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IFRS Practice Statement 1 Management Commentary (2021 Revision)

Description

​In November 2017, the IASB added a project to its agenda to revise and update the IFRS Practice Statement Management Commentary issued in 2010.

The IASB's research indicated that the existing Practice Statement (issued in 2010) did not always provide investors and creditors with the information they need and that it lacked focus on matters that are important for the entity's long-term prospects; contained too much generic information and not enough entity-specific information.

The IASB's main aim in revising the Practice Statement is to develop comprehensive  principles-based requirements that focus on information that investors and creditors need and guidance to help management identify that information and present it clearly.​ In March 2018, the IASB announced the creation of a Management Commentary Consultative Group (MCCG)  to advise the IASB as it developed proposals for updating the Practice Statement. EFRAG was pointed as observer to the MCCG ​ which met  four times.

The IASB published an exposure draft 'Management Commentary' (the 'ED) on 27 May 2021 with a comment period ending on 23 November 2021. . EFRAG published its draft comment letter on 28 July 2021 with a comment period ending on 15 November 2021. The draft comment letter can be found here​

EFRAG TEG discussed the project at its January, April, July and November 2021 meetings. Discussions were also held at joint CFSS-TEG meetings (November 2021) to consider the feedback received to its consultation. Several of EFRAG's working groups,  or panels were also  consulted including the Insurance Accounting Working Group, the Financial Instruments Working Group, the Advisory Panel on Intangibles, the  Academic Panel and the Task Force on Non-financial Risks and Opportunities and the linkage to the Business Model.

Current status 

After considering the feedback received from its public consultation and other outreach activities, EFRAG published its Final Comment Letter on 3 December 2021. In the letter, EFRAG welcomed the objective to improve the information reported in management commentary but pointed out that the role of the management commentary practice statement in fostering connectivity of financial reporting and sustainability information could be enhanced if the IASB and ISSB manage the project jointly. Overall, EFRAG:

  • Supported an objective-based approach including the proposed content elements but suggested to explicitly address the subject of governance and give equal emphasis to the discussion of opportunities and risks
  • Considered that the proposals introduce additional complexity by proposing a different approach to develop objectives-based disclosure than the one proposed in the ED Disclosure Requirements in IFRS Standards—A Pilot Approach,
  • Considered that the statement of full compliance with the Practice Statement should be encouraged but not mandated and that a statement of partial compliance should not be allowed.

EFRAG also  made a number of other detailed recommendations to improve the guidance.

Next steps

As the Practice Statement is not mandated in the EU,  EFRAG does not plan further activities but will continue monitoring developments in the project as necessary. 



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