Compliance with Disclosure Requirements under IFRS 3 of Companies Trading at Prague Stock Exchange

Taisia Nistorenco

doi:10.18267/j.efaj.224

Abstract

This article analyses compliance with information disclosure requirements under IFRS 3 Business Combinations in 23 companies trading at Prague Stock Exchange. The analysis was performed with the use of publicly available data contained in annual reports of the companies. Beyond quantification of the level of compliance, the research explores which factors affect diligence in following IFRS 3 disclosure requirements, specifically the company size, history of trading on the stock exchange, ownership structure and the acquisition price paid. The literature review also focuses on aspects with a potential to influence the level of diligence in areas of disclosure and consequences of infringing the disclosure rules. The paper concludes that the level of compliance can be considered average and in some cases unsatisfactory, while the company size and longer history of trading on PSE are positively correlated with the quality of disclosure.

Highlights

Importance of transparent communication between publicly traded companies and all their stakeholders and the general public is crucial for smooth functioning of capital markets
The aim of this article is to estimate the level of compliance with information disclosure requirements under IFRS 3 Business Combinations as demonstrated by companies listed on Prague Stock Exchange (PSE), to establish the determinants of non-compliance and importance of company-specific factors
By assessing the compliance with information disclosure requirements under IFRS 3 in companies listed on PSE, this study aims to provide a high-level understanding of the quality of reports that minority investors and the general public can work with, and to identify whether there is a need for regulatory intervention

Summary

Introduction

Importance of transparent communication between publicly traded companies and all their stakeholders and the general public is crucial for smooth functioning of capital markets. This has a considerable impact on the decision making processes of a wide spectrum of economic agents. Adoption of IFRS 3 disclosure requirements follows the goal of increasing the relevance, reliability and comparability of information regarding the business combination and, importantly, its effects. It is especially the effects of disclosure of information regarding business combinations that are important when analysing the level of compliance

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Results

Conclusion