international accounting:reporting and disclosure

International Accounting, 7/e

Frederick D.S. Choi

Gary K. Meek

Chapter 5: Reporting and Disclosure

www.HelpWithAssignment.com

Learning Objectives

Distinguish voluntary and mandatory disclosure and the applicable regulatory measures.

Identify the broad objectives for accounting disclosure systems in investor-oriented equity markets.

Discuss “triple-bottom line” reporting and why it is a growing tendency among large multinational corporations.

Have a basic understanding of the following selected corporate financial-disclosure practices: (a) disclosures of forward-looking information, (b) segment disclosures, (c) social responsibility reporting, (d) corporate governance disclosures, and (e) Internet business reporting and XBRL.


Development of Disclosure Voluntary disclosure

Voluntary disclosures are increasing as investors demand more detailed and timely information.

But managers’ incentives for disclosure aren’t always aligned with those of investors.

Disclosure regulations and third party certification can improve the functioning of capital markets.


Development of Disclosure (contin)

Regulatory disclosure requirements Stock exchanges want to be sure that investors have enough information to

evaluate a company’s performance and prospects. Disclosure protects investors, but shareholder protection varies across countries. Twin objectives of investor oriented markets (Frost and Lang 1996):

Investor protection Investors are provided with material information. And are protected through monitoring and enforcement.

Market quality Markets are fair, orderly, and efficient. And free from abuse and misconduct.

SEC financial reporting debate Foreign registrants must furnish financial information substantially similar to that

required of domestic companies. Must reconcile net income and stockholders’ equity to U.S. GAAP if the registrant

uses another GAAP besides US GAAP or IFRS. Do SEC requirements deter foreign companies from listing their securities in the

U.S.? Or do the requirements protect investors and ensure the quality of U.S. capital

markets? Sarbanes-Oxley requirements are also believed to deter foreign companies from

listing in the U.S.www.HelpWithAssignment.com

Reporting and Disclosure Practices

Forward-looking information Includes

Forecasts of revenues, income, cash flows, capital expenditures

Prospective information about future economic performance or position

Statements of management’s plans and objectives for future operations

Softer information about future prospects is more common than precise forecasts. Why?

Forecasts are inherently unreliable. Legal repercussions if forecasts aren’t met.


Reporting and Disclosure Practices (contin)

Segment disclosures Disaggregated information about a firm’s industry and

geographic operations and results Includes disaggregated information on

Revenue Income Depreciation and amortization Capital expenditures Assets Liabilities

Helps users understand how the parts make up the whole Product lines and areas of the world vary in terms of

risks, returns, and opportunitieswww.HelpWithAssignment.com


Social responsibility reporting Reporting to “stakeholders”: employees, customers,

suppliers, governments, activist groups, the general public, in addition to investors

The measurement and communication of information about a company’s effects on employee welfare, the local community, and the environment

A way to demonstrate corporate citizenship “Sustainability” reports integrate economic, social, and

environmental performance “Triple-bottom line reporting”: profits, people, planet

Increasingly being audited to avoid the charge of “green-washing”



Examples: Employee reporting

Employment levels and personnel costs by division and region of the world Management development Compensation Diversity Human rights

Environmental reporting Impact of production processes, products, and services on

Air Water Land Biodiversity Human health

Water, raw material, and energy consumption Activities to reduce pollution Spending on all of the above

Despite criticisms, becoming mainstream among multinational companies

Global Reporting Initiative has issued guidelineswww.HelpWithAssignment.com


Corporate governance disclosures Governance means the responsibilities, accountability,

and relationships among shareholders, board members, and managers to meet corporate objectives.

Governance issues include: Rights and treatment of shareholders Responsibilities of the board Disclosure and transparency Role of stakeholders


Chapter Exhibits (contin)

Governance mechanisms and disclosures are improving around the world.

OECD issued its revised Principles of Corporate Governance in 2004.

Disclosure is a key element of any good system of corporate governance.



Internet business reporting and XBRL World Wide Web increasingly used as an

information dissemination channel. XBRL

Makes data interactive, allowing users to easily manipulate companies’ financial statement data.

Taxonomies have been developed for U.S. and German GAAP and for IFRS.


Annual Report Disclosures in Emerging-Market Countries

Generally less extensive and less credible than disclosures of companies from developed countries.

Empirical evidence shows that earnings are less opaque in developed countries than in developing countries.

Monitoring and enforcement of disclosure requirements are also less extensive in developing countries.


Implications for Financial Statement Users

Expect wide variation in disclosure levels and financial reporting practices.

The levels of mandatory and voluntary disclosure are increasing worldwide.

Managers of companies from low-disclosure countries should consider adopting enhanced disclosure.

Enhanced disclosures can result in competitive advantage over companies with restrictive disclosure policies.


Chapter Exhibits


Exhibit 5-1 (contin)


Choi/Meek, 7/e




For more details on Accounting Assignment Help visit our website at http://www.helpwithassignment.com/accounting-assignment-help


international accounting:reporting and disclosure

Education

board disclosure

disclosure arent

line reporting

mandatory disclosure

disclosure regulations

accounting disclosure

financial information

material information