A STUDY OF NEW TRENDS IN DISCLOSURE AND PRESENTATION OF FINANCIAL REPORTING

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"A STUDY OF NEW TRENDS IN

DISCLOSURE AND PRESENTATION OF

FINANCIAL REPORTING"

Submitted by

IBRAHIM HILAL ALKARAWEE

Under the Guidance of

Mrs. MADHURA BHAGWAT

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ORGANIZATION OF THE STUDY

I- Research Methodology.

II - Financial Reporting in India.

III - New Trends in Financial Reporting in India.

IV - Profile of Companies under the Study.

V - Analysis and Interpretation.

VI - Findings and Suggestion.

VII - Bibliography and webography.

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OBJECTIVES OF THE STUDY

1-To conduct the concept of disclosure and its importance.

2 - To study the types of disclosure.

3 - To determine the new mandatory and voluntary trends,

adopted by companies in financial disclosure.

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Concept of Corporate Financial Reporting

Financial reporting may be defined as communication

of published financial statements and related

information from a business enterprise to third parties

(external users) including shareholders, creditors,

customers, governmental authorities and the public.

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Objectives of Financial Reporting:

1- Provide Financial Information about the Reporting

Entity.

2- Helps the management to regulate the prices of its

goods and services.

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Users of Accounting Information:

External Users: Internal Users:

i- Creditors. i-Management.

ii- Tax Authorities. ii- Employees.

iii-Investors. iii- Owners.

iv-Customers.

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Concept of new trends in disclosure

There are two types of disclosure:

1- Mandatory Disclosure and,

2- Voluntary Disclosure.

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Mandatory disclosure

Mandatory items are those which are legally required to

be disclosed in corporate annual reports as per the

provisions in the Companies Act, 1956 and its various

amendments.

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Voluntary disclosure

Voluntary items are those which are not mandatory, but

these items are voluntarily disclosed by companies in

their annual reports, which are deemed to be relevant

for the interested groups.

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Analysis and interpretation data

The companies selected for these studies are Gas

Authority of India Limited (GAIL), Infosys limited and

Indian Tobacco Company Limited.

These new trends introduced in India so as to improvise

the performance of the company and increase the

transparency in the company.

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New trends of companies under study (mandatory disclosure) are:

1) Revised schedule VI.

2) Report on corporate governance.

3) Financial statement as per IFRS.

4) Business responsibility report.

5) Corporate social responsibility.

6) Environment protection.

7) Accounting for intangible assets.

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New trends GAIL (India) Ltd Infosys Ltd ITC Ltd

2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014

Revised Schedule VI × × √ √ √ × × √ √ √ × × √ √ √

Report on Corporate Governance

√ √ √ √ √ √ √ √ √ √ × √ √ √ √

Financial Statement as per IFRS

× √ √ √ √ √ √ √ √ √ × × × √ √

Business Responsibility Report

× × × √ √ × × √ √ √ × × × √ √

Corporate Social Responsibility

√ √ √ √ √ √ √ √ √ √ √ √ √ √ √

Environment Protection √ √ √ √ √ √ √ √ √ √ √ √ √ √ √

Accounting for Intangible

Assets

√ √ √ √ √ √ √ √ √ √ × × √ √ √

New Trends of Companies under study (Mandatory Disclosure)

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Other additional aspects reported by the company voluntary are:

1) Human resources management.

2) Value added statement.

3) Core values of the company.

4) Code of conduct.

5) Client engagement.

6) Inclusive growth.

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New trendsGAIL (India) Ltd Infosys ITC Ltd

2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014

Human Resources

Management

√ √ √ √ √ √ √ √ √ √ √ √ √ √ √

Value Added Statement × × × × × × × × × × × × × × ×

Core Values of the

Company

× × × × √ × √ √ √ √ √ √ √ √ √

Code of Conduct √ √ √ √ √ √ √ √ √ √ √ √ √ √ √

Client Engagement × × × × × √ √ √ √ √ × × √ √ √

Inclusive Growth √ √ √ √ √ √ √ √ √ √ √ √ √ √ √

Other additional aspects reported by the company voluntarily

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FINDINGS AND SUGGESTIONS

There are many criteria that emphasize the importance

of disclosure, where disclosure is one of the important

base .The important of disclosure comes from the fact

that the majority of the readers of the financial reports

do not have the right to inspect the records of entity.

