PACC6005: Financial Reporting Standards - Financial Assignment

Internal Code: MAS3390

Financial Assignment:

During the past two decades, there have been many ideas for improving business reporting, and nearly all of them focus on the importance of companies providing more nonfinancial information. One reason for the growth in the disclosure of nonfinancial information is that the percentage of an entity’s market value that can be attributed to tangible assets has diminished from about 80% in 1975 to less than 20% in 2009. A 2003 Institute of Chartered Accountants of England and Wales white paper analysed 11 initiatives to reform reporting and reached the following conclusion: “None of these models, whatever their merits, has so far succeeded in commanding general support.” But if no framework for nonfinancial reporting has risen to the level of International Financial Reporting Standards (IFRS) or U.S. Generally Accepted Accounting Standards (GAAP), an increasing number of companies have been experimenting with the more effective disclosure of nonfinancial information. According to CorporateRegister.com, a data repository with over 35,000 reports from 8,220 different companies in 168 countries, almost 5,400 reports containing sustainability and other nonfinancial information were published in 2010. In addition to voluntary nonfinancial reporting by companies, other initiatives have been launched to push the development of more rigorous and systematic reporting of nonfinancial information. For example, South Africa has mandated “integrated reporting”—specifically, a single report that combines information on the company’s financial performance with information on its nonfinancial performance. In 2010, the Johannesburg Stock Exchange (JSE) codified the King III recommendations by amending its listing rules to require approximately 450 listed companies either to produce an integrated report in place of their annual financial and sustainability reports or to explain why they are not doing so. Questions: 1) Identify and discuss the nature of nonfinancial information. 2) Identify and discuss the nature of economic consequences. 3) Discuss how nonfinancial information should be reported. 4) Integration of the discussion of these two concepts and discussion of economic consequences of the nonfinancial information reporting.