REPORTING AND DISCLOSURE

REPORTING AND DISCLOSURE

1. Explain how the disclosure of accounting practices are influenced by differences in corporate financial governance in a country.

Development of the disclosure system is closely associated with the development of systems and practices disclosure influenced by financial resources, legal systems, political and economic ties, the level of economic development, education, culture, and other differences in disclosure is driven largely by differences in corporate governance and finance.

In the United States, Britain and other Anglo-American countries, equity markets provided most of the funding that the company needs to be very advanced. In these markets, ownership tends to spread widely among many shareholders and investor protection is emphasized. Institutional investors play an increasingly important role in these countries, demanding financial returns and increasing shareholder value. In most other countries (like France, Japan and some emerging market countries), share ownership is still highly concentrated and the bank (or the owner and family) has traditionally been a major source of corporate financing. These banks, and the other in obtaining more information about the company's financial position and activities.

VOLUNTARY DISCLOSURE

Some studies show that managers have incentives to reveal information about the company's current performance and future time voluntarily. In a recent report, the Financial Accounting Standards Board (FASB) describes a FASB project on business reporting which supports the view that the company will benefit from the capital market by increasing voluntary disclosure. The report outlines how companies can describe and explain its investment potential to investors.

A number of rules, such as accounting and disclosure rules, and approval by a third party (such as auditing) can improve the functioning of the market. Accounting rules to try to reduce the ability of in record economic transactions in ways that do not represent the best interests of shareholders. Disclosure rules establish provisions to ensure that shareholders receive timely, complete and accurate.

MANDATORY DISCLOSURE PROVISIONS

Stock exchanges and government regulatory agencies generally require that listed companies to foreign companies to share financial information and nonfinancial information similar to that required for domestic firms. Any information that was announced, which was distributed to shareholders or reported to regulatory agencies in the domestic market. However, most states do not monitor or enforce the implementation of the provisions of "suitability disclosure between the (jurisdiction)."

Protection of shareholders differ from country to country. Anglo-American countries such as Canada, Britain and the United States to provide protection to shareholders who are widely and strictly enforced. In contrast, the protection to the shareholders received less attention in some other countries like China for example, prohibiting insider trading (trading that involves the inner circle), while weak law enforcement make the enforcement of these rules are almost non-existent.

REPORTING AND DISCLOSURE PRACTICES

Disclosure rules are very different around the world in some ways like the statement of cash flows and changes in equity, related party transactions, segment reporting, the fair value of financial assets and liabilities and earnings per share. In this section attention is focused on:
1. Disclosure of information to see the future "information look to the future" that includes:

a. forecast revenue, profit and loss, profit and loss per share (EPS), capital expenditures, and other financial post.

b. prospective information regarding the performance or future economic position that is not too sure when compared with the projected post, fiscal period, and the projected number of

c. report management plans and objectives of future operations.

Most companies in each country presents a disclosure of information about plans and goals. Conversely fewer companies that disclose prophecy, from the lowest two companies in Japan and the highest 31 companies in the United States. Most forecasts in the U.S. and Germany regarding capital expenditure, not profits and sales.

2. Disclosure of segment

Investors and analysts will request information regarding operating results and financial industry segments classified as significant and increasing. Example, financial analysts in the United States has consistently been asked report data in the form of a much more detailed than they are now. International Financial Reporting Standards (IFRS) also discussed the highly detailed segment reporting. This report helps the users of financial statements to better understand how the parts of a company affects the whole enterprise.

3. Cash flow statement and fund flow

IFRS and accounting standards in the United States, Britain, and a large number of other countries require the presentation of cash flows.

4. Disclosure of social responsibility

Today the company is required to demonstrate a sense of responsibility to a bunch of so-called interested parties (stakeholders) - employees, customers, suppliers, governments, activist groups, and the general public.

Information regarding the welfare of employees has long been a concern for labor organizations. The problem areas of concern related to working conditions, job security, equality of opportunity, workforce diversity and child labor. Employee disclosure also preferred by investors because it provides valuable input regarding labor relations, cost, and productivity.

5. Specific disclosures for non-domestic users of financial statements and the accounting principles used financial report may contain special disclosures to accommodate the users of financial statements. Such disclosure is:

1. Repeated for convenience of presentation "of financial information into currency

2. Repeated presentation of the results and financial position is limited by the two accounting standards
3. A complete set of financial statements prepared in accordance with accounting standards groups, and some discussion about the differences between the accounting principles that are widely used in the primary financial statements and a few other sets of accounting principles.

Many companies in countries that do not use English as primary language translation also perform throughout the annual report of the home country language into English. Also, some companies prepare financial statements in accordance with accounting standards more widely accepted than domestic standards (particularly IFRS or U.S. GAAP) or in accordance with both domestic and a second group of standard accounting principles.

CORPORATE GOVERNANCE DISCLOSURES

1. Corporate governance related to the internal tools used for running and controlling a firm - responsibility, accountability and the relationship between the shareholders, board members and managers are designed to achieve corporate objectives. The problems of corporate governance include the rights and treatment to the shareholders, the board's responsibilities, disclosure and transparency and the role of the parties concerned. Corporate governance practices has gained the attention of regulators, investors and analysts.

