Management's Discussion and Analysis
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.
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
- MD&A Guidance on Preparation and Disclosure (CICA, PDF)
- MD&A Disclosures in Volatile and Uncertain Times (CICA)
- MD&A Disclosures In Volatile and Uncertain Times — Volume 2 (AcSB)
- National Instrument 51-102, Continuous Disclosure Obligations
- OSC Rule 51-501, AIF and MD&A
- MD&A Interpretive Release (SEC)
- Disclosure in MD&A About Off-Balance Sheet Arrangements, Contractual Obligations and Contingent Liabilities and Commitments (SEC)
- SEC Statement about Management's Discussion and Analysis of Financial Condition and Results of Operations (SEC)
- SEC Cautionary Advice Regarding Disclosure About Critical Accounting Policies (SEC)
- Balanced and Reasonable: A discussion paper on the provision of positive assurance on management commentary (Institute of Chartered Accountants of Scotland, 35-page PDF file)
- Fair Value Discussions in the MD&A (CICA, 2013/01, 24-page PDF file)
- MD&A Disclosure About The Financial Impact of Climate Change and Other Environmental Issues (CICA, PDF)
- 20 Questions Directors Should Ask about MD&A (CICA)
- OSC Staff Notice 51-713, Report on Staff's Review of MD&A (OSC)