Discussion Questions
1. Accounting measurement is the process of assigning numerical symbols to events
Chapter 5
Reporting and Disclosure
or objects. Disclosure, on the other hand, is the communication of accounting
measurements to intended users. Advances in financial disclosure are likely to outpace those related to accounting measurement for a number of reasons. First, many would argue that
financial disclosure is a less controversial area than accounting measurement. Second, changes in disclosure requirements are more rapidly implemented
Finally, whereas a single users equally well under
than changes in set of accounting different social,
accounting measurement rules. measurement rules may not serve economic and legal systems, a sacrificing
its accounting
company can disclose without necessarily measurement system.
2. Four reasons why multinational corporations are increasingly accountable to
constituencies other than traditional investor groups:
a. The development and growth of the influence of trade unions.
being held
b. The growing recognition of the view that those who are significantly affected by decisions
made by institutions in general must be given the opportunity to influence those decisions. c. The rejection by many governments of classical economic premises such as the belief that
the regulated pursuit of private gain maximizes society ' s welfare.
d. The increasing concern over the social and economic impact of multinational corporations
in host countries.
3. Arguments in favor of equal disclosure include:
a. The absence of equal disclosure would create an unfair playing field for
U.S. companies. . companies would have a competitive advantage in that they would not have to disclose the same information and so would not incur the costs involved in generating and publishing it. b. Investors in . companies have the same information needs as those who invest in U.S.
companies. A market concerned with investor protection would make sure that investors have timely and material information on all listed companies, not just those domiciled in the United States. c. Unequal disclosure might impede cross-company comparisons involving U.S.
and . companies.
Possible reasons against equal disclosure include:
a. The high cost of meeting equal disclosure requirements may deter foreign issuers from
listing in the United States. b. The extra costs involved work against the benefits of listing to the foreign companies.
Evaluation of arguments: All of these arguments have merit. There is no unambiguously correct
answer as to what disclosure requirements should be imposed on foreign issuers, and there has been a contentious debate on this subject in the U.S. in recent years. In practice, fairness
arguments often carry great weight in public debate, even when objective economic analysis does not support them.
4. Managers in Continental Europe and in Japan have for many years strongly objected to disclosing
information about business segment financial results. These managers have argued that the
information can be used by their competitors. In addition, Continental Europe and Japan have had traditions of low disclosure.
Requirements for disclosure about segment results have become more stringent in Japan, France, and Germany in response to strong investor and analyst demand for the information. More generally, the three countries are striving to improve the quality of their financial reporting standards in order to improve the reputation and credibility of their capital markets.
5. The simple answer is that mandatory disclosures are corporate disclosures made in response to
regulatory requirements (for example, rules issued by national regulators or stock exchanges), and that voluntary disclosures are purely discretionary in nature. The distinction between mandatory and voluntary
disclosures can be ambiguous in some settings, however. For example, the requirement that U.S. companies must file Form 10-Ks with the . Securities and Exchange Commission is straightforward. However, measurement and disclosure approaches for some of the items in the Form 10-K are not. Similarly, there
are widely divergent views concerning what types of press announcements are mandatory versus voluntary.
Two possible explanations for differences in managers ' voluntary disclosure practices are: (1) Managers in highly competitive industries may be less forthcoming than managers in less
competitive industries due to the expected cost of releasing information of potential use to their competitors. (2) Managers are expected to be more forthcoming when there is good news to
disclose, than when there is bad news, particularly when the news can be expected to affect share prices.
Two explanations for differences in managers ' mandatory disclosure practices
are: (1) Cross-jurisdictional differences in disclosure requirements. (2) Differences in the extent of compliance with disclosure rules due to cross- jurisdictional differences in enforcement.
6. Triple bottom line reporting refers to reporting on a company' s economic, social, and
environmental performance. It is a form of social responsibility reporting designed to demonstrate
good corporate citizenship. So-called “ sustainability ” reports are an increasingly popular means of triple bottom line reporting. There is substantial variation in social reporting today. More regulation would improve comparability, but it might also stifle
reporting innovations. The usefulness of social reporting to outside parties, particularly investors, needs to be demonstrated before implementing more regulation for it.
6. Often we expect to observe less voluntary disclosure by companies in emerging market countries
than by those in developed countries:
a. Equity markets are relatively less developed in many emerging market countries, resulting
in lower total demand for company information by investors and analysts.
b. In many emerging market countries, most financing is supplied by banks and insiders such
as family groups. This also leads to less demand for timely, credible public disclosure, and in these markets enhanced disclosure may have limited benefits.
