The International Accounting Standards Board (IASB) is to “consider a path forward […] at a future meeting” on its management commentary project following a discussion during the board’s 28 April meeting.
Respondents to a recent exposure draft on the project had urged the board to consider the potential overlap with the work of the International Sustainability Standards Board (ISSB) on non-financial reporting.
IASB chair Andreas Barckow said: “I completely agree […] that we probably need to step back and establish what the objective of this project is because of all the other things that are happening inside our broader organisation.”
He added that the IFRS Foundation’s recent merger with the Value Reporting Foundation (VRF) raised the question of how the proposed management commentary would sit alongside the Integrated Reporting Framework.
The VRF was itself the product of a merger between the Sustainability Accounting Standards Board and the International Integrated Reporting Council.
Barckow added: “Should there be only one document? Should there be two documents? For instance, an IR framework and an IR report and a management commentary and things like that. And that’s necessary, I think, so that we actually structure the project going forward.”
The IFRS management commentary started life in 2005 when the board issued a discussion paper on the topic, which eventually led to an exposure draft in 2008. The board finalised the project in December 2010 with the release of the IFRS Practice Statement Management Commentary.
The purpose of the project was to arrive at a model for narrative reporting to sit alongside a company’s financial statements and explore issues such as the state of the business and material changes in line items.
A staff paper prepared for the board in March 2017 considered the overlap between the management commentary and the Integrated Reporting framework.
Following consultation with stakeholders on the wider issue of corporate reporting, the board issued an exposure draft on the latest version of its management commentary practice statement in May 2021.
The statement sets out to bring together sufficient information to enable investors to assess a company’s long-term prospects.
It focuses on key areas such as business model, strategy, resources and relationships, risks, external environment, and financial position and performance.
This information should draw on metrics and other information used by management to monitor the company’s performance and progress.
Application of the management commentary practice statement is non-mandatory as a condition of applying IFRS.
Among the stakeholders urging the board to rethink its approach to the project was corporate governance and stewardship specialist Eumedion.
In an 18 November 2021 comment letter the organisation wrote: “We see a stronger interconnectedness between management commentary and other topics that the ISSB will be setting standards on. Much stronger than between management commentary and the standards set by the IASB.
“However, there obviously is a clear interconnectedness between management commentary and the financial statements. A close cooperation between the two Boards on this topic is most likely to best address this.”
The ISSB is currently consulting on its first two exposure drafts of sustainability reporting standards.