Management Commentary

Management’s commentary [also known as management’s report, operating and financial review, and Management’s Discussion and Analysis (MD&A)] is one of the most useful sections of the annual report. In this section, management discusses a variety of issues. IFRS guidance recommends that management commentary address the nature of the business, management’s objectives, the company’s past performance, the performance measures used, and the company’s key relationships, resources, and risks. Analysts must be aware that some parts of
management’s commentary may be unaudited.

For publicly held firms in the United States, the SEC requires that MD&A discuss trends and identify significant events and uncertainties that affect the firm’s liquidity, capital resources, and results of operations. MD&A must also discuss:

• Effects of inflation and changing prices if material.
• Impact of off-balance-sheet obligations and contractual obligations such as purchase commitments.
• Accounting policies that require significant judgment by management.
• Forward-looking expenditures and divestitures.