Benefits of Disclosing Non-Financial Information
Introduction
In the last three decades, there has been an increasing trend for companies to publish or produce a wide range of information on environmental, social and sustainable nature of their business operations. Some of the disclosures are made on the official company reports but the reports on Sustainability and the CSR (Corporate Social Responsibility) are reported on separate company reports. Some countries have official guide lines that guide the legal requirements of such reports production. In some countries such reports are mandatory but in others they are optional. (Elshandidy, Fraser and Hussainey, 2011)
Disclosures of non financial information on financial statements as required by the International Financial Reporting Standards are basically designed as a common financial global language for business operations so that a firm accounts are interpreted and compared uniformly all over the world. (IASB, 1998) GAAP is an acronym for generally accepted accounting principles. It’s made up of a series of commonly used accounting rules and practices for financial reporting. The objective of GAAP and IFRS is to ensure that there is a standard in all companies concerning financial reporting which should be transparent and consistent from one company to the other. (Economist, 2008) The major reason for inclusion of non-financial information in financial statements is to ease comparability.
Some firms may disclose information on the company’s Corporate Social Responsibility voluntarily especially when they have been designed to as a package to improve the company’s credibility, reputation and acceptance in particular markets. Large Multinational Corporations utilize the disclosures to present their social achievements in a way that promotes the company’s image. Disclosures are business drivers for certain companies. Balance Score cards represent standard measure of a company’s performance. (Einhorn, 2005)
Disclosures of non financial information enhance a firm’s credibility and reputation. It also increases the firm’s ability to do business and by marketing its strong aspects and utilizing its good relations in the society. It may lead to increased sales and enables attraction of better customers, improves transparency in its reporting.
The costs of including non financial information in financial are the costs of collecting the data, the internal processes of organizing the information into meaningful data and the consolidation of internal control systems, staff training and capacity building among the employees and the development of particular tools that are applicable in the processes.
To conclude, the major benefits of the disclosures are the positive results relating to the increased transparency, branding, improved opportunity to analyze the company’s performance, improved credibility and reputation and the ability of consumers and potential investors to evaluate the company’s achievements.
References
Einhorn, E. (2005). The nature of the interaction between mandatory and voluntary
disclosures. Journal of Accounting Research, 43(4), 593-621. http://dx.doi.org/10.1111/j.1475-679X.2005.00183.x
Elshandidy, T., Fraser, I. and Hussainey, K. (2011).Aggregated, voluntary, and mandatory
risk disclosures incentives: evidence from UK FTSE all share. working paper, Stirling
University, Stirling. http://dx.doi.org/10.1108/15265941211203189
Economist (2008) Economist.com, “Closing the GAAP: America embraces international
accounting standards. Economist 2008
IASB (1998) International Accounting Standard 34, International Accounting Standards
Board, IFRS Foundation
Last Completed Projects
| topic title | academic level | Writer | delivered |
|---|