Management commentary, typically referred to as Management Discussion and Analysis (MD&A) forms part of a company’s annual report and provides relevant insights into a company’s growth and long-term prospects including discussion around its financial performance with respect to operational performance and adequacy of a company’s internal control system. The information enables a company’s stakeholders in particular investors to make informed decision making. However, there have been growing concerns regarding the ‘information gap’ between the information provided in management commentaries and the information which investors need. To address these concerns, the International Accounting Standards Board (IASB) has proposed a major overhaul to the existing IFRS Practice Statement 1, Management Commentary. With the proposed statement, IASB aims to introduce a new comprehensive framework that would bring together in one place the information that investors would need to assess a company’s long-term prospects including information about sustainability matters, intangible resources and key relationships. In this edition of Accounting and Auditing Update (AAU), we aim to provide an overview of the proposals regarding management commentary by IASB.
Environmental, Social and Governance (ESG) related disclosures is gaining significant momentum across various forums. While IASB has proposed to include specific reporting on ESG matters in management commentary, on the other hand, the Financial Accounting Standards Board (FASB) has issued an educational material to provide an overview of the intersection of ESG matters with financial accounting standards. It also provides examples of how an entity may consider direct and indirect effects of material environmental matters when applying current GAAP. Our article on the topic summarises the guidance provided by FASB vis-à-vis consideration of relevant ESG matters in financial reporting by entities.
The Ministry of Corporate Affairs (MCA) has issued a slew of amendments to the Indian Accounting Standards (Ind AS) effective for companies from 1 April 2021. The amendments mainly address the financial reporting issues pursuant to benchmark interest rate reform – phase 2 in line with the amendments in IFRS issued by IASB in August 2020. MCA has also notified accounting standards for companies (other than companies to which Ind AS are applicable) including Small and Medium sized Companies (SMCs) under the relevant provisions of the Companies Act, 2013. In view of COVID-19, various relaxations have been given to companies, including conduct of board meeting for approval of the annual financial statements, board’s report, prospectus, etc. through video-conferencing or other-audio visual means. Our regulatory updates section covers these and other relevant financial reporting developments in India and internationally.