REPORTING AND DISCLOSURE

REPORTING AND DISCLOSURE

1.      Accounting Disclosure Practices Influenced By Difference Corporate Governance, Financial Governance In A State

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

A.    VOLUNTARY DISCLOSURE

Some studies show that managers have incentives to reveal information about the company's current performance and future time voluntarily.

B.     MANDATORY DISCLOSURE PROVISIONS

Stock exchanges and government regulatory agencies generally require that foreign companies listed stocks to provide financial and non financial information similar to that required for domestic firms

C.     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:

                         I.            Disclosure of information to see the future.

                      II.            Disclosure of social responsibility.

                   III.            Specific disclosures for non-domestic users of financial statements and the accounting principles

D.    CORPORATE GOVERNANCE DISCLOSURES

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.

E.     DISCLOSURE AND REPORTING ON INTERNAL BUSINESS

Business Reporting Language (Extensible Business Reporting Language - XBRL) is an early stage of financial reporting revolution. Computer language is built into almost all software for accounting and financial reporting to be issued in the future, and most users do not need to learn how to cultivate it so that it can directly enjoy the benefits.

F.      DISCLOSURE REPORTS ANNUAL MARKET IN DEVELOPING COUNTRIES

Disclosure of the company's annual report on emerging market countries are generally less extensive and less credible than the reporting companies in developed countries.

G.    IMPLICATIONS FOR USERS AND FINANCIAL MANAGERS

The managers of many companies are constantly heavily influenced by the cost of mandatory disclosure, the level of mandatory and voluntary disclosure is increasing around the world

2.      Important Issues for Management Decisions Affecting Decision Making Disclosure

Management needs the information as a basis for their decision making. Of each activity and a different management decisions require information that is different

TYPE OF MANAGEMENT

Management activities associated with its level in the organization is divided into 3 sections:

·         Strategic planning is a top-level management activities.

·         Control of systems management is to ensure that the organization has followed a strategy which has been established to effectively and efficiently.

·         Control of system operation is to ensure that each particular task has been carried out effectively and efficiently.

TYPE MANAGEMENT DECISION

Decision-making (Decision making) is in the selection of alternative management actions to achieve the target. Decision is divided into 3 types

·         Decisions are programmed / structured decision-making which are repetitive and routine and iterative and conducted mainly at lower levels.

·         Decision half fixed / semi-structured is that some decisions can be programmed, some repetitive and routine and partly unstructured.

·         Decisions are not programmed / structured is not a decision that does not happen again and again and not always the case.

TYPE OF INFORMATION

Information system provides three different types of information:

·         Information on data collection (Scorekeeping information): information in the form of an accumulation or collection of data to answer questions

·         Information Briefing attention (attention directing information): helps management focus on the problems of deviant, irregularities

·         Information Troubleshooting (Problem Solving information): information to help managers make decisions to solve the problems it faces.

CHARACTERISTICS OF INFORMATION

To support the decision to be made ​​by management, then management needs information that is useful. For each level of management with different activities, information needs are different, the characteristics of this information include:

·         The density of information to lower levels of management, characteristics of the information is detailed (detail) and less dense.

·         Area Information for manjemen under which focuses on a particular issue

·         Frequency of information to lower level management is the frequency of the information it receives regular

·         Time management information to lower levels, the information required is the historical information

·         Access to Information Level require information under repeated periods

·         Source of Information: lower-level managers need more information with data sourced from the company's own internal and upper-level managers need information with external data sources at the firms

THE ROLE OF MANAGEMENT, by Henry Mintzberg

·         Informational Role: the role of personal relationships may consist of a figure head, the leader, liaison.

·         Role of Interpersonal: the role of managers as the central nerve (nerve center) organizations to receive the latest information and as a propagator (disseminator) personal information throughout the organization

·         Decisional role: conducted by the manager is as entreprenuer, as a person handling the disorder, as those who allocate the resources of the organization, and as a negotiator in the event of a conflict within the organization

DECISION PHASE

Simon (1960) introduced the four activities in the decision making process:

·         Intelligence: Gathering information to identify the problem.

·         Design: the design phase of the solution in the form of problem-solving alternatives.

·         Choice: choose from the solution phase of the alternatives provided.

·         Implementation: Phase implement the decision and report the results.

3.      Accounting Disclosure purposes in Equity Markets

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

  Koorperasi a need to attract capital in a very large amount to finance the production and distribution activities of the internal pembiyaan ekstensif.Oleh because it is highly dependent on external capital invested by the investor on a koorperasi, In return, an investor requires disclosure (tansparansi koorperasi ) in which investors can assess the quality of their stock to cultivate.

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

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

·         Because of the uncertainty of return is viewed in a probabilistic sense.

·          The investor uses a number of different measures to quantify the expected results of a security.

·         Investors prefer a high return rate for a certain risk level or vice versa.

·          The value of the securities is positively related to the flow of expected results and inversely related to the risks associated with the refund.

·         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.      Differences aspects Reporting and Disclosure Practices

In deciding what information will be reported, the usual practice is to provide sufficient information for judgments and decisions affecting the users. This principle is often referred to as full disclosure (full disclosure), recognizes that the nature and amount of information included in financial statements reflect a series of trade off assessments. This trade off between (1) the need to disclose in sufficient detail the things that will affect the decisions of users, with (2) the need to condense the presentation of information in order to be understood. In addition, preparation of financial statements must also take into account the cost of manufacture and use of financial statements (Kieso and Weygandt, 2002).

In case of information asymmetry is high, then the users of financial statements do not have enough information to know whether the financial statements, particularly income market has dimanipulasi.Teori Microstructure said that one of the adverse selection problem faced by decision makers is the possibility of firm-specific information is 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 the stock saham.Salah regulation is the decision of the chairman of the Capital market Supervisory Agency number Kep-06 / PM/2000 on 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 and and so on. disclosure prospect is enough 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.

Imhoff and Thomas (1994) in Yanivi (2003) proved that the quality rating of the analysis was positively related to conservatism in the estimation and selection of accounting methods, and a number of detailed disclosures on the reported figures. The implications of this discovery is a company that is more conservative in making estimates and choose the method of accounting (or management company with a level of income / low income smoothing) will reveal more information. If companies choose to report conservative earnings management / low earnings smoothing. Then it shows a negative relationship between income smoothing the level of disclosure.