The following are findings:

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FINDINGS

1- Infosys Ltd is the first company in terms of preparing mandatory disclosure, because it has adopted it early for example it has prepared its financial statement as per IFRS in 2010 but GAIL (India) Limited has prepared its financial statement as per IFRS in 2011 and ITC Ltd has adopted financial statement as per IFRS latterly in 2013. Infosys Ltd has started with Business Responsibility Report in 2012 in its annual reports but GAIL (India) Limited and ITC Ltd have started with Business Responsibility Report in their annual reports in 2013.

2- Infosys Ltd Company and GAIL (India) Limited have provided the report on corporate governance in their annual reports in 2010 but ITC Ltd provided it in its annual reports in 2011. Infosys Ltd Company and GAIL (India) Limited have adopted the accounting for intangible assets in the same year in 2010 but ITC Ltd has adopted it in 2012.

3- However Infosys Ltd came first, the second is GAIL (India) Limited, and the third is ITC Ltd in mandatory disclosure.

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FINDINGS

4- According to the voluntary disclosure, Infosys Ltd is the best company, the second ITC Ltd, and the third GAIL (India) Limited. All three companies under the study yet are not reporting value added statement in their annual reports which is an important indicator of performance.

5- AIL (India) Limited has no report about client engagement adoption.

6- GAIL (India) Limited discloses its corporate social responsibility (CSR) using diagrams which makes easy for stakholders for analysis and it saves their time. They have shown value added statement of per employee in the form of graph. They also focus on women empowerment and play an active role in innovation research and development.

7- Infosys Ltd and ITC Ltd have described core values in a much prescribed manner but GAIL (India) Limited has not given much attention to core values of company. GAIL (India) Limited has been reporting the core values of the company from 2014.

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FINDINGS

8- GAIL (India) Limited has also disclosed various measures undertaken by them toward environmental protection like rainwater harvesting, solid waste management etc. with the help of charts. They have described about corporate governance in a simple manner.

9- Infosys Ltd has focused on human capital management and discloses it in its annual report in a very nice manner. It has also disclosed its historical data in the form of bar diagram which simplifies the shareholders task of comparability.

10- Infosys Ltd has disclosed its financial statement as per revised schedule VI as well as disclosed it as per IFRS. It has used graphical representation wherever it is necessary to simplify the report. It has taken active initiation by giving explanatory statements under various sections.

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Suggestion

Presentation of annual financial reports plays an active role in providing useful financial information about the company's activities that are useful to internal and external users of financial statements in economic decision-making. Presentation of financial reports also helps both existing and potential investors, creditors, and other users in assessing the amounts, timing, and uncertainty of future cash receipts from dividends and interest.

1- All three companies under the study must prepare the value added statement in their annual reports.

2- Infosys Ltd and GAIL (India) Limited should adopt the same manner for certified Global Reporting Initiative (GRI) which was adopted by ITC Ltd in order to promote the efficiency sustainability reporting to gain competitiveness advances as well as promote economic sustainability.

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Suggestion

3- ITC Ltd played an effective role through participation in UN Global Compact principle fully but Infosys Ltd and GAIL (India) Limited are following it in a limited way so they must ensure complete adoption of the standards in order to comply with the principle of UN Global Compact which is related with areas like labour standards, human rights, environment and anti-corruption.

4- GAIL (India) Limited should disclose the ISO in an effective manner in its annual report so that the shareholders/stakeholders can know about industrial and commercial standards as well as ensure quality, safety, and efficiency of business.

5- GAIL (India) Limited should follow Extractive Industries Transparency Initiative for optimum using of natural resources which will lead to economic growth and development as well as increase in transparency in transaction between the government and companies.

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Suggestion

6- GAIL (India) Limited also can disclose the proper disclosure of the core value of the company.

7- GAIL (India) Limited should focuses on client engagement in its annual reports.

8- All the companies under the study should follow disclosure as per The Carbon Disclosure (CDP) norms Project in order to disclose their footprint and water usage and the strategies that they are taking to reduce it in their annual reports as well as economic decision making to cover all fields such as environment, health, care etc.

9- All the companies under the study are following proper norms for mandatory disclosure and also voluntarily disclosing a large amount of data in the annual reports. They must continue to follow and also continuously improve upon these high standards of disclosure in future also.

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