Matakuliah
Tahun
: F0142/Akuntansi Internasional
: September 2006
Session 05
Reporting and Disclosure
1
Introduction
• Hundreds of companies have
increased their disclosures by :
– Voluntarily adopting International
Financial Reporting Standards (IFRS) or
US GAAP.
– Complying with domestic and overseas
stock exchange and regulatory
requirements
– Responding to various demands for
information from investors and analyst
2
Development of Disclosure
1. Voluntary Disclosure
• As investors around the world demand more detailed and
timely information, voluntary disclosure levels are
increasing in both highly developed and emerging market
countries.
2. Regulatory Disclosure Requirements
• To protect investors, most securities exchanges impose
reporting and disclosure requirements on domestic and
foreign companies that seek access to their markets.
3. The U.S SEC Financial Reporting Debate
• SEC requires foreign registrants to furnish financial
information substantially similar to that required of
domestic companies
3
Reporting And Disclosure Practices
• Annual report disclosure practice
reflect managers’ responses to
regulatory disclosure requirement and
their incentives to provide information
to financial statement users
voluntarily.
4
Reporting And Disclosure Practices
• Disclosures of Forward Looking
Information
– Considered highly relevant in equity markets
worldwide
– The EU’s Fourth Directive states that the annual
reports should include an indication of the
company’s likely future development.
– Forward looking information include :
• Forecasts of revenues, income (loss), EPS and
other financial items
• Prospective information about future economic
performance
• Statement of management’s plans and objectives
for future operations
5
Reporting And Disclosure Practices
• Segment Disclosures
– Investors and analyst demand for information
about firms’ industry and geographic segment
operations and financial results is significant
and growing.
– International Financial Reporting Standards
(IFRS) include highly detailed segment
reporting as do accounting standards in many
countries
– Segment disclosure help financial statements
users better understand how the parts of a
company make up the whole
6
Reporting And Disclosure Practices
• Cash Flow and Funds Flow Statements
– IFRS and accounting standards in the United States,
the United Kingdom and a growing number of other
countries require the presentation of cash flow
statements.
– The cash flow statement is an area where substantial
worldwide convergence can be expected
• Social Responsibility Disclosures
– Companies are being called upon to answer to a wide
range of “stakeholders”, employees, customers,
suppliers, governments, activist groups and the
general public who have areas of concern than a
company’s ability to create economic value
7
Reporting And Disclosure Practices
• Special Disclosures for Non Domestic Financial
Statement Users and Accounting Principles
Used
– Annual reports can include special disclosures to
accommodate non domestic financial statement
users, such as :
• Convenience restatement of financial statement to a non
domestic currency
• Limited restatements of financial results and position to
a second set of accounting standards
• A complete set of financial statement prepared in
conformance with a second set of a accounting
principles
• Discussion of differences between accounting principles
used in the primary financial statements and some other
set of accounting principles
8
Reporting And Disclosure Practices
• Corporate Governance Disclosures
– Among corporate governance issues are:
•
•
•
•
The right s and treatment of shareholders
The responsibilities of the board
Disclosure and transparency
The role of stockholders
– Companies’ corporate governance
practices are receiving increasing
attention from regulators, investors and
analysts.
9
Reporting And Disclosure Practices
• Internet Business Reporting and
Disclosure
– The World Wide Web is increasingly being used
as an information dissemination channel, with
print media often playing a secondary role.
– Electronic information dissemination offers the
advantage of often being less expensive than
use of print media and offers instantaneous
communication.
– Stock exchanges, regulators and public
companies are increasingly using the Internet
to provide financial statement users with
immediate and low cost access to company
information
10
Annual Report Disclosures In
Emerging Market Countries
• Disclosures in annual reports of companies in
emerging market countries are generally less
extensive and less credible than those of companies
in developed countries
• Low disclosure levels in emerging market countries
are consistent with systems of corporate
governance and finance in those countries
• Investor demand for timely and credible information
about companies in emerging market countries has
been growing, and regulators have responded to this
demand by making disclosure requirements more
stringent and by stepping up their monitoring and
enforcement efforts.
11
Implications For Financial
Statement Users And Managers
• Financial statement users should expect
wide variation in disclosure levels and
financial reporting practices
• The requirement to adopt IFRS no later than
2005 will require many European companies
outside the United Kingdom to increase their
disclosures substantially
12