
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Chapter 12—External environment
Introduction
12.1 | An entity’s external environment encompasses:
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12.2 | An entity can be affected by factors in its external environment (for example, the existence of a competitive threat) and by trends in these factors (for example, emerging changes in consumer preferences).
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12.3 | Information about factors and trends in an entity’s external environment provides insights into their effects on the entity’s business model, on management’s strategy for sustaining and developing that model, on the entity’s resources and relationships, and on the risks to which the entity is exposed. |
12.4 | Factors and trends that might affect an entity include those relating to:
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Disclosure objectives
12.5 | Management commentary shall provide information that enables users to understand how the entity’s external environment has affected or could affect:
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12.6 | The information provided about factors and trends in the entity’s external environment shall enable users to understand:
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12.7 | The information provided to meet the headline objective in paragraph 12.5 and the specific objectives in paragraph 12.6 is intended to help users assess:
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Key factors and trends in the entity’s external environment
12.8 | In providing material information to meet the disclosure objectives in paragraphs 12.5–12.6, management commentary shall focus on key factors and trends in the entity’s external environment. Key factors and trends are factors and trends that have had, or could have, a fundamental effect on the entity’s ability to create value and generate cash flows, including in the long term. |
12.9 | Factors or trends management identifies as key could include those that relate to:
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12.10 | In some cases, the effects of one factor or trend might be indistinguishable from the effects of another factor or trend. Information about interrelated factors or trends may be clearer and more concise if those factors or trends and their effects are discussed collectively, rather than in isolation. |
Metrics
12.11 | Material information about factors and trends in the entity’s external environment is likely to include metrics that management uses to monitor key factors and trends and to measure progress in responding to them. Such metrics could include measures of:
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Examples of information that might be material
12.12 | Paragraphs 12.13–12.16 provide examples of information about factors and trends in the entity’s external environment that might be material, depending on the entity and its circumstances, for each of the specific disclosure objectives in paragraph 12.6. The information described in the examples might not relate to a key matter but nonetheless might be material. |
The nature of factors and trends in the entity’s external environment
12.13 | Material information about the nature of factors and trends in the entity’s external environment (see paragraph 12.6(a)) could include:
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How factors and trends in the entity’s external environment have affected or could affect the entity
12.14 | Material information about how factors and trends in the entity’s external environment have affected or could affect the entity (see paragraph 12.6(b)) could include:
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How management monitors and plans to respond to factors and trends in the entity’s external environment
12.15 | Material information about how management monitors and plans to respond to factors and trends in the entity’s external environment (see paragraph 12.6(c)) could include:
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Progress in responding to factors and trends in the entity’s external environment
12.16 | Material information about progress in responding to factors and trends in the entity’s external environment (see paragraph 12.6(d)) could include:
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Chapter 13—Financial performance and financial position
Introduction
13.1 | An entity’s financial performance is reported in its financial statements by:
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13.2 | An entity’s financial position is reported by the assets, liabilities and equity recognised in its statement of financial position and information disclosed in the notes, such as information related to recognised or unrecognised assets and liabilities. |
13.3 | Information in management commentary about an entity’s financial performance and financial position complements information provided in the related financial statements. To explain the entity’s financial performance and financial position reported in those financial statements, management commentary provides more discussion, analysis and forward-looking information than is included in the entity’s financial statements, as well as information about a wider range of matters, including matters that have not led to recognition or disclosure in the financial statements. |
Disclosure objectives
13.4 | Management commentary shall provide information that enables users to better understand the entity’s financial performance and financial position reported in the entity’s financial statements.
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13.5 | The information about the entity’s financial performance and financial position provided in management commentary shall enable users to understand:
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13.6 | The information provided to meet the headline objective in paragraph 13.4 and the specific objectives in paragraph 13.5 is intended to help users assess:
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Key aspects of the entity’s financial performance and financial position
13.7 | In providing material information to meet the disclosure objectives in paragraphs 13.4–13.5, management commentary shall focus on key aspects of the entity’s financial performance and financial position. Key aspects are aspects that are fundamental to understanding the entity’s ability to create value and generate cash flows. |
13.8 | Aspects of an entity’s financial performance and financial position that management identifies as key could include:
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Metrics
13.9 | Material information about an entity’s financial performance and financial position is likely to include metrics management uses to monitor and measure key aspects of that financial performance and financial position. Such metrics could include:
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13.10 | To explain an entity’s financial performance or financial position, management commentary might provide analyses that involve adjusting amounts reported in the entity’s financial statements to exclude the effects of some events or circumstances. For example, a constant currency analysis could present performance comparisons that exclude the effects of currency variations, a pro forma analysis could present ‘like for like’ performance comparisons that exclude the effects of new stores or acquired businesses, or a bridge analysis could identify the components of performance variances between the current and previous reporting periods. Any such analyses provided in management commentary form part of the management commentary and therefore need to possess the attributes required by Chapter 5, be coherent and comply with requirements for metrics specified in Chapter 7. For example, the analyses need to provide a balanced picture of the entity’s financial performance or financial position, precise descriptions of the adjustments made to the amounts reported in the financial statements and all the information necessary for users to understand those adjustments. |
