The International Accounting Standards Board (IASB) has unanimously decided to move forward with the revision of IFRS Practice Statement 1 Management Commentary, making targeted refinements to its proposals set out in the Exposure Draft Management Commentary.

IFRS Standards do not require companies to prepare a management commentary, although many securities regulators require a similar report. The IASB found through its outreach that the revised Practice Statement would be helpful for regulators looking to update and improve national requirements, as well as for jurisdictions that do not have their own requirements or guidance in this area.

The initial decision to update the Practice Statement follows demand for better information about factors that have affected or could affect a company’s ability to create value and generate cash flows.

The project codifies innovations in reporting, including concepts from the IFRS Foundation’s Integrated Reporting Framework. It provides standard-like requirements for management commentary, designed to support investor-focused best practice.

In response to calls for collaboration between the IASB and the International Sustainability Standards Board (ISSB), the IASB had put the project on hold while the ISSB worked on and finalised its first two IFRS Sustainability Disclosure Standards and completed the consultation on its agenda priorities. Recent board discussions centred around three alternatives for the project: retire, keep on hold, or finalise.

IASB considers the move to finalise as paving the way for more integrated financial and non-financial reporting in the future. It will collaborate with the ISSB and consult with the Integrated Reporting and Connectivity Council as part of finalising the updated guidance.

The IASB expects to issue the revised Practice Statement in the first half of 2025.

Laura Woods, ICAEW’s Technical Manager, Corporate Reporting, says: “The IASB’s decision to finalise the Management Commentary project is an interesting development and clearly not a straightforward one. The project began a number of years ago and a huge amount has happened over that time period, in particular a significant expansion to the IFRS Foundation’s size and remit, but also the new and evolving demands and expectations from wider stakeholders. Finalising a project like this in the face of so much change is clearly a challenge, but hopefully worthwhile’.