2. Understand the important issues that affect the management decision to make the disclosure decision

Management needs the information as a basis for their decision making. Information systems have an important role in providing for all levels of management. Tiap2 activities and different management decisions require different information. By it's kana interchangeable remedy which provides information relevant and useful to management, the information system developers hrs understand first activities undertaken by management and the type of decision.

TYPE OF MANAGEMENT

Management activities associated with its level in the organization is divided into 3 sections:
1. Strategic planning: a top-level management activities, the environmental evaluation process outside the organization, implementation of organizational goals, and determination of the environmental evaluation of the strategy-outside the organization: external environment can affect the course of the organization, therefore the top-level management to evaluate smart hrs, hrs interchangeable react kesempatan2 given by an eye outside environment,  new products, new markets. Besides the top-level management hrs tekanan2 of responsiveness to the external environment inimical organization and where possible convert pressure into an opportunity.

2. Goal setting is what a chieved by the organization based on the vision is owned by management. For example, the company's goal is within the 5 years to be the biggest seller in the industry with a 60%  strategy: Management of TKT on determining who tindakan2 hrs undertaken by the organization with the intention of achieving tujuan2nya remedy. With the strategy of all abilities who sumberdaya2 be deployed in order to achieve organizational goals.

3. Management control: the system to assure that the organization has followed a strategy which has been established to effectively and efficiently. This is a tactical level (tactical level), that is how middle management tactic to execute strategic planning can be done successfully. Run tactics which are usually short term management control consists of: the creation of the work program, budget preparation, execution and measurement, reporting and analysis.

4. Control of operations: The system to assure that each particular task has been carried out effectively and efficiently. This is an application program specified in control operations carried out under the management control process guidelines and focused on the lower level tugas2.

TYPE MANAGEMENT DECISION

Decision-making (Decision making): is the selection of alternative management actions to achieve the target.

Decision is divided into 3 types:

1. Decision programmed / structured decisions: decisions which berulang2 and routine, so that DAPT programmed. Structured decision happens and is done mainly  below TKT. Example of a decision ordering products, making collection of accounts receivable, etc..
2. Decision half programmed / semi-structured: the decision which partially interchangeable programmable, most repetitive and routine and some ill-structured. These decisions often are complex and require detailed reply perhitungan2 and analysis. Examples of decision to buy a computer that is more sophisticated systems, the promotion fund allocation decisions.
3. Decisions are not programmed / unstructured: a decision which does not happen again and again and not always the case. This decision occurred on the upper level management. Information for decision making morbidly ill structured and easy to get ill easily available and usually come from the outside environment. Experience Manager is a very important thing in ill-structured decision-making. The decision to merge with another company is an example of ill-structured decision-spasmodic.

DECISION PHASE

Simon (1960) introduced the four activities in the decision making process:
1. Intelligence: Gathering information to identify the problem.
2. Design: the design phase of the solution in the form of problem-solving alternatives.
3. Choice: choose from the solution phase from which alternatives are provided.
4. Implementation: Phase implement the decision and report the results.

Decision Making in Management

Decision Making

Decision-making (decision making) is to assess and impose was taken after some calculations and considerations option was dropped, there are several steps that may be traversed by the decision maker. These stages may include identification of major problems, alternative will be selected and arrive at the best decision. In general, the notion of decision making has been suggested by many experts, such as:

Steps in Problem Analysis

1. Determining the purpose of determining the first target without confusing what is to be achieved and what you want done

2. Gather facts by studying the records are relevant, applicable rules and customs, talk to the person concerned to know the opinion

3. Consider the facts and determine the follow-up to be taken by connecting facts with one another.

4. Take action with respect to:

·         Determine who should take action.

·         Consider who needs to be informed about the decision to be taken

·         Determine the appropriate time to carry out actions that have been decided.

5. Check the results of its implementation to determine whether the objectives achieved and learned changes in attitudes and relationships between one party to another party.

Experts said the decision:

1. G. R. Terry:

Suggested that the selection decision is based on certain criteria of two or more alternatives are possible.

2. Claude S. George, Jr.:

Said that the decision-making process undertaken by most managers in the form of an awareness, which includes consideration of the activities of thinking, assessment and selection among alternatives.

DECISION PHASE
1. Intelligence activities
Creative process to find a condition that requires a decision is selected or not.
2. Design activities
Activities that put forward the concept of intelligence-based activities to achieve goals.
Design activities include:
- Find
- Develop methods
- Analyze the actions taken
3. Election activities
Choose one of the many alternatives in the existing decision-making. The selection is based on established criteria.
 of the three mentioned above, we can conclude the decision-making stages are:

·         Identify the main problem

·         Develop alternative

·         Analyze the alternatives

·         Taking the best decision

1. Decision Making Techniques
Operational Research / Operations Research
The use of scientific methods in analyzing and solving problems.
2. Linear Programming
Research with mathematical formulas.
3. Gaming War Game
The theory of the determination of strategy.
4. Probability
Probability theory is applied to the rational calculation of matters is not normal.

