A Reporting Framework for Management Commentary Reporting in Iran

Objective With the rapid growth of the economy and the expanding role of the private sector, financial markets have gained increased importance. Among the factors influencing the efficiency of financial markets, how information is disseminated to various stakeholders plays a crucial role. The method of information transfer stands as a key component in shaping the efficiency of capital markets. Management Commentary (MC), serving as a supplementary report to companies' financial statements, holds a pivotal role in enhancing capital market transparency through the disclosure of both financial and non-financial information. The objective of this research is to formulate an MC framework and subject it to experimental testing utilizing quantitative data. It is to introduce, for the first time, an MC framework specifically tailored to the context of Iran. Methods This study adopts a mixed research methodology. Initially, qualitative content analysis was utilized, involving the comprehensive review of documents and studies pertaining to the IFRS Foundation in the domain of Management Commentary (MC), along with other relevant guidelines and reporting frameworks. This systematic examination facilitated the construction of the initial MC reporting framework and the formulation of pertinent hypotheses. Subsequently, to adapt and present the MC reporting framework in the Iranian context, survey data, obtained through a researcher-designed questionnaire, was collected. Each sub-category of the reporting framework was assessed and ranked using the one-sample Wilcoxon signed-rank test, with the final ranking determined based on Friedman's test. Results Based on the findings of the qualitative section, the initial framework for MC comprises five key dimensions: Objectives, Qualitative Characteristics, Content Elements, Forward-Looking Information, and Information Related to the Long-Term Success of the Company. According to the findings of the quantitative section, none of these dimensions and their subcategories were rejected. Therefore, the MC reporting framework in Iran was structured across five dimensions as follows: 1. Objectives: comprising five distinct objectives, 2. Qualitative characteristics: encompassing eleven specific characteristics, 3. Content elements: consisting of six defined content elements, 4. Forward-looking information: comprising seven principles & 5. Information related to the long-term success of the company: categorized into six distinct areas. The relative importance of each dimension within the reporting framework is ranked as follows: 1. Objectives, 2. Qualitative characteristics, 3. forward-looking information, 4. Content elements, and 5. Information related to the long-term success of the company. Furthermore, the subcategories within each dimension of the reporting framework were also assessed and ranked according to their relative importance. Conclusion The suggested reporting framework has the potential to serve as a valuable reference for institutions and organizations responsible for formulating capital market regulations. This includes entities like Audit Organization and Securities & Exchange Organization. By utilizing this framework, these regulatory bodies can develop native standards and guidelines for the presentation of MC. Furthermore, companies can benefit from this framework when presenting their MC. This ensures a more tailored and effective approach to MC reporting within the context of the Iranian capital market.