La informática educativa y el software multimedia educativo

Disclosing information voluntarily, going beyond what is required by law or listing rules can be advantageous for the following reasons:

(a) Wider information provision

Disclosures covering wider areas than those required by law or regulations should give stakeholders a better idea of the environment within which the company is operating and how it is responding to that environment. This should enable investors to carry out a more informed analysis of the strategies the company is pursuing, reducing information asymmetry between directors and shareholders.

(b) Different focus of information

Voluntary information can be focused on future strategies and objectives, giving readers a different perspective to compulsory information that tends to be focused on historical accounting data.

(c) Assurance about management

Voluntary information provides investors with further yardsticks to judge the performance of management. Its disclosure demonstrates to shareholders that managers are actively concerned with all aspects of the company's performance.

LOs 8.7 8.8

LO 8.9

While the provision of detailed information can be very useful and goes a long way in achieving the corporate governance principles of transparency and accountability, the downside is that there is such a large amount of information that some shareholders may get ‘‘information overload'.

In response to this, many companies ask shareholders if they want to receive a summarised annual report and accounts, and then publish the full report and accounts plus the other voluntary information on their website. This allows users to choose how much they want to read.

For example, Tesco plc, a UK supermarket group has a vast amount of information on its corporate website, but users can create their own report by only selecting the information they wish to read and therefore avoid the information they are not interested in.

Many of the top 20 Australian publicly listed companies allow shareholders to view annual reports interactively online. This means they can access any annual report or financial statement and launch interactive features allowing them to navigate through the report or statement as they wish. Companies providing this feature include BHP Billiton Ltd, Telstra Corporation Ltd, Wesfarmers Ltd, the Westfield Group and Woolworths Ltd.

Key chapter points

x Agency is extremely important in corporate governance as often the directors / managers are acting as agents for the owners. Corporate governance frameworks aim to ensure directors / managers fulfil their responsibilities as agents by requiring disclosure and suggesting they be rewarded on the basis of performance.

x Annual reports must convey a fair and balanced view of the organisation. They should state whether the organisation has complied with governance regulations and codes. It is considered best practice to give specific disclosures about the board, internal control reviews, going concern status and relations with stakeholders.

Quick revision questions

1 What does the following statement define?

'A contract under which one or more persons engage another person to perform some service on their behalf'.

A substance over form B accountability C agency theory D principal theory 2 What is fiduciary duty?

A the need for directors to prepare financial statements that show a true and fair view

B the need for directors to act in the best interests of the company and not out of self-interest C the need for directors to disclose their personal shareholding in a company they manage D the directors running a company on behalf of the shareholders

3 Which of the following are examples of agency costs?

I Directors' salaries II External audit fees

III Finance department salaries A all of them

B I only C II only D I and II only

4 According to IAS 1 Presentation of financial statements, which of the following are mandatory disclosures in the annual financial report?

I Income statement

5 ABC Co is a large company, listed on the London Stock Exchange. Is it required to prepare a corporate governance report as part of its annual financial report?

A yes, the report must be disclosed B no, the report is not required

6 Which of the following must be disclosed in a non-listed company's annual report?

A environmental report B management commentary

Answers to quick revision questions

The answers to these quick revision questions can be found in the Answers to quick revision questions at the end of the Study Manual.

Self-assessment questions

1 Which of the following does not accord with the duties of an agent?

A an unpaid agent is not bound to carry out his agreed duties

B an agent must obey instructions even if asked to perform an illegal act C an agent may delegate his duties in a few special circumstances

D an agent's own interests must not conflict with those of the principal 2 Consider the following statements:

I A management buy-in occurs when existing managers purchase the business

II In a share option scheme, employees are given a number of share options, each of which gives the holder the right after a certain date to subscribe for shares in the company at a fixed price

Which of the statements are correct?

A I only B II only

C both statements D neither statement

3 Which International Accounting Standard deals with the presentation of financial statements?

A IAS 1 (revised) Presentation of financial statements B IAS 16 property, plant and equipment

C IFRS 1 First time adoption of IFRS D IFRS 4 Insurance contracts 4 Consider the following statements:

I The responsibility for preparation of the financial statements is that of the auditors II The auditors' report confirms that the financial statements are correct

A I only B II only

C both statements D neither statement

5 Which of the following is a non-mandatory disclosure in a listed company's annual report?

A statement of financial position B corporate governance disclosures C social and environment report D statement of cash flows

6 Which of the following is not an advantage of voluntary disclosures by companies?

A gives stakeholders a better idea of the environment within which the company is operating and how it is responding to that environment.

Answers to self-assessment questions

The answers to these self-assessment questions can be found in the Answers to self-assessment questions at the end of the Study Manual.

Answer to chapter question

1 When an agent acts for a principal they have a number of duties:

x The agent who agrees to act as an agent for reward has a contractual obligation to perform his agreed task.

x The agent must act strictly in accordance with his principal's instructions provided these are lawful and reasonable. Even if he believes disobedience to be in his principal's best interests, he may not disobey instructions. Only if he is asked to commit an illegal act may he refuse.

x A paid agent undertakes to maintain the standard of skill and care to be expected of a person in his profession.

x The agent owes a duty to perform his task himself and not to delegate it to another other than in certain special circumstances.

x The agent owes to his principal a duty not to put himself in a situation where his own interests conflict with those of the principal.

x The agent must keep in confidence what he knows of his principal's affairs even after the agency relationship has ceased.

x An agent must hand over any benefit to the principal unless he agrees that the agent may retain it.

Learning objectives Reference Efficiency in capital markets and company reporting LO9 Distinguish between the following concepts of capital market efficiency: LO9.1

weak form efficiency LO9.1.1

semi-strong form efficiency LO9.1.2

strong form efficiency LO9.1.3

Discuss the benefits of providing company information to shareholders LO9.2 Discuss the content of the following company reports: LO9.3

annual financial report LO9.3.1

chairman’’s statement LO9.3.2

directors’’ report LO9.3.3

corporate governance statement LO9.3.4

corporate social responsibility report LO9.3.5

auditors' report LO9.3.6

Chapter 9

Efficiency in capital markets and