19.02.03- rita ilisson - deloitte&touche1 financial and non-financial disclosure rita ilisson...

19.02.03- Rita Ilisson - Deloitte&Touche 1

Financial and Non-Financial Disclosure

Rita IlissonIAS Manager, Deloitte & Touche CEMember, IASC Standards Advisory Council


Corporate Governance accountability!

create value - return on capital gov regulations + culture of self-policing! good corporate economic efficiency

structures relationship betweenmanagementboardshareholdersstakeholders

provides incentives for pursuing the interest of the company and its shareholders

facilitates effective monitoring


Corporate Governance!


OECD Principles of Corporate Governance 1998 – good corporate governance

framework + business ethics + corporate awareness

environmental interestsocietal interests

no single model two-tiered – supervisory + executive boardunitary – board overseen by internal auditor


Management?


OECD Principles of Corporate Governance I. the rights of shareholders

secure methods of ownership registration right to convey and transfer shares obtain relevant information on timely basis receive notice of meetings

vote in absentia elect members of the board share in profits protection during mergers

anti-take-over devices - shield management from accountability


OECD Principles of Corporate Governance II. equitable treatment of shareholders

foreign and minorityprocedures - not unnecessarily difficult insider trading and self-dealingmanagement/board – disclose related party

transactions

III. role of stakeholders in corporate governancerights protected by lawperformance-enhancing mechanisms for

stakeholder participation i.e. employee share schemes


OECD Principles of Corporate Governance IV. disclosure and transparency

timely and accurate disclosure all material matters dissemination and accessdisclosure (minimum)financial and operating results

high quality accounting standardsfinancial and non-financial disclosure

off-BS guarantees within groupcompany objectives

material foreseeable risksmaterial issues regarding stakeholders


OECD Principles of Corporate Governance

financial and non/financial disclosuresgovernance structures and policies

members of board, key executives and their remuneration

incentive schemes, stock option schemes, pensions, guarantees, etc

audit committee ?nominations committee ?remunerations committe ?

major share ownership and voting rights audited – FS or FS and MD&A


OECD Principles of Corporate Governance V. responsibilities of board

integrity of accounting and financial reporting systems

independent auditor controls for monitoring risk, financial control

and compliance with laweffectiveness of governance practicesoversees process of disclosure and

communication board members – with sufficient time?

remuneration? – access to information?


OECD Principles of Corporate Governance V. responsibilities of board

steer in best interest - company and shareholders compliance with laws review/guide strategy, set performance objectives monitor implementation select, compensate and monitor key executives review key executive and board remuneration monitor and manage potential conflicts of interest

of management, board and shareholders


Management?


Directors’ Responsibility for the Financial Statements management responsible for preparing FS

present true and fair view of financial position and performance

prepared under IFRS or other GAAP

FS reflect events which occur btw balance sheet date and authorization date ...., which affect the valuation of assets and liabilitiesauthorisation vs. approval date?events after the balance sheet date, which do

not affect notes or MD&A(IAS 10 Events after the Balance Sheet Date)


Directors’ Responsibility for the Financial Statements assets/liabilities valued on a prudent basis

FS preparation requires judgement estimates up-to-date information up to authorisation

actual outcome may not coincide disclaimer ! management cannot be held responsible for

future changes in market or ec environment

the company is a going concernif not going concern?


IAS 1 – Presentation of Financial Statements financial statements = BS, IS, CFS, in OE

notes a) compliance b) accounting policies c) supporting info for items on face of each

financial statement order in which line items presented

d) other disclosures – contingencies and non/financial disclosures


IAS 1 – Presentation of Financial Statements

notesnumerical breakdowns and narrativescompliance

all IFRSs (IAS) present fairly – “true and fair” overridechange in accounting policies

retrospective restatement (Imp Project)ED 1 First-Time Application of IFRS

explicit and unreserved statement in those financial statements of compliance with IFRSs



accounting policies change in accounting policies

retrospective restatement (Imp Project)measurement basisother – elucidated in standardsunder accounting policies or in the notes

judgements made in applying accounting policies (Imp Project)

key measurement assumptions about the future (Imp project)

dividends proposed of declared



encouraged to present a financial review main features of financial performance and

position principle uncertaintiesmain factors determining performancechanges in operating environmentresponses to these changes and effectpolicy for investment to maintain and enhance

performancedividend policysources of funding – policy on gearing risk management policiesstrengths/resources not in BS?

environmental reports


European Directives annual Report (MD&A)

fair review of the business and position important events since the end of fin yearactivities in the field of R&D likely future development information about own shares

notes# employees and staff costsemoluments to members of administrative,

managerial and supervisory bodies any commitments – retirement pensionsadvances/credits – interest %, amounts repaidguarantees


Board?


European Directives Report of the High Level Group of Company Law

Experts on a Modern Regulatory Framework for Company Law in Europe – Oct 2002alternatives for primary legislation

secondary legislation –standard settingcompany law should be flexiblelisted companies - required to maintain and

continuously update company information on website

other proposals


IOSCO Principles for Ongoing Disclosure and Material

Development Reporting by Listed Companies – X.02key elements

information material to investor comprehensive list or general obligation

timeliness - immediate and periodicsimultaneous and identical disclosure

multiple listingsdisseminationdisclosure criteria

fair + no material omissionsequal treatment of disclosure (not to certain)allocation of accountability


Auditor?


IOSCO Principles of Auditor Independence and the Role of

Corporate Governance in Monitoring an Auditor’s Independence – X.02auditor independencegovernance body independent of M selects auditoraudit committee

key body which interacts with auditormandate – without restraint

meet on regular and frequent basisevaluate audit fees in relation to work

required to support audit opinionmonitor independencediscuss findings of quality control inspections


Sarbanes-Oxley Act of 2002 SEC – right to bar executives convicted of fraud from serving as officers auditors

restriction on nonaudit services to listed clientsretention of audit/review workpapers – 7 yrs.certain partners on team must rotate after 5-7 yrs.sharpened independence rules

partner may only procure audit, review and attest services

must report to audit committee “critical” accounting policies

independent oversight board for accounting profession


Sarbanes-Oxley Act of 2002 disclosure of

corporate audit committee financial experts understands - FS (financial statements) GAAP (generally accepted accounting principlesinternal controls and proceduresaudit committee functionsability to assess application of principles –

accounting estimates, accruals and allowancesexperience in preparing, auditing, analysing FS

and supervising these activitiescode of ethics

written standards – public copyfull, fair and timely disclosure


Management? Board? Auditors? Analysts? Legal Advisors? Bankers?

19.02.03- rita ilisson - deloitte&touche1 financial and non-financial disclosure rita ilisson...

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