Examples of information that might be material
13.11 | Paragraphs 13.12–13.14 provide examples of information about the entity’s financial performance and financial position that might be material, depending on the entity and its circumstances, for each of the specific disclosure objectives in paragraph 13.5. The information described in the examples might not relate to a key matter but nonetheless might be material. |
What factors have affected the entity’s financial performance or financial position in the reporting period or could affect them in the future, including in the long term
13.12 | Material information about factors that have affected the entity’s financial performance or financial position in the reporting period or could affect them in the future, including in the long term (see paragraph 13.5(a)), could include:
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How management has allocated financial resources in the reporting period
13.13 | Material information about how management has allocated financial resources in the reporting period (see paragraph 13.5(b)) could include:
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How the entity’s financial performance and financial position compare with forecasts or targets previously published by the entity, if any
13.14 | Material information about how the entity’s financial performance and financial position compare with forecasts or targets previously published by the entity, if any (see paragraph 13.5(c)) could include:
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Appendices
Appendix A—Defined terms
| First use in paragraph | ||||||||
|---|---|---|---|---|---|---|---|---|
| create value | 1.11 | Create or preserve value for the entity and hence for its investors and creditors. An entity’s activities create value if they enhance or preserve the present value of the entity’s future cash flows. | ||||||
| forward-looking information | 3.10 | Information relating to possible future transactions, other events or conditions. Forward-looking information includes:
| ||||||
| general purpose financial reports | 1.11 | Reports that provide financial information about a reporting entity that is useful to primary users in making decisions relating to providing resources to the entity. Those decisions involve decisions about:
General purpose financial reports include—but are not restricted to—an entity’s management commentary, general purpose financial statements and sustainability-related financial disclosures. | ||||||
| general purpose financial statements (financial statements) | 1.4 | A particular form of general purpose financial reports that provide information about the entity’s assets, liabilities, equity, income and expenses. | ||||||
| key matters | 1.12 | Matters that are fundamental to an entity’s ability to create value and generate cash flows, including in the long term. | ||||||
| management commentary | 1.3 | A particular form of general purpose financial reports that provide information that:
| ||||||
| materialinformation | 1.6 | In the context of management commentary, information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial reports make on the basis of those reports, which include the management commentary and the related financial statements and which provide financial information about a specific reporting entity. | ||||||
| metric | 1.15 | A measure used to monitor a quantitative or qualitative aspect of an entity’s financial or non-financial performance or position. | ||||||
| primary users of general purpose financial reports (users) | 1.11 | Existing and potential investors, lenders and other creditors. | ||||||
| recognised(when describing assets or liabilities) | 1.16 | Included in the assets and liabilities recorded in an entity’s statement of financial position. Some types of resources and obligations are not recognised as assets or liabilities applying recognition criteria in IFRS Accounting Standards—for example, some internally generated intangible assets. | ||||||
| reporting period | 1.8 | The period covered by financial statements and related management commentary. | ||||||
| sustainability-related financial disclosures | 1.4 | A particular form of general purpose financial reports that provide information about the reporting entity’s sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, its access to finance or cost of capital over the short, medium or long term, including information about the entity’s governance, strategy and risk management in relation to those risks and opportunities, and related metrics and targets. |
Appendix B—Long-term prospects, intangible resources and relationships, and environmental, social and governance matters
Introduction
B1 | Primary users of general purpose financial reports (users) need information about factors, including sustainability-related factors, that have already affected an entity’s financial performance or financial position as well as information about factors that could affect the entity’s ability to create value and generate cash flows in the future, including in the long term. Such factors could include matters relating to the entity’s intangible resources and relationships—including resources not recognised as assets in the entity’s financial statements—and environmental, social and governance matters. |
B2 | To comply with this Practice Statement, management commentary provides information about such factors if that information is material. In the context of management commentary, information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that primary users of general purpose financial reports make on the basis of those reports, which include management commentary and the related financial statements and which provide financial information about a specific reporting entity (see paragraph 4.1). |
B3 | Information might be material if it relates to a key matter. Key matters are those that are fundamental to an entity’s ability to create value and generate cash flows, including in the long term. Management commentary focuses on key matters (see paragraph 4.5). However, information might not relate to a key matter but nonetheless might be material. |
Long-term prospects, intangible resources and relationships, and environmental and social matters
B4 | This appendix provides an overview of requirements and guidance in this Practice Statement that management is likely to need to consider in deciding what information it needs to provide about:
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B5 | Tables B.1–B.3 include summarised descriptions of applicable requirements and guidance with cross-references to further detail. The tables do not introduce new requirements. Accompanying each description is:
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B6 | The examples do not provide illustrative disclosures and management may need to provide other information to meet disclosure objectives in the Practice Statement. |
