Management's Discussion and Analysis

Seeing the company through management's eyes

The Management's Discussion and Analysis (MD&A) presents challenges for audit committees and their auditors because it is broader in scope than traditional financial statements. It focuses on the business, includes non-financial performance metrics and contains prospective information. In addition, there is only a minimum of guidance for the MD&A's preparation.

The purpose of the MD&A, as stated by the Canadian Securities Administrators, is:

... to give a reader the ability to look at the issuer through the eyes of management by providing both a historical and prospective analysis of the business of the issuer.

The MD&A must be fact-based. Its purpose is to provide readers with management's view as to what is critical to an understanding of the company's historical performance and its future prospects. The MD&A is management's opportunity to discuss the company's financial performance and critical non-financial performance indicators and to integrate the two. In so doing, the MD&A complements the financial statements, but is also broader than them.

The MD&A report is a powerful vehicle to communicate to shareholders a meaningful assessment of a company's performance, liquidity and future prospects.