Management commentary is an opportunity for management to outline how an entity’s financial position, financial performance and cash flows relate to management’s objectives and its strategies for achieving those objectives. The information contained in management commentary is therefore of keen interest to investors and other users of financial statements. However, while management commentary-type reporting is mandatory in many jurisdictions, some do not have guidance for this type of narrative report.  Many preparers and users therefore indicated a need for the IASB to provide such guidance.

The proposals draw upon international best practice in the preparation and presentation of management commentary.  The IASB believes that providing non-mandatory guidance will improve the consistency and the comparability of management commentary across jurisdictions.

Introducing the exposure draft containing the proposals, Sir David Tweedie, Chairman of the IASB, said:

Management commentary is one of the most useful sections of an annual report, yet many countries applying IFRSs do not have guidelines that cover how to prepare or present this important information.  In today’s uncertain financial climate it is particularly important for entities to explain their financial performance relative to their expectations and their strategies.

The exposure draft Management Commentary is open for comment until March 1,  2010.  It can be accessed on the ‘Open for Comment’ section on www.iasb.org.  Respondents’ comments will help the IASB in the development of final guidance on management commentary.