B7 | Material information in management commentary is likely to include metrics that management uses to monitor key matters and to measure progress in managing those matters. Some examples in the tables refer to a metric that a particular entity’s management has used and that it reports in management commentary if it judges this information to be material in that fact pattern. The fact that a table mentions a metric does not indicate that the metric always applies or needs to be provided in all cases. |
B8 | Tables B.1–B.3 are designed to help management identify matters that might be key and information that might be material. Management determines which information is material in the entity’s circumstances. For example, if one of an entity’s sites has scarce water resources and is threatened with closure, users might need information about the entity’s exposure to water stress. Information about water consumption at that site might be material to users, but information about the entity’s water consumption at other sites might not be material. |
B9 | Tables B.1–B.3 discuss reporting on factors that could affect an entity’s long-term prospects, on intangible resources and relationships and on environmental and social matters separately. |
B10 | Sometimes, more than one table describes requirements or guidance that might lead management to identify the same key matter or the same material information. For example, a relationship with the entity’s specialist employees could be viewed as a factor affecting the entity’s long-term prospects, an intangible relationship or a social matter. Any of these perspectives could lead management to identify this relationship as one of the entity’s key resources and relationships. |
B11 | Conversely, some requirements and guidance appear in more than one table. For example, requirements and guidance in Chapter 10 would apply equally to identifying material information about an intangible relationship and material information about a social matter. Material information identified by applying those requirements or guidance does not need to be provided more than once in a management commentary. |
B12 | Tables B.1–B.3 do not prescribe the order or structure for reporting information. |
Governance matters
B13 | As stated in paragraph 1.24, management commentary provides material information about governance matters as necessary to meet its objective set out in Chapter 3 and the disclosure objectives set out in Chapters 8–13. For example, some insight into governance matters may be drawn from management’s description of its strategy, from information on progress in managing key matters or from information about differences between metrics used for incentive plans and metrics used for monitoring progress in implementing management’s strategy. Users might need such information to assess management’s stewardship of the entity’s resources. However, this Practice Statement does not require comprehensive or detailed reporting on an entity’s governance. Governance is typically regulated by local laws, which may also require entities to provide specified information about governance. |
Other reporting requirements or guidelines
B14 | Narrative reporting requirements or guidelines published by another standard-setting body or other organisations, including requirements or guidelines for use by entities in specific industries or on specific topics, such as sustainability reporting, could help management identify environmental and social matters and information about those matters that might be material. That is more likely to be the case if the requirements or guidelines have a reporting objective that focuses on the information needs of the primary users of general purpose financial reports, such as IFRS Sustainability Disclosure Standards (see paragraph 4.14). |
B15 | Management may also provide in its management commentary additional information that is not material but that an entity needs to disclose to comply with reporting requirements or guidelines other than this Practice Statement. However, if some of that information is not material to users in the context of management commentary, management shall present it in a way that does not obscure material information (see paragraph 5.17). Also, if management provides additional information outside management commentary, but in the same larger report, management shall identify management commentary clearly and distinguish it from other information provided in the same larger report (see paragraph 2.1). |
| Overview of requirements and guidance | Example of a matter that might be key or information that might be material | |||||
|---|---|---|---|---|---|---|
| Chapter 3—Objective of management commentary | ||||||
| B.1.1 An entity’s ability to create value and generate cash flows across all time horizons | Paragraph 3.1(b) requires management commentary to provide management’s insight into factors, including sustainability-related factors, that could affect an entity’s ability to create value and generate cash flows across all time horizons, including in the long term. Paragraphs 3.12–3.15 provide guidance on determining whether information would affect users’ assessments of that ability. | A company has adopted a least-cost approach to manufacturing that may damage its reputation for product quality and reduce demand for its products in the long term. The company’s management commentary reports on progress in implementing the approach, including metrics used to monitor the short-term effects of the approach (for example, cost savings) and its long-term effects (for example, product failure rates). | ||||
| Chapter 4—Material information and key matters | ||||||
| B.1.2 Management’s stewardship of an entity’s resources | Paragraph 4.2(b) states that information in management commentary influences users’ decisions by influencing their assessment of management’s stewardship of an entity’s resources—how efficiently and effectively management has used and protected those resources. | Management of an airline has surrendered a collection of landing rights because of a temporary fall in demand. To help users to assess management’s stewardship of the airline’s resources, its management commentary provides information about the rights surrendered and explains whether and how the airline could reacquire those rights in the future, and how this affects management’s long-term plan for recovering from the fall in demand. | ||||
| B.1.3 Key matters | Paragraph 4.5 states that management commentary is required to focus on key matters—matters that are fundamental to an entity’s ability to create value and generate cash flows, including in the long term. | A manufacturer’s long-term prospects depend on entering a new market. The manufacturer’s management identifies management’s strategy for entering that market as a key aspect of its strategy and provides information about it. Such information might include metrics used by management to monitor progress in implementing that strategy (for example, the manufacturer’s market share). | ||||
| B.1.4 Makingmateriality judgements | Paragraphs 4.15–4.17 and the related notes provide guidance on assessing whether information is material. Making materiality judgements about possible future events with uncertain outcomes involves consideration of the potential effects of those events on the amount and timing of an entity’s future cash flows, including in the long term. | Management of an oil and gas company knows expected trends in environmental legislation could cause the company to curtail its operations significantly. The company’s management commentary provides information about those expected trends in legislation and about management’s response to those trends, even if the curtailment would occur only after, for example, 10 years. | ||||
| Chapter 6—Coherence | ||||||