8. In general, for the same reasons as in Discussion Question 7, we expect to observe fewer
regulatory disclosure requirements in emerging market countries than in developed countries. The equity markets and disclosure requirements in many emerging market countries are not yet well developed, and accounting and auditing systems in emerging market countries are less well developed than in more developed market countries. 9. The two broad objectives of investor-oriented equity markets are investor protection and market
quality. In the absence of investor protection, investors will not be willing to participate in a market. However, in the absence of market quality, markets will not function satisfactorily. Many would consider the objectives equally important. 10. It certainly is possible that more required disclosure will further encourage investor participation in
capital markets by providing more and better information on which to base investment decisions. Benefits of increased
investor participation include increased liquidity, reduced transaction costs,
and more accurate and efficient market pricing. However, it can also be argued that in some situations disclosure requirements are excessive. In markets where disclosure requirements are considered too stringent, companies may be deterred from publicly listing their shares, and may choose to use secondary markets (such as the over-the-counter market in the United States) that lack the investor protections of regulated stock exchanges, and which provide investors with lower liquidity and higher transaction costs. Thus, more required disclosure is not necessarily better than less.
11. Forecasts of revenues and income are relatively uncommon because there can be legal
repercussions if forecasts are not met. Forecasts rely on subjective estimates of uncertain future events, making them unreliable in many situations. Vaguer forms of forward looking information are more common than precise forecasts. For example, directional forecasts (up or down) of revenues and income are more common than range forecasts which are, in turn, more common than precise forecasts of these amounts. 12. Corporate governance refers to the structure of relationships and responsibilities among
shareholders, board members, and corporate managers. Investors and financial analysts use
information about a company
governance (for example, whether an audit
' s corporate
committee ' s members are
independent, and responsibilities and remuneration of board members) to better assess the level of investor protection (and therefore, expected cash flows to investors) at the company.
Exercises
1.
financial reporting means that timely and accurate are made on all a. Transparent
disclosures important matters affecting a company' s position and performance. It financial implies openness, communication, and accountability. b. Transparent financial reporting protects investors because nothing is
hidden from them. Investors can better assess the risks of owning securities when information is truthful and complete. Transparent financial reporting also improves market quality. It enhances investor confidence. Open communication creates markets that are fair, orderly, efficient, and free from abuse and misconduct. c. The financial reporting requirements on the Hong Kong Exchange promote transparent
financial reporting and they protect investors and promote market quality. For example, they require a complete set of audited financial statements, including a balance sheet, income statement, cash flow statement, and explanatory notes. Substantial disclosures
are also required, including segments and forward looking information discussed in the
chapter. Reports must include a management discussion and analysis. Accounting principles may be either Hong Kong Financial Reporting Standards or International Financial Reporting Standards. Both sets of standards are known for their high quality. All reports must be in
English. There are requirements on corporate governance. Timely disclosure of price sensitive information is required. Annual reports must be published within four months of year-end and half-yearly reports must be published within three months. Overall, the reporting requirements are substantial and complete.
2.
Schering AG provides a qualitative
forecast of one-year-ahead and two-year-
in the likely
ahead net sales. One-year-ahead net “mid to sales are expected to increase
From this, an investor would
high single- digit ” range.
infer growth of between 6 and 8 percent. Two-year-ahead sales are expected to increase further. Thus, this forecast is directional (up). There are similar forecasts of net sales for certain products and for certain regions.
For example, Yasmin? is expected to experience double - digit ” growth, while Betaferon? is expected to grow at high single - digit ” rates. Net sales in Europe are expected to grow at mid single - digit rates, while those in the
Schering also forecasts United States are forecast to be “above average. an operating margin of 18 percent for the next year.
forecast. There is no forecast of net income. Investors should find this information percentages would be even useful. Investors a
This is a precise
useful, but specific growth re
concerned about a company 's
own forecasts. future prospects. Managemen't s expectations guide users
Investors would also find a forecast of net income useful. 3. IFRS 8 requires that the following segment:
items be disclosed
for each reportable
a. Profit or loss. b. Assets.
c. Particular income and expense items if such measures are regularly provided to the chief
operating decision maker.
d. Reconciliations of reportable segment revenues, profit or loss, assets, and liabilities to
consolidated totals. (A reportable segment is an operating segment about which separate financial information is available that is evaluated regularly by management in
国际会计第七版课后答案作者：弗雷德里克
