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While the financial report is an invaluable source of information for company shareholders and scheme unit holders in providing historical financial performance and position, it contains limited analysis and information on the business strategy, risks, prospects and the underlying drivers of the business.
The operating and financial review (OFR) (also known as 'management commentary' or 'management discussion and analysis') forms part of a listed entity's annual report and is required by the Corporations Act to contain information investors would reasonably require to make an informed assessment of the entity's operations; financial position; and business strategies and future prospects for future financial years.
There is an opportunity for listed entities to make their operating and financial reviews more useful to investors. ASIC has released Regulatory Guide 247 Effective disclosure in an operating and financial review (RG 247) to assist directors in improving the standard of disclosure in OFRs tailored to the circumstances of the entity.
RG 247 aims to promote better communication of useful and meaningful information to shareholders and unit holders; and assist in understanding the OFR requirements.
ASIC's guidance is not intended to add unnecessary length to annual reports, but rather promote more meaningful information and analysis for investors. The OFR is not expected to contain prospectus level disclosure and is not required to include financial forecasts. It...