The equity market has an important position in the national economy and individual investors are becoming increasingly active in these markets. As a result, and public disclosure, investor protection, shareholder value and form of corporate governance (corporate governance) are driven by the stock market is increasingly important. Likewise, although the disclosure practices vary widely from country to country, slowly began to arise similarity (convergence). However, important differences between countries will continue to affect the whole company, except the largest, especially companies that are active in capital markets or international product markets.
Government regulators are trying to maintain or enhance the credibility of the national capital market also affect the disclosure practices around the world. Stock exchanges also concluded that the continued growth and success they achieve depends on market supply of high quality with an effective investor protection. As a result, oversight by regulators and stock exchanges are increasing and becoming more stringent disclosure provisions. Trend leads to increasing investor protection and disclosure will continue as the stock exchanges face increasing competition from other exchanges and trading system from a less regulated.
The discussion will be done include disclosures relating to financial reporting for external users.
DEVELOPMENT OF DISCLOSURE
Development of the disclosure system is closely associated with the development of accounting systems. Disclosure standards and practices are influenced by financial resources, legal systems, political and economic ties, the level of economic development, education, culture, and other influences. National differences in disclosure is driven largely by differences in corporate governance and finance. In the United States, Britain and other Anglo-American countries, equity markets provided most of the funding that the company needs to be very advanced. In these markets, ownership tends to spread widely among many shareholders and investor protection is emphasized. Institutional investors play an increasingly important role in these countries, demanding financial returns and increasing shareholder value. In most other countries (like France, Japan and some emerging market countries), share ownership is still highly concentrated and the bank (or the owner and family) has traditionally been a major source of corporate financing. These banks, and the other in obtaining more information about the company’s financial position and activities.
Some studies show that managers have incentives to reveal information about the company’s current performance and future time voluntarily. In a recent report, the Financial Accounting Standards Board (FASB) describes a FASB project on business reporting which supports the view that the company will benefit from the capital market by increasing voluntary disclosure. The report outlines how companies can describe and explain its investment potential to investors. A number of endorsement by a third party (such as auditing) can improve the functioning of the market. Accounting rules to try to reduce the ability of manjer in record economic transactions in ways that do not represent the best interests of shareholders. Disclosure rules establish provisions to ensure that shareholders receive timely, complete and accurate.
MANDATORY DISCLOSURE PROVISIONS
Stock exchanges and government regulatory agencies generally require that listed companies to foreign companies to share financial information and nonfinancial information similar to that required for domestic firms. Any information that was announced, which was distributed to shareholders or reported to regulatory agencies in the domestic market. However, most countries the implementation of the provisions of “suitability of disclosure between the (jurisdiction).” Protection of shareholders differ from country to country. Anglo-American countries such as Canada, Britain and the United States to provide protection to shareholders who are widely and strictly enforced. In contrast, the protection to the shareholders received less attention in some other countries like China for example, prohibiting insider trading (trading that involves the inner circle), while weak law enforcement make the enforcement of these rules are almost non-existent.
SEC FINANCIAL REPORTING DIFFERENCES AS
In general, the SEC requires companies to applicants from abroad noted that financial information which is basically the same as those required of domestic companies. However, the financial statements of foreign registrants do not have to be prepared in accordance with U.S. GAAP if the statements were prepared according to a comprehensive set of accounting principles and accompanied by other quantitative reconciliation of net earnings, stockholders’ equity and earnings per share under U.S. GAAP, if materially different.
SEC reporting requirements are generally consistent with the goal of investor protection and market quality. However, strict reporting requirements may result in the achievement of investor protection by causing a reduction in the opportunity cost of investment or investment costs are high.
REPORTING AND DISCLOSURE PRACTICES
Disclosure rules are very different around the world in some ways like the statement of cash flows and changes in equity, related party transactions, segment reporting, the fair value of financial assets and liabilities and earnings per share. In this section attention is focused on:
1. Disclosure of information to see the future “information look to the future” that includes:
(a) the forecast revenue, profit and loss, profit and loss per share (EPS), capital expenditures, and other financial post
(b) information regarding the performance or prospective future economic position that is not too sure when compared with the projected post, fiscal period, and the projected number of
(c) statements of management plans and objectives of future operations. Most companies in each country presents a disclosure of information about plans and goals manjemen. Conversely fewer companies that disclose prophecy, from the lowest two companies in Japan and the highest 31 companies in the United States. Most forecasts in the U.S. and Germany regarding capital expenditure, not profits and sales.