DECISION-MAKING PROCESS

Decision-making processes nearly equal to the formal strategic planning process that is several stages:
A. Stage 1: Understanding and formulation of the problem
2. Phase 2: Collection and analysis of relevant data.
3. Phase 3: Development
4. Phase 4: Evaluation of Alternatives
5. Stage 5: Selection of best alternative
6. Stage 6: Implementation of decision

3. Identifying the purpose of accounting disclosure in the equity markets.

In a competitive economy, the disclosure is a means to channel  accountability to capital providers (investors) and to  allocation of resources to their most productive use.

a need to attract capital in a very large amount to finance the production and distribution activities are extensive. Therefore internal  is highly dependent on external capital invested by the investor on a , In return, an investor requires disclosure in which investors can assess the quality of their stock to cultivate.

Conceptual link between disclosure and cost of capital  of the theory of investment behavior under conditions of uncertainty, namely:

1. In a world of uncertainty, investors look at returns on investment securities as money received as a consequence of ownership.

2. Because of the uncertainty of return is viewed in a probabilistic sense.
3. Investors use a number of different measures to quantify the expected results of a security.
4. Investors prefer a high return rate for a certain risk level or vice versa.
5. The value of a security is positively related to the flow of expected results and inversely related to the risks associated with the refund.

6. Thus, disclosure of the company will increase the probability distribution of outcomes expected by investors by reducing the uncertainty associated with the refund. So will improve performance (performance of the company) in the eyes of investors that lure investors to invest on a larger similar securities so as to reduce the cost of capital.

4. Understanding the fundamental differences corporate financial disclosure practices in various aspects.

In case of information asymmetry is high, then the users of financial statements do not have enough information to know whether the financial statements, in particular earnings have been manipulated. Microstructure market theory says that one of the adverse selection problem faced by decision makers is the possibility of firm-specific information that the material not disclosed to the public (Yanivi, 2003). Capital market regulators to reduce this information asymmetry by making the minimum requirement for disclosure needs to be done by the companies listed on stock exchanges. One such regulation is the decision of the Capital Market Supervisory Board chairman KEP-06/PM/2000 number of guidelines for financial statement presentation. Greenstein and Sami (1994) in Yanivi (2003) examined and found that the obligation of the Securities Exchange Committee (SEC) regarding the disclosure of public enterprise segment in the U.S. stock market has reduced the information asymmetry is indicated by a decrease in bid-ask spread of the company.

Level of disclosure in the financial statements will help users of financial statements to understand the content and the numbers reported in financial statements. There are three levels of disclosure that is full disclosure, disclosure is reasonable, and adequate disclosure. Refers to the full disclosure of all information provided by the company, well-informed financial and nonfinancial information. Full disclosure not only include the financial statements but also includes information provided in the management letter, company prospect, and so on. Adequate disclosure is the disclosure required by applicable accounting standards. While the disclosure is reasonably adequate disclosure coupled with other information that could affect the fairness of financial statements such as contingencies, commitments and so forth.

Notes to the financial statements include narrative explanations or details of the amount shown in the balance sheet, income statement, cash flow statement and statement of changes in equity as well as additional information such as contingency obligations and commitments. Notes to the financial statements also include the information required and encouraged to be disclosed in the Statement of Financial Accounting Standards and other disclosures necessary to produce a fair presentation of financial statements.

Notes to the financial statements disclose:

1. Information on the basic financial statements and accounting policies are selected and assigned to important events and transactions.

2. The information presented in GAAP but not presented in the balance sheet, income statement, cash flow statement and statement of changes in equity.

3. Additional information is not presented in the financial statements but is required in order to be fair representation.

Level of disclosure in the financial statements will help users of financial statements to understand the content and the numbers reported in financial statements. There are three levels of disclosure that is full disclosure, disclosure is reasonable, and adequate disclosure. Refers to the full disclosure of all information provided by the company, well-informed financial and nonfinancial information. Full disclosure not only include the financial statements but also includes information provided in the management letter, company prospect, and so on. Adequate disclosure is the disclosure required by applicable accounting standards. While the disclosure is reasonably adequate disclosure coupled with other information that could affect the fairness of financial statements such as contingencies, commitments and so forth.

Quality of Disclosure

Disclosure quality in corporate annual reports known by a variety of concepts. Among others, the sufficiency (adequacy) (Buzby, 1975), completeness (comprehensiveness) (Barrett, 1976), Informative (informativeness) (Alford et al., 1993), and on time (time lines) (Courtis, 1976; Whittred, 1980 ). Imhoff (1992) refers to the level of completeness as a characteristic quality of disclosure, while Singhvi and Desai (1971) refers to the completeness (completeness), accuracy (Accuracy), and reliability (reliability) as the characteristic quality of disclosure. Empirical indicators of the quality of expression in the form of disclosure index (disclosure index) which is the ratio (ratio) between the number of elements (items) information that is filled with a number of elements that might be met. The higher the number the disclosure index, the higher the quality.