The management report is one of the key documents for the approval of financial statements. Those responsible for preparing it are often unfamiliar with its content and how it is drawn up.
What is a management report?
The management report is a document prepared by the manager or the Board of Directors and presented to the associates or shareholders at the Annual General Meeting.
Who prepares the management report?
Commercial companies (SA, SAS, SARL, SNC, sociétés en commandite) are required to produce a management report.
Non-trading companies may include such an obligation in their articles of association.
Article 138 of the AUSCGIE stipulates that it is the manager (SARL), the Board of Directors or the managing director (SA) who draws up the management report at the close of the financial year.
In addition, article 853 paragraph 11 of the AUSCGIE provides that in simplified joint stock companies, the management report is approved by the Chairman.
What is the content of the management report?
The content of the management report is governed by the provisions of article 138 of the AUSCGIE. It is identical for all companies. At the very least, the following items must be included in your management report:
- The company's situation over the past year: difficulties encountered, significant events, progress made. This is a summary of the events of the past year;
- The company's results: this involves explaining the formation of the company's results and the evolution of its main financial and non-financial aggregates. Relevant ratios can be calculated and compared over several years. Information and comments must be consistent with those given in the notes to the financial statements;
- Any change in the presentation of financial statements or in valuation, amortization or provision methods (article 141 of the AUSCGIE). For example, changes in accounting methods; ;
- Significant events occurring between the end of the financial year and the time the management report is drawn up (post-balance sheet events), such as claims, tax audits or the loss of a major customer. In the final analysis, the aim is to highlight events likely to have a significant impact on the company's business (both positive and negative) and which occurred during this period; ;
- Research and development activities (for companies presenting consolidated financial statements) ;
- Company outlook: foreseeable developments, risks and uncertainties, cash flow forecasts and financing plan (in the form of a multi-year table).
Communication
The management report is made available to associates or shareholders at the same time as the company's financial statements, in accordance with the legal deadline, i.e. 15 days before the Annual General Meeting.
Auditing by the Statutory Auditor
Pursuant to the provisions of article 140 of the AUSCGIE, the management report is sent to the Statutory Auditor. 45 days at least before the date of the General Meeting, in the same way as the other documents required for approval of the financial statements.
As part of his due diligence, the Statutory Auditor is required to verify the contents of the management report and, in particular, the consistency of the information given in this report with the audited financial information. He mentions this in his audit report to shareholders, in the section of the report dealing with specific verifications.
Penalties in the absence of a management report
Under the terms of article 111 of the Uniform Act on Accounting and Financial Reporting, the directors of entities that fail to draw up an inventory and prepare annual, consolidated or combined financial statements for each financial year are liable to criminal penalties. as well as the management report and, where applicable, the social report.
Conclusion
More than an obligation, the management report should be seen as a tool at the service of the company and its shareholders, enabling them to report on the company's situation and prospects.
You can download a sample management report by following this link.
