Preparing a Simple and Effective MD&A

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Preparing a Management Discussion and Analysis (MD&A) can be both difficult and time consuming for some people. However, it does not always need to be that way. The MD&A’s purpose is to provide an objective, easily readable introduction to the financial statements and assessment of the year-over-year financial position. The MD&A needs to be brief yet effective. So you ask, “How do we do that?” We have identified five tips below that can help you create a quick, effective, and informational MD&A:

  1. Give the important top-down analysis before getting into the detail.
  2. Make sure you explain ‘Why?’ the results are like they are – it’s what the readers are looking for after all.
  3. Identify accounts or groups of accounts with major changes or transactions.
  4. Don’t be afraid to use charts or graphs. When discussing year to year comparisons, it could be easier to follow using simple easy to grasp charts.
  5. Take organized notes throughout the year as to any changes or expected changes to happen.

Writing a meaningful MD&A can be challenging; however, with the five helpful tips above, it can be easier. The MD&A is an opportunity for you as management to tell the facts behind the numbers in the financial statements, providing a more complete picture of the entity and not simply repeating the numbers. The MD&A does not need to be long or consume a lot of time and resources to prepare — it merely needs to discuss the specifics of the entity.

For more information on MD&A’s visit the following websites: www.gasb.org, www.gfoaz.org, or www.gfoa.org.

By Cailee Arnold