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Management’s Discussion and Analysis: Canadian Publicly Listed Companies Perspective

February 17, 2021

Canadian publicly listed companies are not only required to file financial statements on a quarterly and annual basis, but they must also provide users with a supplemental management discussion and analysis (“MD&A”).  According to the Form 51-102F1, a “MD&A is a narrative explanation, through the eyes of management, of how a company performed during the period covered by the financial statements, and of the company’s financial condition and future prospects.” Therefore, a MD&A helps management to communicate not only the current position and performance of the company, but it provides them with an opportunity to plan for the future in the form of forward-looking statements and help users of the financial statements make an informed decision.

Structure

 Some of the integral items in the MD&A consist of the following:

  • Overall performance and discussion of operations including an analysis of the company’s financial condition; financial performance; and cash flows; discussing known trends, demands commitments, events or uncertainties in comparison to prior year.
  • Selected annual information for the annual MD&A and summary of the quarterly results for each of the eight most recently completed quarters with certain minimum items to be including revenue, profit or loss attributable to owners of the parent and per-share (basic and diluted) and disclosure in its MD&A the following outstanding share data prepared as of the latest practicable date (e.g. date MD&A prepared).
  • An analysis of the company’s liquidity including the company’s ability to generate sufficient amounts of cash and cash equivalents in the short and long term and description of the sources of funding and the working capital requirements.
  • Details of the company’s capital resources including commitments for capital expenditures as of the date of the financial statements and known trends or expected fluctuations in capital resources.
  • Discussion of any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the financial performance or financial condition.
  • Disclosures of off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the financial performance or financial condition
  • Transparency in the way of disclosure of transactions with related parties as defined under International Financial Reporting Standards.

Conclusion

It is crucial for companies to prepare an MD&A in a way that is useful for primary readers of a company’s financial reports and ensure compliance with the minimum requirements with Form 51-102F1.

Canadian Auditing Standard “CAS” 720, The Auditor’s Responsibilities Relating to Other Information in Documents Containing Audited Financial Statements, deals with the auditor’s responsibilities relating to other information which includes the MD&A. Therefore, there is a requirement for a company’s auditor to read and consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained during the audit.

Get in touch with a member of our Audit and Assurance team to discuss more about what this means for you and your business.