| B.1.5 Relationships between related matters | If a matter discussed for one area of content in management commentary has implications for matters discussed for other areas of content, paragraph 6.5 requires management commentary to include the information necessary for users to assess thoseimplications. | A vehicle manufacturer derives a competitive advantage from its reputation for product quality and after-sales service. The manufacturer’s management has decided to focus on maintaining and developing the manufacturing activities and to sell its servicing business. In discussing the strategic decision to sell the servicing business, the manufacturer’s management commentary provides information necessary for users to assess the implications of the sale of the servicing business, such as the implications for the manufacturer’s business model, risk profile and customer relationships. | ||||
| Chapter 8—Business model | ||||||
| B.1.6 Description of an entity’s business model | Paragraph 8.1 states that an entity’s business model is the integrated set of processes by which the entity seeks to create value and generate cash flows, including in the long term. | An engineering company’s competitive advantage depends on a high level of staff expertise to support its quality of service. The company’s description of its business model in management commentary includes information about processes designed to maintain staff expertise and quality of service, including in the long term. Information about these processes might include metrics used to monitor them. | ||||
| B.1.7 Environmental and social impacts of an entity’sactivities | If the environmental or social impacts of an entity’s activities have affected or could affect the entity’s ability to create value and generate cash flows, including in the long term, paragraph 8.6(c) requires information in management commentary to enable users to understand those impacts. Paragraphs 8.14–8.15 provide examples, for such impacts and for progress in managing those impacts, of information that might be material. | The environmental impacts of an extractives company could affect its ability to maintain its extraction licences and secure new licences. The company’s management commentary provides information about those impacts, including metrics used by management to monitor the impacts (for example, the volume of waste products produced). | ||||
| B.1.8 Adaptability, resilience and durability of an entity’s business model | Paragraphs 8.7(b)–8.7(c) explain that information in management commentary is intended to help users assess the adaptability, resilience and durability of an entity’s business model. Those features of the business model could underpin the entity’s ability to create value and generate cash flows in the long term. | A packaging company depends on a single patent for a biodegradable material. The patent is due to expire in 10 years’ time. The company’s management commentary explains the extent of the company’s dependence on the patent, including related metrics used by management (for example, revenue from products produced using that material). The management commentary also indicates levels of investment in developing new materials that could help the company diversify its product range. | ||||
| B.1.9 Key features of an entity’s business model and information about those features | Paragraph 8.8 requires management commentary to focus on key features of an entity’s business model—features that fundamentally underpin the entity’s ability to create value and generate cash flows. Paragraph 8.9 provides examples of features of the entity’s business model that could be identified as key. These include features that may create uncertainty about the entity’s ability to create value and generate cash flows in the future, including in the long term. Paragraphs 8.5–8.6 require, for an entity’s business model, information that meets specified disclosure objectives. | A meal kit delivery company could readily lose its customer relationships to increasing competition in the market. The company’s management commentary identifies the company’s reliance on these relationships as a key feature of its business model and provides information about that feature, including information about the company’s progress in retaining the relationships (for example, customer reorder rate) and in developing new relationships. | ||||
| B.1.10 Alignment of an entity’s business model with its stated purpose | Paragraph 8.12(g) provides an example, for the entity’s business model, of information that might be material—an explanation of how the entity’s business model relates to the entity’s stated purpose (which typically indicates what the entity is ultimately seeking to achieve in the long term), if an entity has published a statement of purpose. | A pharmaceutical company has a purpose centred on fighting a specified medical condition. The company’s management commentary explains how the company seeks to achieve its purpose by producing treatments for the condition and by developing more effective treatments in the long term. In describing the company’s business model, its management commentary describes both production and development activities. | ||||
| Chapter 9—Strategy | ||||||
| B.1.11 Drivers of management’s strategy | Paragraph 9.5(a) requires information in management commentary to enable users to understand the drivers of management’s strategy. Those drivers could include an entity’s stated purpose (what the entity is ultimately seeking to achieve in the long term). | A pharmaceutical company has a stated purpose centred on fighting a specified medical condition (see also the example in B.1.10). Driven by this purpose, management’s strategy includes establishing a new research capability. The company’s management commentary explains management’s strategy for establishing a new research capability, states that this part of the strategy is driven by the company’s stated purpose and sets out that stated purpose. | ||||
| B.1.12 The aims of management’s strategy and related milestones and plans | Paragraphs 9.5(b)–9.5(d) require information in management commentary to enable users to understand the aims of management’s strategy (which provide a direction for the entity, including in the long term) and the milestones towards and plans for achieving those aims. Paragraphs 9.12–9.14 provide examples, for aims, milestones and plans, of information that might be material. | A manufacturer has a long-term aim of establishing a leading reputation for product quality. The manufacturer’s management commentary explains this aim and indicates the time frame over which the aim is expected to be achieved. The management commentary also describes management’s milestones on the path towards this aim, including, for example, milestones for executing plans to insource component manufacture to give the manufacturer greater control over product quality. | ||||
| B.1.13 Progress in implementing management’s strategy | Paragraph 9.5(f) requires management commentary to provide information to users to understand progress in implementing management’s strategy, including progress towards achieving the long-term aims. Paragraph 9.16 provides examples, for progress in implementing management’s strategy, of information that might be material. | Continued from the example in B.1.12. The manufacturer’s management commentary reports on progress towards achieving this long-term aim, including metrics used by management to monitor progress (for example, the number of defective products, and the proportion of components manufactured in-house). | ||||
