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The Chartered Accountants of Canada are providing business leaders advice on how to keep investors informed in these unsettled and challenging times.
The Canadian Institute of Chartered Accountants (CICA) has issued a special Alert aimed at helping companies supplement financial statements by providing useful information through Management’s Discussion and Analysis (MD&A).
“The Alert provides suggestions about matters that may need to be discussed in the MD&A to provide the transparent and complete communications that investors will be expecting,” said Chris Hicks, Principal, Knowledge Development, with the CICA. “In particular, the MD&A should explain, through management’s eyes, the effects of market volatility on an entity’s performance, financial condition and future prospects.”
The Alert highlights several areas where a well-prepared MD&A would be expected to communicate the effects of recent market developments. These include:
- Strategy and risk management
- Results analysis
- Liquidity
- Critical accounting estimates
- An entity’s ability to continue as a going concern
Entities should take extra care with their MD&A to ensure that it communicates a transparent and balanced reporting of management’s insights about the entity’s prospects,” said Hicks. “To achieve this, entities may wish to reconsider the overall structure of their MD&A. Communicating how an entity is dealing with the current financial crisis, where past results may not be indicative of the future, will likely involve some significant changes.”
The Canadian Performance Reporting Alert (CPRAlert) titled MD&A Disclosures In Volatile and Uncertain Times can be found electronically in a special resource centre on the CICA’s website.
November 5,
2008
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