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19.02.03- Rita Ilisson - Deloitte&Touche 1
Financial and Non-Financial Disclosure
Rita IlissonIAS Manager, Deloitte & Touche CEMember, IASC Standards Advisory Council
19.02.03- Rita Ilisson - Deloitte&Touche 2
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
19.02.03- Rita Ilisson - Deloitte&Touche 4
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
19.02.03- Rita Ilisson - Deloitte&Touche 6
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
19.02.03- Rita Ilisson - Deloitte&Touche 7
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
19.02.03- Rita Ilisson - Deloitte&Touche 8
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
19.02.03- Rita Ilisson - Deloitte&Touche 9
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
19.02.03- Rita Ilisson - Deloitte&Touche 10
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?
19.02.03- Rita Ilisson - Deloitte&Touche 11
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
19.02.03- Rita Ilisson - Deloitte&Touche 13
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)
19.02.03- Rita Ilisson - Deloitte&Touche 14
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?
19.02.03- Rita Ilisson - Deloitte&Touche 15
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
19.02.03- Rita Ilisson - Deloitte&Touche 16
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
19.02.03- Rita Ilisson - Deloitte&Touche 17
IAS 1 – Presentation of Financial Statements
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
19.02.03- Rita Ilisson - Deloitte&Touche 18
IAS 1 – Presentation of Financial Statements
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
19.02.03- Rita Ilisson - Deloitte&Touche 19
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
19.02.03- Rita Ilisson - Deloitte&Touche 21
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
19.02.03- Rita Ilisson - Deloitte&Touche 22
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
19.02.03- Rita Ilisson - Deloitte&Touche 24
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
19.02.03- Rita Ilisson - Deloitte&Touche 25
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
19.02.03- Rita Ilisson - Deloitte&Touche 26
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