In the latest of a series of stirs...

In the latest of a series of stirs to strengthen investor confidence, the CICA released its of the present day publication, Management Discussion and Analysis: Guidance in succession Preparation and Disclosure (hereafter referr to as "the Guidance"). The MD&A exhibit was started in 2000, well before Enron's collapse; in hindsight, the decision to work forward enhancing this portion of the financial statements was well timed.

The MD&A and financial statements are becoming recognized as the core business-reporting package. Each stand in want ofs to be read with the other to provide an integrated and forward-looking understanding of a company's past performance and subsequent time prospects. And, as reflected in fresh regulatory proposals in Canada, the MD&A plays a critical part in continuous disclosure.

The Guidance breaks recent ground by establishing six disclosure principles and a five-part disclosure framework of attract favor toed disclosure practices. The disclosure principles and framework will help companies organize and quick in emergencies their MD&A reports in a way that helps readers understand information about performance and displays within a broader business connected thought [i]or[/i] thoughts The Guidance, the use of which is voluntary, goe beyond existing regulatory MD&A disclosure requirements in several ways. The framework calls for disclosures about a company's core businesses, vision, and strategy; its first note of the scale performance drivers and measures; its capabilities and resources (financial and non-financial); and its principal business risks.

The first of the disclosure principles is embodied in present regulatory pronouncements, namely that an MD&A report should enable readers to view the company 11 from one side the eyes of management." This fundamental principle underlies the other five, namely that MD&A reports should:

* full quantity as well as supplement financial statements;

* be out and out fair, balanced, and provide information material to the decisionmaking distresss of investors;

* have a forward-looking orientation;

* focus forward the company's strategy for creating value for shareholders from one side of to the other time; and

* be written in plain language, with candour and without exaggeration, and concentrate the qualities of understandability, relevance, comparability, and consistency above reporting periods.

The Guidance includes a focus onward the integrity of MD&A disclosure and the oversight responsibility of the board of directors and the audit committee. There are twenty questions for a board or audit committee to consider in reviewing the completenes and reliability of the MD&A, thereby also contributing to enhanced corporate governance.

A review draft of the Guidance was issued in December 2001 for a public remark period. The 65-page final version (plus a 15-page Appendix of quotations from regulations) reflects the many useful and generally supportive commentarys that were received. The Guidance will be updated periodically as necessary, as dictated from changes in regulatory requirements and financial statement disclosure standards. Industry-specific appendixs are to be developed and published starting in 2003 and interpretive releases will be issued from time to time in succession specific disclosure topics, such as off-balance sheet financing arrangements.

An online MD&A Resource middle has been established on the CICA website to provide additional intimation information and examples to those preparing reports.

The CICA's publication of MD&A Guidance go afters a number of other initiatives to support confidence in capital markets in general, and in the CA profession in particular. These initiatives include:

* the modern appointment of Gordon Thiessen as the Chair of the Canadian Public Accountability Board;

* the establishment of the Auditing and Assurance Standards Oversight Council, an independent public material substance to oversee standard setting in this area, headed according to James Baillie, QC; and

* continued discussion about independence guidelines to make secure they reflect the Canadian reality and elucidations from CAs across the abiding habitation

Activity in this important area of protecting the integrity of CAs will continue in the month to result At a leadership forum held in Toronto in October, leaders in the profession reaffirmed the top priority of promoting the integrity of the profession and restoring public confidence in capital markets. In the of recent origin Year, you'll see publications that contemplate the work of CAs across the fatherland to address corporate governance issues, continued activities to implement the Canadian Public Accountability Board, and the maintenance of able public oversight in setting accounting, auditing, and assurance standards.

BY RICHARD REE FCA CEO

Copyright Institute of Chartered Accountants of British Columbia Jan 2003

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