IASB Discussion Paper on Management Commentary

Specific questions for comment posed in the International Accounting Standards Board's (IASB's) Discussion Paper (DP) entitled, "Management Commentary," published Oct. 10, 2005, with comments due April 28, 2006, are as follows:

Requirements for management commentary (MC)
The project team concluded that an entity's financial report should be viewed as a package comprising the primary financial statements, accompanying notes and MC (section 1). They also concluded that the quality of MC was likely to be enhanced if the Board issued requirements relating to MC (section 6).

Question 1: Do you agree that MC should be considered an integral part of financial reports? If not, why not?

Question 2: Should the development of requirements for MC be a priority for the board? If not, why not? If yes, should the IASB develop a standard or non-mandatory guidance or both?

Question 3: Should entities be required to include MC in their financial reports in order to assert compliance with IFRSs? Please explain why or why not

Purpose of MC

The project team concluded that the objective of MC has three elements (section 2). The project team also concluded that the primary focus of MC is to meet the information requirements of investors.

Question 4: Do you agree with the objective suggested by the project team or, if not, how should it be changed? Is the focus on the needs of investors appropriate?

Principles, qualitative characteristics and content of MC
The project team concluded that it is not appropriate to specify the precise information that must be disclosed within MC, or how it is presented. Rather, it believes that any requirements for MC should set out the principles and qualitative characteristics, as well as the essential areas of MC, necessary to make the information useful to investors. It is up to management to determine what information is necessary to meet these requirements, and to determine how the information is presented. The project team has also suggested that it is appropriate to consider ways to limit the amount of information management discloses, as a way of ensuring that only relevant information is presented to investors (see sections 3 and 4).

Question 5: Do you agree with the principles and qualitative characteristics that the project team concluded are essential to apply in the preparation of MC? If not, what additional principles or characteristics are required, or which ones suggested by the project team would you change?

Question 6: Do you agree with the essential content elements that the project team concluded that MC should cover? If not, what additional areas would you recommend or which ones suggested by the project team would you change?

Question 7: Do you think it is appropriate to provide guidance or requirements to limit the amount of information disclosed within MC, or at least ensure that the most important information is highlighted? If not, why not? If yes, how would you suggest this is best achieved?

Question 8: Does your jurisdiction already have requirements for some entities to provide MC? If yes, are your local requirements consistent with the model the project team has set out? If they are not consistent, what are the major areas of conflict or difference? If you believe that any of these differences should be included in an IASB model for MC please explain why.

Placement criteria
The project team concluded that it would be helpful to establish criteria to guide the Board in determining whether information it requires entities to disclose within financial reports should be placed in MC, or in the general purpose financial statements. The project team have suggested placement criteria (section 5).

Question 9: Are the placement criteria suggested by the project team helpful and, if applied, are they likely to lead to more consistent and appropriate placement of information within financial reports? If not, what is a more appropriate model?