| B.1.14 Key aspects of management’s strategy and information about those aspects | Paragraph 9.7 requires management commentary to focus on key aspects of management’s strategy—aspects that are fundamental to sustaining and developing an entity’s ability to create value and generate cash flows, including in the long term. Paragraphs 9.4–9.5 require, for management’s strategy, information that meets specified disclosure objectives. | A manufacturer is facing competition from companies with emerging technologies. Its management has developed a strategy for managing this competition, including in the long term. The strategy is based on product innovation. The manufacturer’s management identifies this strategy as key and management commentary provides information about the strategy, including related metrics used by management to monitor progress in product innovation (for example, the proportion of revenue generated by new products introduced to the market in the past two years). | ||||
| B.1.15 Financial resources required to implement management’s strategy | Paragraphs 9.15(a)–9.15(b) provide examples, for the financial resources required to implement management’s strategy (including its long-term aims), of information that might be material. | A company’s long-term aim is to refocus its operations on a new market. Management expects a period of reduced profitability before the company reaches its intended market share. This reduced profitability will create a need for additional external financing. The company’s management commentary indicates what level of financial resources is expected to be needed to reach the long‑term aim, for example, to fund loss-making operations while the entity reaches its intended market share. The management commentary also explains how management intends to finance its strategy for reaching its long-term aim, including its plans for obtaining any additional resources necessary for implementing the strategy. Management commentary also explains the terms of covenants in the entity’s existing finance arrangements and the contingency plans for obtaining alternative financing should those covenants be breached. | ||||
| B.1.16 Incentive plans linked to progress in implementing management’s strategy | Paragraph 9.16(d) provides an example, for management’s strategy, of information that might be material—an explanation of how incentive schemes for management or other employees are linked to progress in implementing the strategy (including in the long term). | A retailer is entering a new market and management aims to achieve a 20% share in that market in five years. The retailer’s management incentive scheme is linked to progress in achieving this aim. The retailer’s management commentary reports the metrics used to monitor the market share and explains whether the same metrics are also used to determine management’s incentive payments. | ||||
| Chapter 10—Resources and relationships | ||||||
| B.1.17 Factors that could affect the availability or quality of resources | Paragraph 10.15(a) provides examples, for factors that could affect the availability or quality of an entity’s resources, of information that might be material. Such information might include information about systemic factors in the entity’s wider environment that could affect access to the resource in the long term. | Public concerns over the impact of a mining company’s activities in an ecologically sensitive area have created uncertainty over the renewal of regulatory permits to operate the affected mines. The company’s management commentary provides information about the conditions for renewing the permits and factors that create the uncertainty over their renewal, including metrics used by management to monitor progress in managing those factors. | ||||
| B.1.18 Factors that could affect the availability or quality of relationships | Paragraph 10.15(b) provides examples, for factors that could affect the availability or the quality of an entity’s relationships in the future, including in the long term, of information that might be material. Such information might include information about aspects of the entity’s culture that management considers to be important to the strength of the relationship. | A consultancy firm depends on the reputation it has earned for the integrity of the advice it provides. The consultancy firm’s management commentary provides information on aspects of the firm’s culture that are important to supporting the integrity of its advice across all time horizons and reports the metrics used by management to monitor those aspects. | ||||
| Chapter 11—Risks | ||||||
| B.1.19 Key risks and information about those risks | Paragraph 11.6 requires management commentary to focus on key risks—risks that could fundamentally disrupt an entity’s ability to create value and generate cash flows, including in the long term. Such risks include risks that might fundamentally disrupt the entity’s business model or management’s strategy for sustaining and developing the entity’s business model, including risks that might cause disruption only in the long term (paragraphs 11.7–11.8). Paragraphs 11.3–11.4 require, for risks, information that meets specified disclosure objectives. | A software development company’s business model is threatened by the emergence of alternative solutions that could fundamentally reduce the demand for its products in the long term. Management identifies the emergence of alternative solutions as a key risk. The company’s management commentary provides information about this risk, including information about the company’s exposure to the risk (for example, information about the proportion of the company’s revenue and profit attributable to activities at risk from the alternative solutions) and management’s plans for reducing the risk (for example, by developing new software products). | ||||
| Chapter 12—External environment | ||||||
| B.1.20 Key factors and trends in the external environment and information about those factors and trends | Paragraph 12.8 requires management commentary to focus on key factors and trends in an entity’s external environment—factors and trends that have fundamentally affected or could fundamentally affect an entity’s ability to create value and generate cash flows, including in the long term. Paragraphs 12.5–12.6 require, for factors and trends in the external environment, information that meets specified disclosure objectives. | Changing population demographics could create demand for different types of product offered by a life insurance company. Management identifies these changes in demand as a key trend in the external environment. The company’s management commentary describes the company’s positive and negative exposure to those changes and explains how management is changing the company’s product range and its marketing and distribution methods in response to those changes. | ||||
| Chapter 13—Financial performance and financial position | ||||||
| B.1.21 Factors that could affect financial performance or financial position | Paragraph 13.5(a) requires information in management commentary to enable users to understand what factors have affected an entity’s financial performance or financial position in the reporting period or could affect them in the future, including in the long term. Paragraph 13.12 provides examples, for factors that could affect the entity’s financial performance or financial position, of information that might be material. | A company’s management intends to withdraw from a polluting activity in the long term to maintain its reputation for responsible behaviour. The company’s management commentary discloses management’s intention to withdraw from that activity and provides information on the revenue and expenses that result from the activity and are included in the current‑period financial statements. | ||||
