28/07/2021 - EFRAG is consulting on its Draft Comment Letter in response to the IFRS Practice Statement Exposure Draft ED/2021/6 Management Commentary

​The ED sets out proposals to revise the Practice Statement issued in 2010 and aims at comprehensive requirements that focus on information that investors and creditors need and guidance to help management identify that information and present it clearly. 

Although the Practice Statement is not mandated in the EU (and entities are not required to comply with a Practice Statement to comply with IFRS Standards), EFRAG welcomes the IASB’s consultation and sees benefit in developing guidance for jurisdictions where guidance either does not exist or could be enhanced. Initiatives such as the revised Practice Statement can also contribute to a cross-fertilisation of ideas to improve information in management commentary across jurisdictions. 

​Overall, EFRAG supports the proposed objective-based approach including the six content elements and considers that developing specific, rule-based requirements for the management commentary is primarily the responsibility of legislators, security regulators and/or national standard-setters.  However, EFRAG suggests to address the subject of 'Governance' across the six proposed content elements, to give more emphasis​ to the discussion on 'Opportunities' and to consider an additional content element on 'Off-balance sheet commitments'.​ EFRAG suggests that the discussions on Intangibles and ESG matters could be expanded and given more emphasis in the main text and additional illustrative examples are suggested .​

EFRAG also assesses that the proposals in the ED introduce additional complexity by proposing three different types of objectives for the six content elements. EFRAG considers that the IASB should consider the outcome of its ongoing consultation on the ED Disclosure Requirements in IFRS Standards—A Pilot Approach, to assess whether a similar two-tier objective-based approach could be applied to the revised Practice Statement. ​Finally, EFRAG suggests that the IASB better defines some of the terms and concepts used across the ED.