In June 2025, the IFRS Foundation held its annual conference, talking about some of its key priorities and developments across the year. During this conference, the International Accounting Standards Board (IASB) announced that it had issued its revised Practice Statement 1 Management Commentary.
Management commentary can go under many names across different jurisdictions, such as the strategic report or financial review. This can be a good place for users to get an understanding of the areas that management has deemed to be key.
The IASB intends the revised Practice Statement to provide information that meets investors’ needs
While this can be a good source of information, stakeholders have fed back limitations to the IASB, including it being generic, difficult to reconcile to the financial statements, incomplete and difficult to compare to other entities or periods.
The specific contents of what is required in management commentary will depend on the jurisdiction of the entity, rather than being covered by IFRS Accounting Standards or IFRS Sustainability Disclosure Standards.
The IASB released its first Practice Statement in relation to management commentary in 2010. Rather than being a standard, the aim was for the Practice Statement to be used as a basis for firms that are required to produce information by regulators, or those who voluntarily choose to provide such information.
On 23 June 2025, the IASB revised this Practice Statement to reflect the changes in the business environment that have taken place since 2010. The aims remain the same, and the IASB intends the revised Practice Statement to be:
- a global benchmark for regulators to use in updating or developing national requirements and guidance on management commentary
- a comprehensive resource for companies in providing information that meets investors’ needs.
Six key areas
The Practice Statement specifies six areas of interrelated content to be covered in a management commentary. While these headings are not prescribed, the Practice Statement does state that these areas should be covered by management commentary. They are:
- The entity’s business model – how the entity creates value and generates cashflows.
- Strategy – the entity’s strategy for sustaining and developing the entity’s business model.
- Resources and relationships – the resources and relationships that the entity relies on for the business model and strategy (including assets not recognised in the financial statements).
- Risks – the risk of events that could disrupt the business model or strategy, resources or relationships.
- External environment – how the external environment has affected, or could affect, items 1 to 4.
- Financial performance and financial position – information on the performance and position included within the financial statements.
Understanding and insight
The IASB has stated that the aim of management commentary is to provide information that:
- enhances investors’ understanding of the company’s financial performance and financial position reported in its financial statements
- provides management’s insight into factors, including sustainability-related factors, that could affect the company’s ability to create value and generate cashflows across all time horizons, including in the long term.
As investors often comment that they need more company-specific information, the Practice Statement is not listing a prescribed ‘checklist’ of information to include. Instead, it takes what the IASB refers to as ‘an objectives-based approach’, which aims to give companies flexibility to tell their story while allowing regulators to assess compliance with the revised Practice Statement.
Management commentary could connect information in the financial statements and sustainability-related disclosures
This objectives-based approach looks at two types of objective: headline disclosure objectives and specific disclosure objectives. These objectives are applicable across the six areas of content outlined above. Headline disclosure objectives establish the overall information needs, whereas specific disclosure objectives cover the more detailed needs of investors.
The disclosure objectives for each area of content are accompanied by descriptions of the assessments investors make using the information provided for that area of content, together with examples of key matters, metrics and information that might be material.
Other items
Like the principles within IFRS Accounting Standards, only material information is required. In the context of management commentary, information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that investors make based on general-purpose financial reports.
Material information will likely relate to an entity’s ability to create value
Information judged material for management commentary may differ from information judged material for financial statements because management commentary and financial statements have different objectives and provide different types of information about an entity in accordance with their respective reporting requirements.
Much of the material information needed to meet the overall objective of management commentary and the disclosure objectives for the areas of content will likely relate to key matters – that is, matters fundamental to an entity’s ability to create value and generate cashflows, including in the long term. However, not all information that is material relates to a key matter. Material information is included in management commentary even if it does not relate to a key matter.
Coherent summary
While management commentary sits separately from the requirements of IFRS Accounting Standards and IFRS Sustainability Disclosure Standards, it is hoped that this brings all these elements together in a coherent summary.
Because management commentary provides information that complements information in the financial statements, a well-designed management commentary incorporating sustainability-related financial disclosures could also effectively connect information in the entity’s financial statements and in its sustainability-related financial disclosures.
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