| Overview of requirements and guidance | Example of a matter that might be key or information that might be material | |||||
|---|---|---|---|---|---|---|
| Chapter 6—Coherence | ||||||
| B.2.1 Relationships between related pieces of information | Paragraph 6.7(b) requires an explanation of areas of apparent inconsistency between information provided in management commentary and information provided in the related financial statements, in another general purpose financial report or in the entity’s public communications—for example, in presentations to investors and creditors or in press releases. | In the reporting period, a technology company launched an innovative new product. In a capital markets update, the company provided information on orders for the new product since its launch and initial customer feedback. Due to the production of the new product not reaching its full capacity in the initial stages of the production process, sales of the new product for the reporting period were not commensurate with the volume of orders received. In discussing the potential of the company’s innovation, the company’s management commentary provides information about sales of the new product for the reporting period and explains the apparent inconsistency with the information about the volume of orders. | ||||
| Chapter 8—Business model | ||||||
| B.2.2 Information about an entity’s processes | Paragraph 8.13(c) provides examples, for an entity’s cycle of creating value and generating cash flows, of information that might be material. Such information might include information about processes involved in obtaining, maintaining or enhancing the entity’s resources and relationships, including intangible resources and relationships. | The success of a professional services firm depends on the technical expertise of itsemployees. The firm’s management commentary provides information about the firm’s staff training programmes, including related metrics used by management (for example, levels of investment in those programmes). | ||||
| Chapter 9—Strategy | ||||||
| B.2.3 Key aspects of management’s strategy and information about those aspects | Paragraph 9.7 requires management commentary to focus on key aspects of management’s strategy—aspects that are fundamental to sustaining and developing an entity’s ability to create value and generate cash flows in the future, including in the long term. Paragraph 9.8 provides examples of aspects of an entity’s strategy that could be identified as key. Such aspects could include management’s strategy for preserving or enhancing the entity’s access to resources or relationships (which may include intangible resources or relationships) and for preserving or enhancing the quality of those resources or relationships. Paragraphs 9.4–9.5 require, for management’s strategy, information that meets specified disclosure objectives. | A consumer products company aims to maintain its reputation with customers for ethical behaviour. The company’s management identifies this aspect of its strategy as key and provides information about it in management commentary, including information about progress in maintaining and developing the company’s reputation, supported by related metrics used by management (for example, the results of brand integrity surveys). | ||||
| Chapter 10—Resources and relationships | ||||||
| B.2.4 Key resources andrelationships | Paragraph 10.8 requires management commentary to focus on an entity’s key resources and relationships—resources and relationships on which the entity’s ability to create value and generate cash flows fundamentally depends. Paragraph 10.9 provides examples of resources or relationships that might be identified as key, including examples of intangible resources and relationships such as an exclusive right or unique know-how. Paragraph 10.3 states that resources are not restricted to those recognised as assets in the entity’s financial statements. | A manufacturer can access an important market only because it maintains relationships with particular distributors. The manufacturer’s management identifies the relationships with those distributors as key and provides information about them in management commentary. | ||||
| B.2.5 Information about an entity’s key resources and relationships | Paragraphs 10.5–10.7 require, for resources and relationships (including intangible resources and relationships), information that meets specified disclosure objectives. Paragraphs 10.13–10.16 provide examples, for the entity’s resources and relationships (including intangible resources and relationships), of information that might be material. | Continued from the example in B.2.4. The manufacturer’s management commentary describes important features of the distributor relationships and provides information about the extent of the manufacturer’s dependence on those relationships (for example, information about revenue depending on them). The management commentary also provides information about management’s actions to maintain and develop those relationships and reports on progress in managing them, including metrics used by management to monitor progress. | ||||
| Chapter 11—Risks | ||||||
| B.2.6 Key risks and information about those risks | Paragraph 11.6 requires management commentary to focus on the key risks to which an entity is exposed—risks of events or circumstances that could fundamentally disrupt the entity’s ability to create value and generate cash flows, including in the long term. Paragraph 11.7 provides examples of risks that could be identified as key. Such risks could include risks of events or circumstances that might fundamentally disrupt an intangible or other resource, or fundamentally disrupt a relationship, for example, by damaging the entity’s reputation. Paragraphs 11.3–11.4 require, for risks, information that meets specified disclosure objectives. | A media company’s ability to generate revenues fundamentally depends on its subscriber base. Management identifies risks that could fundamentally disrupt its relationship with subscribers as key risks. The company’s management commentary provides information about these risks, which might include information about possible new entrants to the market and about actions management is taking to manage the risk of subscribers moving to competitors. | ||||
| Chapter 12—External environment | ||||||
| B.2.7 Key factors and trends in the external environment and information about those factors and trends | Paragraph 12.8 requires management commentary to focus on key factors and trends in the entity’s external environment—factors and trends that have fundamentally affected or could fundamentally affect an entity’s ability to create value and generate cash flows, including in the long term. Paragraph 12.9 provides examples of factors and trends in the entity’s external environment that could be identified as key. Such factors and trends could include factors and trends that relate to the entity’s intangible or other resources and relationships. Paragraphs 12.5–12.6 require, for factors and trends in the external environment, information that meets specified disclosure objectives. | The loyalty of a financial services company’s customers is being affected by changing customer preferences. Management identifies these changes in customer preferences as a key factor in the entity’s external environment and provides in management commentary information about those changes, including information about how management is responding to them. | ||||
