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In response to investors and creditors’ changing information needs and to developments in the narrative reporting landscape, the Board has developed proposals for a comprehensive new framework that would enable companies to bring together in management commentary the information investors and creditors need to assess a company’s long-term prospects. Such information would include information about the company’s intangible resources and relationships and about sustainability matters affecting the company. That framework would replace IFRS Practice Statement 1 Management Commentary.

The Board is proposing an objectives-based approach centred on disclosure objectives for the six areas of content in management commentary: the company’s business model; management’s strategy; resources and relationships; risks; external environment; and financial performance and financial position. The approach is designed to provide both:

  1. sufficient flexibility for a company to be able to tell its unique story, focusing on what is important to the company’s long-term prospects; and
  2. an effective basis for regulators to enforce the revised Practice Statement and for auditors to assess compliance with it.

The Board has designed its proposals so that companies could apply local laws or regulations, or requirements or guidelines issued by other organisations for specific industries, or on specific topics such as sustainability reporting, to help them identify material information for inclusion in management commentary.  Such requirements could include standards set by a future International Sustainability Standards Board, the creation of which is being considered by the IFRS Foundation Trustees. Companies would also be permitted to include immaterial information required by those laws, regulations, requirements or guidelines as long as it does not obscure material information.

It would be for local lawmakers and regulators to decide whether to require companies within their jurisdiction to prepare management commentary that complies with the framework. Companies may choose to comply, even if they are not required to do so.

Financial statements can comply with IFRS Standards even if they are not accompanied by management commentary, or if the accompanying management commentary does not comply with the Practice Statement. The Board does not propose any changes to those conditions.

Access the Exposure Draft below. The comment letter period was open until 23 November 2021.