Narrative reporting to generate more meaningful disclosure
The International Accounting Standards Board (IASB) published an IFRS Practice Statement on Management Commentary on 8 December.
Although not compulsory, the statement permits entities to adapt the information provided to particular circumstances of their business, including the legal and economic circumstances of individual jurisdictions.
This approach is expected to generate more meaningful disclosure about the most important resources, risks and relationships that can affect an entity’s value, and how they are managed.
wording within the document confirms that the IASB has thrown its weight behind the integrated reporting movement led by Prince Charles to introduce social and environmental matters into annual reports.
The new narrative reporting proposals will not be mandatory for unlisted companies and there is unlikely to be a widespread take up among SMEs. However, there is expected to be some requirement - particularly for the larger companies - when the Operating and Financial Review (OFR) is extended to mid-size companies.