| Chapter 13—Financial performance and position | ||||||
| B.2.8 Factors that have affected or could affect financial performance or position | Paragraph 13.5(a) requires information in management commentary to enable users to understand what factors have affected the entity’s financial performance or financial position in the reporting period or could affect them in the future, including in the long term. Such factors are likely to include matters discussed for other areas of content, including matters related to intangible resources and relationships. | Management of a subscription-based streaming company is developing a plan to grow a section of its subscriber base. The company’s management commentary explains how the implementation of this plan could affect the company’s financial performance, for example, by describing the section of the subscriber base that management plans to grow, providing metrics about that section and explaining the expected costs of implementing the plan. | ||||
| B.2.9 Expenditure on enhancing resources and relationships | Paragraph 13.13 provides examples, for the allocation of an entity’s financial resources in the reporting period, of information that might be material. Such information might include information about the entity’s expenditure on enhancing the entity’s ability to create value and generate cash flows, for example by investing in research and development. | The long-term prospects of a company providing cybersecurity solutions depend fundamentally on continuing to develop new products. The company’s management commentary provides information about the company’s development of new products, including an analysis of the company’s research and development expenditure. | ||||
| Overview of requirements and guidance | Example of a matter that might be key or information that might be material | |||||
|---|---|---|---|---|---|---|
| Chapter 4—Material information and key matters | ||||||
| B.3.1 Identifying key matters | Paragraphs 4.7–4.8 provide guidance on identifying key matters. Paragraph 4.8 explains that matters raised by an entity’s customers, suppliers, employees or other stakeholders might be key if they are fundamental to the entity’s ability to create value and generate cash flows. | The ethical integrity of a skincare producer’s supply chain is the subject of severe public concern. That concern could lead to a loss of so many customers that it could fundamentally affect the producer’s ability to create value and generate cash flows. The producer’s management identifies supply chain ethical integrity as a key matter and provides information about it in management commentary, including information about progress in managing this matter. | ||||
| Chapter 6—Coherence | ||||||
| B.3.2 Relationships between related pieces of information | Paragraph 6.6 states that some information in management commentary might be understood best in the context of information in another part of the management commentary, or in the context of information in the entity’s financial statements or another general purpose financial report. Paragraph 6.6 requires such information in management commentary to be presented in a way that explains that context and the relationships between the related pieces of information. | A manufacturing company has a strategy to expand into a new market. The environmental regulations in that market are evolving. The company has identified a sustainability-related risk that the company may be unable to comply with the forthcoming changes to the environmental regulations. The company provides information about that risk in accordance with the applicable sustainability-related financial reporting requirements. The company’s management commentary explains how its ability to expand into the new market could be affected by the evolving environmental regulations in that market and refers to related information about the sustainability-related risk provided in accordance with the applicable sustainability-related financial reporting requirements. | ||||
| Chapter 8—Business model | ||||||
| B.3.3 Key features of an entity’s business model | Paragraph 8.8 requires management commentary to focus on key features of the business model—features that fundamentally underpin an entity’s ability to create value and generate cash flows. Key features might include the environmental and social impacts of the entity’s activities if such impacts have affected or could affect the entity’s ability to create value and generate cash flows, including in the long term. | A drink producer’s activities are water-intensive. The entity operates a water-stressed site and is required to meet regulatory conditions to continue operating there. The producer’s management identifies as a key feature of its business model the fact that it operates a water-stressed site and must meet regulatory conditions to continue operating. The producer’s management commentary provides information about that key feature. | ||||
| B.3.4 Information about the environmental and social impacts of an entity’sactivities | Paragraph 8.6(c) requires information in management commentary to enable users to understand the environmental and social impacts of an entity’s activities if those impacts have affected or could affect the entity’s ability to create value and generate cash flows, including in the long term. Paragraph 8.14 provides examples of information that might be material. | Continued from the example in B.3.3. The producer’s management commentary provides information about the revenue generated from the water-stressed site and explains the regulatory conditions the producer is required to meet for the site to continue to operate. | ||||
| B.3.5 Progress in managing environmental and social impacts | Paragraph 8.15(c) provides examples, for progress in managing the entity’s environmental and social impacts, of information that might be material. | Continued from the example in B.3.3. The producer’s management commentary describes management actions intended to reduce water consumption at the water-stressed site and reports on management’s progress in managing the matter, including related metrics used by management (for example, water consumption at the water-stressed site). | ||||
| Chapter 9—Strategy | ||||||
| B.3.6 Key aspects of management’s strategy and information about those aspects | Paragraph 9.7 requires management commentary to focus on key aspects of management’s strategy—aspects that are fundamental to sustaining and developing an entity’s ability to create value and generate cash flows in the future, including in the long term. Paragraph 9.8 provides examples of aspects of strategy that could be identified as key. These aspects could include those that relate to:
Paragraphs 9.4–9.5 require, for management’s strategy, information that meets specified disclosure objectives. | Management of a manufacturing company is implementing a strategy for moving to less environmentally damaging methods of production in response to changing customer or regulatory requirements. The company’s management identifies this strategy as key and its management commentary provides information about this strategy, including metrics used by management to monitor progress in implementing the strategy. | ||||
| Chapter 10—Resources and relationships | ||||||
