Disclosure and Financial Reporting Essay Example | Topics and Well Written Essays - 2250 words

Disclosure and Financial Reporting - Essay Example It also helps the other market players to decide on mergers and acquisitions. Through disclosure of financial statements, the companies also endorse the financial information that has been sent to their regulating authorities like Securities and Exchange Commission (SEC). It is important to understand the key issues that affect the financial decisions of managers in disclosures and financial reporting. In this essay, the changes in regulations and standards that have improved the method of financial reporting and disclosure and the subsequent impacts on a company in terms of future cost, risk exposure and profits are being discussed. Several laws have been enacted and acts have been passed in different countries with the objective of making financial reporting and its disclosures more reliable and trustworthy. The objective of addressing the key issues is to ensure and protect the interest of the stakeholders and investors. One such act that addressed these issues is Sarbanes-Oxley A ct. It was first implemented for companies listed in NYSE and has now been spread all over the world. Sarbanes-Oxley Act has redefined and changed the ways of Corporate Governance of companies leading to efficient and transparent operations (Ambler, Massaro and  Stewart, 2005, p.38). ... Many investors had previously complained about the relevance and volume of financial information in their disclosures and were also unhappy of finding useful information in the disclosure and financial reporting by companies. In the above context, SOX was enacted in order to make it mandatory for companies to certify accuracy and relevance of the financial information disclosed by them. Non-adherence to SOX Act also earned penalties for the companies. The enactment of SOX has empowered the external auditors and has increased the role of oversight for the concerned Board of Directors. The change in role of the Board of directors has redefined corporate governance by making it stricter than earlier. Through efficient corporate governance, the companies were able to deal with the new system of laws and regulations and maintain healthy relationships with their stakeholders (Rao, 2000, p.42). The continuous monitoring of the board of directors helped in eliminating the misdeeds or misappr opriations in the part of corporate officers. As a result of these changes in regulation, the following key issues were addressed. Proper system of accounting and financial reporting was put in place which enabled disclosure of only and only relevant information to the stakeholders of the company. Secondly, flexible requirements were put in place for the companies to report relevant information for some specific circumstances. Thirdly, a judgment panel or framework was instituted to decide which information is pertinent with respect to specific situation faced by the companies. Fourthly, suitable techniques were adopted in order to make information more user-friendly and easy to find for the readers.