The Importance and Use of Disclosure

Read the disclosure statement found below or on the Foundations website carefully and answer the questions below. You will need a calculator to complete the activity. Upload your answers to Black Board.

The main purpose of the financial statements is to provide creditors and investors with a summary of a business financial activity. All statements are prepared at certain times throughout the year. The balance sheet reports liabilities, assets, and owner equity of the company. The income statement matches incurred expenses during a period of generated revenue. The statement of retained earnings reports retained earnings from net loss and net incomes from

The full disclosure principle states that any future event that may or will occur, and thatwill have a material economic impact on the financial position of the business, should be disclosed to probable and potential readers of the statements. Such disclosures are most frequently made by footnotes. For example, a hotel should report the building of a new wing, or the future acquisition of another property. A restaurant facing a lawsuit from a customer who was injured by tripping over a frayed carpet edge should disclose the contingency of the lawsuit. Similarly, if accounting practices of the current financial statements were changed and differ from those previously reported, the changes should

The nature of the banker-customer relationship is one of agency. Amongst the duties that stem from this relationship, the bank’s duty of confidentiality is clearly an issue of great importance. The focus of this essay is on the scope and limitations of the bank’s duty, both to its customers as to the public. In order to analyse this it is necessary to firstly consider the idea of duty of confidentiality, Secondly, it is necessary to study the Court of Appeal’s judgement in the case of Tournier. Thirdly, this essay will take the Jack Committee report into consideration. Lastly, this paper will briefly mention the Banking Code, it will also discuss whether the principle in Tournier may be outdated and if so, whether it is in need of a new crystallised self, clearly stating the limits and boundaries of the bank’s duties both to the customer and to the public itself in the form of a statute. To conclude this essay will consider the future of the duty of confidentiality.

Such an intense focus has been placed on quarterly earnings as an indication of a company’s success by everyone from analysts to executives that ethics have for the most part been thrown out the window, sacrificed to the all important number, i.e. earnings per share. This is the theory in Alex Berenson’s book “The Number: How the Drive for Quarterly Earnings Corrupted Wall Street and Corporate America.” This number has become part of a game to be played, a figure to be manipulated – beat the number and Wall Street all but throws a parade, miss it and a company’s stock may be abandoned. Take into account the incentives that executives have to beat the number and one can find plenty of reasons to manage earnings.

This paper is being submitted to Steven Mendoza, Ph.D., MSCP in partial fulfillment of the requirements for Law and Ethics, PSY627, on January 24, 2015.

Entity-wide disclosures are required under Accounting Standards Codification (ASC) 280-10-50-40 through 280-10-50-42. The disclosures are required because every corporation does not report information in a similar fashion, and the disclosures would provide comparability of the financial statements among entities. For example, if a corporation uses a geographic approach in its financial statements, disclosing certain information about the products or services sold will make comparability to other companies much easier. The disclosures will also help with comparability within an entity if they decide to choose another method of reporting operating segments in the future. There are three types of entity-wide disclosures; products and services, geographic areas, and/or major customers. Every public company has to comply with the disclosures, even if the company has one reportable segment. The only exception to the entity-wide disclosures is if it is impractical to provide the information, such as it would be extremely costly to the corporation, or if the “internal reporting systems are not capable of gathering financial information by product or service by geographic area.” A disclosure should be made when entity-wide disclosures are impractical.

North Carolina sets specific laws regarding the sale of used cars. Used cars are generally sold as-is or with a limited warranty. Only in certain circumstances are sellers required to disclose information about the vehicle's history. Whether you're buying or selling a used car, it's important to know your rights and obligations under state laws.

In this research paper the authors want to express their thoughts by stating that how to them earnings reporting pertains to the discovery of information that has not been disclosed by either people or other types of sources and focus towards the negative in this study. In my opinion, the title of the paper itself could have had a different title only because throughout the paper it analyzes negative or bad news rather than really paying attention to both perspectives. Also the paper captures the information or news that occurs by using a three day window in which Quarterly Earnings Announcement (QEA) take place and compares it to a period where it does not take place. Furthermore, in this paper there are three hypotheses that arise

Disclosure is information regarding an activity of financial records that creditors, investors, and humans should know what when on in the company or organization regarding the finances increase or decrease. This includes strikes in the company, major fire, theft, a bad product, or a product that is at a high-demand regarding the time of year.

How do you interpret the situation when a person self-discloses too much information to soon in a relationship? How do you feel being on the receiving end of this sensitive information?

In the article “Textual risk disclosures and investors risk perceptions” by Kravet and Mushu (2011), the authors provided evidence that textual risk disclosures in annual reports corresponds with a similar amount of increase or decrease in the stock price and increased volatility in the volumes traded in the market, these disclosures are a mean for the managers to send signals about future firm performance to the investors who can then use the information to make a rational decision. The authors research 4315 firms between the years 1994 and 2007 leading to a sample of 28,110 observations for their article. The authors test how the investors and analyst’s behavior changes during the two months before and after the filings of the 10 – K reports the authors collect their data from. The test is conducted by linking the various test variables such as changes in stock returns, changes in volume traded by linking them amongst other variables to changes in management's forecasts, changes in risk disclosures, changes in sales, changes in institutional

In the underlying paper the author re-examines the conservatism principle and its asymmetric effects on earnings. With samples consisting of all firm-year observations from 1963 to 1990 with returns data on the CRSP NYSE/AMEX Monthly files and respective accounting data on the COMPUSTAT Annual Industrial and Research files, he formulates and tests four major hypotheses to find evidence for his predictions. At first he chracterizes “conservatism in accounting as the more timely recognition in earnings of bad news regarding future cash flows than good news”.1 In his first hypothesis he predicts a more sensitive response of earnings towards bad news in comparison to good news, proxied by negative and positve annual stock returns. His second prediction is that earnings are more timely than cash flow, indicating a stronger association of accruals to conservative accounting effects. Hypotheses three and four account for a test on the

In any business operations, full financial disclosure refers to the provision of the necessary information about a company for better decision making by the people accustomed. It is the financial revelation of a given company. There are some financial disclosures in any business that ensure proper understanding of financial statements to the financial readers, or potential auditors. Examples are the annual financial reports and the financial declarations of the company. The annual financial reports of the enterprise are very useful since they discloses the revenues recognized in the business, and the accountability of the inventories plus the income taxes accounted for during that period of operation. Second, is the disclosure of this financial statements which gives the actual revelation of the company 's stock options, liabilities and the effects of foreign currencies?! This disclosure includes the company 's balance sheet of the year, income statements and also the cash statements flows of that year. This information gives a proper understanding of the financial status users about the effects of inflation and price change on property and inventories (Berger, 2011).

The problem that exists in Pakistan under the current system is the lack of environmental information that could create a drive towards improvement. There exists the classic principal-agent problem with regulators needing good data about firm’s pollution levels, but the firms do not have a medium or drive of providing such information. This information asymmetry is addressed through introducing instruments such as the TRI or PROPER, which provides a platform for information collection and usage. It will indeed incentivise firms an incentive to improve their public image in the cheapest way available to them (Grafton et al, 2004).