2. Disclosure of segment
Investors and analysts will request information regarding operating results and financial industry segments classified as significant and increasing. Example, financial analysts in the United States has consistently been asked disagregat report data in the form of a much more detailed than they are now. International Financial Reporting Standards (IFRS) also discussed the highly detailed segment reporting. This report helps the users of financial statements to better understand how the parts of a company affects the whole enterprise.
3. Cash flow statement and fund flow
IFRS and accounting standards in the United States, Britain, and a large number of other countries require the presentation of cash flows.
4. Disclosure of social responsibility
Today the company is required to demonstrate a sense of responsibility to a bunch of so-called interested parties (stakeholders) – employees, customers, suppliers, governments, activist groups, and the general public. Information regarding the welfare of employees has long been a concern for labor organizations. The problem areas of concern related to working conditions, job security, equality of opportunity, workforce diversity and child labor. Employee disclosure also preferred by investors because it provides valuable input regarding labor relations, cost, and productivity.
5. Specific disclosures for non-domestic users of financial statements and the accounting principles used
Financial statements may contain specific disclosures to accommodate the users of financial statements nondomestik. Such disclosure is:
1. “Re representation for comfort” to the financial information in currencies nondomestik
2. Repeated presentation of the results and financial position is limited by the two accounting standards
3. A complete set of financial statements prepared in accordance with accounting standards kesua groups, and some discussion about the differences between the accounting principles that are widely used in the primary financial statements and a few other sets of accounting principles.
Many companies in countries that do not use English as primary language translation also perform throughout the annual report of the home country language into English. Also, some companies prepare financial statements in accordance with accepted accounting standards more widely than the domestic standard (especially IFRS or U.S. GAAP) or in accordance with both domestic and a second group of standard accounting principles.
CORPORATE GOVERNANCE DISCLOSURES
Corporate governance related to the internal tools used for running and controlling a firm – responsibility, accountability and the relationship between the shareholders, board members and managers are designed to achieve corporate objectives. The problems of corporate governance include the rights and treatment to the shareholders, the board’s responsibilities, disclosure and transparency and the role of the parties concerned. Corporate governance practices has gained the attention of regulators, investors and analysts.
DISCLOSURE AND REPORTING BUSINESS THROUGH THE INTERNET
World Wide Web is increasingly being used as channels of information dissemination, where the print media now plays a secondary role. Business Reporting Language (Extensible Business Reporting Language – XBRL) is an early stage of financial reporting revolution. This computer language is built into almost all software for accounting and financial reporting to be issued in the future, and most users do not need to learn how to cultivate it so that it can directly enjoy the benefits.
DISCLOSURE REPORTS ANNUAL MARKET IN DEVELOPING COUNTRIES
Disclosure of the company’s annual report on emerging market countries are generally less extensive and less credible than the reporting companies in developed countries. For example, the disclosure of which is insufficient and misleading and neglected consumer protection cited as the cause of the East Asian financial crisis in 1997. Low level of disclosure in emerging market countries is consistent with the system of corporate governance and finance in these countries. Less developed equity markets, banks and internal parties such as family groups distribute most funding needs and generally not too much of a need for public disclosure of credible and timely manner, when compared with the more advanced economies. However, investor demand for information about the company in a timely and credible in emerging market countries more and more regulators to respond to this demand by making provisio.
IMPLICATIONS FOR USERS AND FINANCIAL MANAGERS
The managers of many companies are constantly heavily influenced by the cost of mandatory disclosure, the level of mandatory and voluntary disclosure is increasing worldwide. Managers in countries that traditionally have low disclosure should consider whether it operates a policy of disclosure may provide significant benefits in the amount of their company. Moreover, the managers who decided to provide more disclosure in areas considered important by investors and financial analysts, such as disclosure of segment and reconciliation, can gain competitive advantage from another company that has a strict disclosure policy.