CIMA calls for a management commentary standard

29 April 2006

CIMA (The Chartered Institute of Management Accountants) is calling for the International Accounting Standards Board (IASB) to develop a Management Commentary standard, which must be voluntary in the short-term.

Commenting on the recent IASB discussion paper, CIMA has concluded that an IASB standard is necessary to achieve significant improvements in reporting and disclosure. CIMA is a strong advocate of the statutory Operating and Financial Review (OFR) and considered the decision to abolish the statutory requirement for an OFR in the UK to be a retrograde step. CIMA was glad to note the similarities between the ASB statement on best practice for the OFR, and the IASB's draft Management Commentary standard included in this discussion paper. To cope with the challenges posed by different jurisdictional issues, it's vital that any Management Commentary standard retains the high-level and principles-based approach of draft standard presented in this discussion paper.

CIMA's Chief Executive Charles Tilley recognises the significant jurisdictional problems which will have to be resolved before any standard can become mandatory:

'The IASB is the right body to develop a Management Commentary standard to encourage improvements in reporting and disclosure from all entities which have committed to IFRS compliance. However, we face several years of uncertain progress to that goal, because different jurisdictions which currently require IFRSs may have the option of whether to apply a MC standard. For example, if the EU decides to adopt a future MC standard, it may allow or direct member states to choose whether to follow it. And of course, audit, enforcement and liability issues are all dependent on whether adoption is mandatory or voluntary in any jurisdiction.'

CIMA believes that investor decision-making can be significantly aided if industry sectors develop and evolve guidance for commonly accepted key performance indicators (KPIs), which could be used voluntarily by entities in their narrative reporting.

Charles Tilley said:

'In keeping with the 'through the eyes of management' principle, we do not believe that the use of specific KPIs should be made mandatory by any MC standard. Rather, we expect that industry bodies and the capital market will encourage the use of those which gain widespread acceptance.'

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For further information, please contact:

Lottie Muir
Press & PR Manager
CIMA
+44 (0) 20 8849 2407
steven.hilton@cimaglobal.com

Notes to editors

CIMA (the Chartered Institute of Management Accountants) is the only international accountancy body with a sole focus on business. It is a world leading professional institute that offers an internationally recognised qualification in management accountancy, focusing on accounting in business, in both the private and public sectors. CIMA is the voice of over 155,000 students and members in 158 countries and is responsible for the education and training of management accountants who work in industry, commerce and not-for-profit and has more members in the public sector than any other UK based body. CIMA prides itself on the commercial relevance of its syllabus, which is in tune with the activities of high performance organisations, and evolves continually to reflect the latest developments in global business. It is committed to upholding the highest ethical and professional standards of members and students, and to maintaining public confidence in management accountancy. For more information about CIMA, please visit http://www.cimaglobal.com/