| B.3.7 Key resources andrelationships | Paragraph 10.8 requires management commentary to focus on key resources and relationships—resources and relationships on which an entity’s ability to create value and generate cash flows fundamentally depends. Paragraph 10.9 provides examples of resources and relationships that could be identified as key. Paragraph 10.2(b) states that an entity’s resources might include rights over unextracted or unharvested natural resources. Paragraph 10.4(b) states that an entity’s relationships might include relationships with governments, regulators, non-governmental organisations or local communities. | The production process of a battery manufacturer depends on a scarce natural resource for which there is no viable alternative. The manufacturer’s management identifies this scarce natural resource as key and provides information about it in management commentary, including information needed to assess the manufacturer’s ability to obtain sufficient quantities of the resource. | ||||
| B.3.8 Information about key resources and relationships | Paragraphs 10.5–10.6 require, for resources and relationships, information that meets specified disclosure objectives. As noted in B.3.7, the resources might include, for example, rights over natural resources and the relationships might include relationships with governments, regulators, non-governmental organisations or local communities. | To maintain its licence to operate, a regulated company is required to meet specified social objectives. The company’s management commentary explains what those social objectives are and why they are fundamental to maintaining its operations. The management commentary also explains how management monitors the company’s success in meeting those objectives and reports metrics used by management to monitor that success. | ||||
| Chapter 11—Risks | ||||||
| B.3.9 Key risks and information about those risks | Paragraph 11.6 requires management commentary to focus on the key risks to which an entity is exposed—risks of events or circumstances that could fundamentally disrupt an entity’s ability to create value and generate cash flows, including in the long term. Paragraph 11.7 provides examples of risks that could be identified as key. These risks could include those that might:
Paragraphs 11.3–11.4 require, for risks, information that meets specified disclosure objectives. | An engineering consultancy specialises in advising on a product that may be affected by environmental regulation. The consultancy’s management identifies the effect of environmental regulation on customer demand as a key risk and provides information about this risk in management commentary, including information about the consultancy’s exposure to the risk (for example, the proportion of services that would be affected). | ||||
| Chapter 12—External environment | ||||||
| B.3.10 Key factors and trends in the external environment | Paragraph 12.8 requires management commentary to focus on key factors and trends in an entity’s external environment—those that have had, or could have, a fundamental effect on an entity’s ability to create value and generate cash flows, including in the long term. Paragraphs 12.9–12.10 provide guidance on identifying key factors and trends. Those factors and trends might include ones relating to the natural environment, society or related regulations (see paragraphs 12.4(c)–12.4(e)). | A car manufacturer expects that possible changes in climate-related regulations would affect it adversely if they are enacted. In response, management has adopted a zero-carbon strategy to reduce the manufacturer’s exposure to those changes, including shifting production to hybrid or fully electric models. The manufacturer’s management identifies possible changes in climate-related regulations as a key factor in the external environment and provides in management commentary information about those changes (for example, about the expected timing and nature of the changes). | ||||
| B.3.11 Information about key factors and trends in the external environment | Paragraphs 12.5–12.6 require, for factors and trends in an entity’s external environment, information that meets specified disclosure objectives. Paragraphs 12.13–12.16 provide examples, for such trends and factors, of information that might be material. As noted in B.3.10, those factors and trends might include ones relating to the environment, society or related regulations. | Continued from example in B.3.10. The manufacturer’s management commentary explains possible changes in climate-related regulations and assumptions management made in developing its response. Management commentary provides information to help users assess potential effects of the possible changes on the company’s prospects (for example, by indicating which of the manufacturer’s products might become uneconomic over the range of potential regulatory outcomes and the proportion of revenue generated by those products). The management commentary describes management’s zero-carbon strategy and its plans to diversify from the products affected. The management commentary also reports progress in implementing that strategy, including related metrics used by management to monitor progress (for example, carbon emissions of the manufacturer’s products and metrics used to monitor the success of newly introduced electric models). | ||||
| Chapter 13—Financial performance and financial position | ||||||
| B.3.12 Key aspects of financial performance and financial position and information about those aspects | Paragraph 13.7 requires management commentary to focus on key aspects of an entity’s financial performance and financial position—aspects that are fundamental to understanding an entity’s ability to create value and generate cash flows, including in the long term. Paragraph 13.8 provides examples of aspects of financial performance and financial position that could be identified as key. Key aspects could include aspects of financial performance and financial position related to environmental or social matters if understanding those aspects is fundamental to understanding an entity’s ability to create value or generate cash flows. Paragraphs 13.4–13.5 require, for an entity’s financial performance and financial position, information that meets specified disclosure objectives. | A company has been fined for failing to comply with environmental regulations. The fine has affected the company’s financial performance for the reporting period. The financial statements disclose the amount of the fine and the reasons for it. The company will have to change its business model to comply with the regulations in the future. The company’s management identifies the fine as a key aspect of the company’s financial performance for the reporting period and the management commentary discusses both the fine and how management expects the necessary changes to the business model will affect the entity’s future revenue and expenses. | ||||
| B.3.13 Factors that have affected or could affect financial performance or financial position | Paragraph 13.4(a) requires management commentary to provide information to enable users to understand what factors have affected or could affect an entity’s financial performance or financial position. It explains that such factors are likely to relate to key matters discussed in other areas of content in management commentary. As illustrated in B.3.3–B.3.11, such matters include environmental and social matters. Paragraph 13.12 provides examples, for factors that have affected or could affect an entity’s financial performance or financial position, of information that might be material. | A company operates a site that might have to be closed because it is environmentally damaging. The company’s management commentary describes the revenue and profit generated by the site that would be at risk if the site were to close as well as the expected costs of closing the site. | ||||