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10 March 2010

EFRAG's comment letter on IASB ED 'Management Commentary' recommending postponement


EFRAG supports the IASB‘s decision to develop high-level, principle-based, non-mandatory guidance on MC, although the project should not be developed at the moment given other more important IASB‘s priorities.

This letter is submitted in EFRAG‘s capacity of contributing to the IASB‘s due process and does not necessarily indicate the conclusions that would have been reached in its capacity of advising the European Commission on endorsement, were the ED to result in material falling within the scope of the EU‘s IAS Regulation.
The ED describes at a high-level and in a principles-based way a framework for the preparation and presentation of Management Commentary (MC‘) and the content of a decision-useful MC. The proposal is that this material will represent non-mandatory guidance on MC.
 
EFRAGs detailed comments on the ED are set out in the appendices. (Appendix 1 contains our responses to the questions asked in the ED, whilst appendix 2 contains some additional observations related to the objective, users and qualitative characteristics of MC and on placement principles.)
 
To summarise EFRAG comments:
 
·         EFRAG supports the IASB‘s decision to develop high-level, principle-based, non-mandatory guidance on MC, although the project should not be developed at the moment given the IASB‘s other priorities;
 
·         EFRAG broadly supports the detailed proposals, except that:
 
·         EFRAG has some concerns about the desirable qualitative characteristics it is proposed that MC should have;
 
·         EFRAG does not support the IASB‘s decision to defer the development of placement principles until Phase E of the Conceptual Framework project. EFRAG thinks that some sort of placement principles is necessary to increase financial reporting effectiveness where MC is prepared.
 
·         EFRAG thinks it should be clarified that financial statements prepared in accordance with IFRS that are accompanied by management commentary.
 
 


© EFRAG - European Financial Reporting Advisory Group

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