Finance · Financial reporting · Component
The commentary
What changed, why, and what is being done — the part that turns numbers into something someone can act on.
The deliverable
What it is
A statement handed over without commentary leaves interpretation to the reader, and each reader will reach a different conclusion.
Three explained lines are worth more than forty unexplained ones. The discipline is choosing which three.
One level in
What it is made of
Each element is a constituent part of the component. Follow one to see the attributes it carries.
The explanations
Why the material variances happened.
3 attributes: Line · Explanation · Materiality threshold
LearnThe actions
What is being done about what the numbers show.
3 attributes: Action · Owner · Effect expected
LearnThe outlook
What is expected next, and what would change that.
3 attributes: Expectation · Forecast · What would change it
Learn
Define materiality in advance. Otherwise what gets explained is decided by whoever writes the commentary.
The other components in financial reporting
The reporting pack
What is produced each period and for whom — kept short enough that it is read and relevant enough that it is used.
LearnThe close calendar
What happens when, so the pack arrives while it is still useful — which usually means accepting estimates.
Learn