REPORTING AND DISCLOSURE PRACTICES

What do firms worldwide essentially disclose in their annual reports? Annual report disclosure practices reflect managers’ responses to regulatory disclosure requirements and their incentives to supply information and facts to economic statement users voluntarily. In many parts of the globe, disclosure guidelines mean little, and monitoring and enforcement are largely absent. Insofar as disclosure guidelines aren't enforced, the necessary disclosures are (in practice) voluntary, due to the fact corporate managers will not comply with disclosure guidelines if compliance is much more expensive than the expected costs of noncompliance.

Consequently, it is important to clearly distinguish between disclosures that are “required” and disclosures that basically are produced. It's misleading to concentrate on disclosure guidelines without having also looking at actual disclosure practices. For some varieties of disclosure (e.g., disclosures about material developments), managerial discretion plays such an vital role that monitoring (and hence enforcement) is tricky. Thus, these types of disclosure are far more or less voluntary. Finally, disclosure rules differ dramatically worldwide in places for example changes in equity statements, associated party transactions, segment reporting, fair value of financial assets and liabilities, and earnings per share. In this section we concentrate on (1) disclosures of forward-looking information and facts, (2) segment disclosures, (3) social responsibility reporting, (four) corporate governance disclosures, and (5) Internet organization reporting and XBRL.

These disclosure and reporting items had been selected because of their significance to monetary statement users. For instance, financial analysts and regulators have emphasized the importance of corporate disclosures of forward-looking data, including that related to corporate objectives and planned expenditures, and business-segment info. Governance disclosures have turn into essential in recent years as a result of corporate scandals at Enron, WorldCom, Parmalot, Ahold, and other corporations.

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Concepts for Ongoing Disclosure and Reporting of Materials Developments