THE OBJECTIVES AND CONTENTS OF A MANAGEMENT COMMENTARY

The International Accounting Standards Boards (IASB) believes that the objective of a Management Commentary has three elements, i.e. to provide information to help investors:

 
 
 

• to interpret and assess the financial statements in the context of the environment in which the entity operates;
• to assess what management views as the most important issues facing the entity and how it intends to manage those issues; and
• to assess the strategies adopted by the entity and the potential success of those strategies.

The IASB also believes that a quality Management Commentary should:

• supplement and complement financial statements information;
• provide an analysis of the entity through the eyes of management ; and
• have an orientation to the future.

A Management Commentary should posses the attributes that make the information useful to investors, namely understandability, relevance, supportability, reliability, balance and comparability over time.

In the Management Commentary, an entity should disclose information on: 

• the nature of its business;
• its objectives and strategies;
• its key resources, risks and relationships;
• its results and prospects; and
• its performance measures and indicators.

The Management Commentary should give users of the financial statements a valuable insight into management's view of the main trends and factors underlying the current and future development, performance and position of the entity's business.