Europe has a long tradition of requiring adequate management commentary information. CESR agrees with EFRAG and IASB that if resources are to be expanded, then the provisions of management commentaries should not be prescribed by an IFRS, but rather by non-authoritative guidance.
The Committee of European Securities Regulators (CESR), through its standing committee on financial reporting (CESR-Fin), has considered EFRAG’s draft comment letter on the IASB’s Exposure Draft (ED) Management Commentary.
Seeing management commentary as an integral part of financial reports, CESR fully supports requiring enhanced management commentary information. It believes that information contained in the management commentary is firmly connected to financial statements as it provides users of financial reports with key information on the way management looks at the financial statements. Furthermore, we believe that management commentary should be as comparable and coherent between entities as possible.
As EFRAG mentions in its draft response to the IASB, Europe has a long tradition of requiring adequate management commentary information. Principles for preparing management commentary are laid out in the Fourth and Seventh Company Law Directives and are supplemented by national requirements. Consequently, although we can see benefit in developing guidance for other jurisdictions, where guidance either does not exist or could be enhanced, CESR believes that the IASB could be using its resources better to address more urgent issues.
This said, CESR agrees with EFRAG and the IASB that if resources are to be so expanded, then the provisions of management commentaries should not be prescribed by an IFRS but rather by non-authoritative guidance. Therefore, as indicated in our response to question 1, the wording regarding the non mandatory nature of the guidance should be crystal clear.
© CESR - Committee of European Securities Regulators
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