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 for communicating to shareholders a meaningful assessment of a company's performance, liquidity and future prospects.

Consideration points

Reporting the following items may require significant management’s estimates and judgments. Directors should discuss with management its selection of assumptions to ensure that management has considered a variety of scenarios to reach a balanced approach:

  • Strategy and Growth
  • Risks and Opportunities
  • Results and Outlook
  • Investment and Financing

Do you believe the current environment of highly technical and complex standards impedes meaningful disclosures?

  • Yes

  • No

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