This Standard governs management reporting for all parent entities that are required by German law to prepare a group management report in accordance with section 315 of the HGB or that do so voluntarily. It encourages application of the Standard to management reports prepared in accordance with section 289 of the HGB.
The objective of group management reporting under this Standard is to report on the use of the group’s resources by management during the reporting period and to provide information that enables a knowledgeable user to obtain a suitable understanding of the course of business, the position and the expected development of the group, and of the opportunities and risks associated with this development.
The requirements of the Standard are formulated in such a way as to satisfy the specific group management reporting requirements of different entities and sectors. The Standard starts by stating the principles to be applied to group management reports. The Standard then addresses, in separate sections, the following reporting elements: fundamental information about the group; the report on the economic position; the report on post-balance sheet date events; the report on expected developments and on opportunities and risks; the internal control system and risk management system relevant for the consolidated financial reporting process; risk reporting on the use of financial instruments; takeover-related disclosures; the consolidated corporate governance statement; and the responsibility statement. Additionally, Appendices 1 and 2 to the Standard contain sector-specific requirements governing risk reporting by credit institutions, financial services institutions, investment institutions, payment institutions and electronic money institutions (institutions), as well as by insurance undertakings and pension funds.
The group management report is required to be prepared and presented separately from the consolidated financial statements and other published information as a separate component under the heading ‘Group Management Report’.
The Standard sets out six principles of group management reporting: completeness; reliability and freedom from bias; clarity and transparency; conveyance of group management’s perspective; materiality; and proportionality of information.
Disclosures on fundamental information about the group are the starting point for the presentation, analysis and assessment of the course of business and the economic position of the group. The business model, branches, and research and development activities must be described. In addition, publicly traded entities are required to describe their internal management system.
The report on the economic position presents, analyses and assesses the course of business (including the business performance) and the position of the group. The macroeconomic and sector-specific environment must also be discussed. The presentation, analysis and assessment of the course of business must convey information about the business activities during the reporting period. Events and developments that are responsible for the course of business must be addressed, together with their significance for the group. The disclosures on the results of operations of the group focus on the presentation, analysis and assessment of the key sources of earnings. The group’s financial position must be presented, analysed and assessed on the basis of the capital structure, capital expenditures and liquidity. The effects of any material increases or decreases in assets, liabilities, or equity on net assets, including due to the effects of inflation or exchange rates, must be described. The disclosures must include the most significant financial key performance indicators and, to the extent that they are material for an understanding of the course of business and position of the group, non-financial key performance indicators.
In conjunction with the consolidated financial statements, the report on expected developments and on opportunities and risks is designed to enable a knowledgeable user to obtain a suitable understanding of the expected development of the group and of the material opportunities and risks associated with this development. Forecasts must be made about the most important financial and non-financial key performance indicators that are also used for the internal management of the group. The forward-looking period must cover at least one year, starting from the most recent reporting date of the consolidated financial statements. Foreseeable special factors affecting the period after the forward-looking period must be presented and analysed. The forecasts must contain disclosures about the expected change in the projected key performance indicators compared with the relevant actual figures for the reporting period, and must illustrate the direction and intensity of the change. Risk reporting encompasses disclosures on the individual risks and a summary presentation of the risk position, together with disclosures on the risk management system if the parent entity is publicly traded. It must report on material risks that could affect the decisions of a knowledgeable user of the group management report. The risks presented must be quantified if this is also done for internal management purposes and the quantitative disclosures are material for a knowledgeable user. To enhance the clarity and transparency of the risk report, the individual risks must either be ranked by their importance or combined into categories of similar risks. Opportunities must be treated in the same way as risks.
The disclosures on the internal control and risk management systems relevant for consolidated financial reporting encompass structures, processes and controls used to prepare the consolidated financial statements. Disclosures on their effectiveness are not required.
In its risk reporting relating to the use of financial instruments, group management is required to report on its risk objectives and risk management methods in connection with the financial instruments deployed. Group management must also address specific risks to which the group is exposed from the use of financial instruments.
The objective of the takeover-related disclosures is to enable a potential offeror to obtain a comprehensive picture of the potential offeree entity and its structure, as well as any barriers to takeovers, before making a takeover bid.
The Standard expands on the content of the consolidated corporate governance statement (in accordance with section 315d of the HGB in conjunction with section 289f of the HGB). The Standard also contains a suggestion for the wording of the responsibility statement (in accordance with section 297(2) sentence 4 of the HGB and section 315(1) sentence 5 of the HGB) for those cases in which the responsibility statements for the consolidated financial statements and the group management report are issued separately or together. It sets out in greater detail the required disclosures for the diversity policy that certain groups must provide in their consolidated corporate governance statement.
Certain groups must enhance their group management reports by adding a consolidated non-financial statement. This statement contains a brief description of the business model and must contain information relating to, as a minimum, the five aspects of environmental, social, and employee matters, respect for human rights, anti-corruption and bribery matters. Disclosures must be made for these aspects that are necessary for an understanding of the development, performance and position of the group, and of the impact of its business activities on these aspects.
Appendices 1 and 2 modify and supplement the risk reporting requirements applicable to all sectors by specific risk reporting requirements for institutions and for insurance undertakings and pension funds. Irrespective of whether or not they are publicly traded, institutions and insurance undertakings and pension funds must present the material characteristics of their group-wide risk management system. The risks to which institutions and insurance undertakings and pension funds are exposed must also be combined into categories of similar risks. Appendix 1 therefore requires institutions to present a minimum level of disclosures on counterparty credit risk, market risk, liquidity risk and operational risk. Appendix 2 requires insurance undertakings and pension funds to present a minimum level of disclosures on underwriting risks (classified into property and casualty insurance risks and life insurance risks), the risk of default on insurance business receivables, investment risk and operational risk.
To satisfy the information requirements of the capital markets, the following additional reporting requirements apply to publicly traded parent entities and, in part, to parent entities with a publicly traded subsidiary: