Disclosure Compliance Research Articles

Early evidence of the effect of ASU 2017‐12 on derivative disclosure compliance

AbstractThe growth in the use of financial derivatives for a variety of purposes has caused increased complexity in derivative reporting standards. As such, financial statement users have asked the Financial Accounting Standards Board to update guidance to increase transparency while preparers seek clearer guidance on the application of standards and a broadened scope of hedge accounting. The most recent derivative accounting guidance update, ASU 2017‐12 (Topic 815), broadens instruments that qualify for hedge accounting, expands allowable hedge accounting techniques, and reduces reporting requirements by omitting the reporting of hedge ineffectiveness. While these changes might simplify reporting requirements, there is the risk that the omitted disclosure would have been relevant to investors’ decision‐making. In this paper, we examine how derivative disclosure practices changed following the implementation of ASU 2017‐12. Using a hand‐collected sample of twenty S&P 500 firms, we calculate a derivative disclosure compliance (DDC) score and find that, on average, DDC scores decreased following firm adoption of ASU 2017‐12. This decline was realized for firms regardless of the notional amounts of derivative instruments held. However, the decline was not significant for early adopting firms suggesting a motivation for completeness by select firms. Our initial findings indicate that the update on derivative disclosures is not being uniformly applied potentially lessening its value to users. As a result, further updates may be necessary.

ANALISIS SHARIA GOVERNANCE & STRUKTUR MODAL TERHADAP TINGKAT KEPATUHAN SYARIAH BERDASARKAN STANDAR AAOIFI

This study aims to analyze the influence competency of SSB, SSB size, board of directors’ meetings, board tenure, audit committee, firm size, and leverage on the level of disclosure of sharia compliance based on AAOIFI standards in Indonesia and Malaysia for the period 2011-2020 using DPS disclosure based on AAOIFI Governance Standard No. 1 & 5. The population of this study were Sharia commercial banks in Indonesia and Malaysia using purposive sampling method. Data analysis was performed by panel data regression. The results showed that the variable competence of DPS, the number of DPS, and the board of Directors meeting a positive effect on sharia compliance. While the variable tenure of the board of Directors, audit Committee, firm size, and leverage does not affect sharia compliance

Moderating Role of Financial Performance on The Relationship Between Board Attributes and Corporate Sustainability Disclosure Compliance

The concept of financial performance is of great concern to stakeholders. This empirical paper investigates the moderating role of financial performance on the link between board attributes and corporate sustainability disclosure compliance (CSDC). The going concern of a company depends on its ability to generate returns from operating, investing, and financing activities. Thus, it is crucially important to explore the extent to which a firm's financial performance strengthens the influence of firm-level determinants of CSDC. The sample for the current study consists of 118 Nigerian-listed companies over seven years between 2011 and 2017. The dynamic GMM regression analysis is used for data analysis. The GMM results reveal the moderating effect of return on assets and return on equity on the influence of firm and board attributes on CSDC, evident from significant positive interaction with board size, board independence, gender diversity and audit committee. This implies that when firms gain financial strength to engage in more sustainable activities, this increases the level of corporate sustainability disclosure compliance.

ANALISIS PENGUNGKAPAN SUSTANINABILITY REPORT BERDASARKAN GRI INDEKS PADA PT.INDOFOOD CBP SUKSES MAKMUR DAN PT. UNILEVER INDONESIA

AbstractThis research was conducted to find out how the application of sustainability reports in the company's annual reports and make a comparison of how the level of application is in two large companies listed on the Indonesia Stock Exchange in the consumer goods industry sector in 2021. The object of this research is PT. Indofood CBP Sukses Makmur and PT. Unilever Indonesia, with the variable in this study is the level of compliance in disclosing the sustainability report The data used in this study was secondary data in the form of company annual reports taken directly from the company's website which is the object of research. The author uses the GRI index as an indicator in the implementation of the sustainability report and uses content analysis and comparative methods as analytical tools. The results showed that the level of disclosure compliance in the Indofood CBP Sukses Makmur sustainability report was classified as partially applied and PT. Unilever Indonesia is also classified as partially applied. In addition to seeking economic benefits, the two companies also deal with the impacts arising from the company's activities.

EXAMINATION OF COMPLIANCE WITH DISCLOSURE REQUIREMENTS OF IFRS 16 BY LISTED LOGISTICS FIRMS IN NIGERIA

This paper surveyed the compliance level with the disclosure requirements of IFRS-16 among transportation/logistics firms listed in the NSE. The sampled 15 firms that claim to adopt and apply IFRS-16 starting effective January 2019. We examined their varying degree of disclosure compliance based on their audited annual reports for 2019 & 2020. A compliance checklist index based upon the IFRS compliance, presentation and disclosure checklist 2021 and KPMG Guide to annual financial statements – Disclosure checklist 2020 was adapted for this study. We found that disclosures were generally not comprehensive enough in terms adequacy of the disclosures relating to adoption of the new standard, judgement made by management in the application of the company’s accounting policy, insufficient entity-specific information, when explaining their accounting policy for leases. Most of the entities failed to disclose the measurement policy applied to right of use assets at transition and how the company’s incremental borrowing rate is determined. The surveys also provide indications that the level of compliance differs among the subsector ranging from low to moderate level of disclosure. This level of insufficiency of disclosures is an indication of lack of necessary transparency to investors regarding exposures, risks, uncertainties, and leverage which raise doubt over whether the disclosure objective of IFRS16 had been met, as envisage by the standard.

DETERMINAN PENGUNGKAPAN SHARIA COMPLIANCE PERBANKAN SYARIAH BERDASARKAN STANDAR AKUNTANSI SYARIAH INTERNASIONAL AAOIFI

This study aims to determine the factors that influence sharia compliance based on International Sharia Accounting Standards (AAOIFI) in Islamic banking in Indonesia. This study uses secondary data from the annual report of Islamic banking for the 2016-2020 period. This study aims to analyze the shariah board tenure, shariah board educational background, firm size, and firm age on shariah compliance disclosure in sharia banking. The method used is panel regression analysis. Based on the test results, the variables of board tenure, DPS education, and firm age do not have a significant influence due to the lack of diversity in the tenure of the board and DPS educational background, and the older firm age does not guarantee the fulfillment of sharia compliance which refers to AAOIFI. Meanwhile, the effect of board age and firm size indicates that the age diversity of the board, which is dominated by older age will have more experience and competence, as well as an increase in the size of the banking system, which has the potential to increase the disclosure of sharia compliance according to AAOIFI standards.

Financial Reporting and Disclosure (non)Compliance Discourse among Nigerian Political Parties (1999 to 2019)

Financial Reporting and Disclosure (non)Compliance Discourse among Nigerian Political Parties (1999 to 2019)

Drivers of Mandatory and Non-Mandatory Internet Corporate Reporting in Public and Private Sector Indian Companies

The paper’s objective was to measure the drivers of mandatory and non-mandatory internet corporate reporting by public and private sector companies following the internet disclosure compliance of listing and obligation requirement of SEBI under Clause 46. Several drivers, namely firm size, profitability, leverage, liquidity, board size, independence of board, and CEO duality, were used to measure the effectiveness of mandatory and non-mandatory disclosure. A multiple regression model was applied to test the present paper’s hypotheses. The results of multiple regression revealed that the firm’s size was exceptionally important for both sectors. In contrast, public sector disclosure was largely impacted by leverage, liquidity, board size, and board independence. In comparison, the private sector disclosure scores were mainly impacted by leverage and board size, although there is no relationship between ICR and firm profitability and CEO duality. In performing separate multivariate regression between the two sectors, many disparities emerged. This disparity showed that public and private sector corporations had quite different firm and governance characteristics of the disclosure. As the first exploratory research to assess the mandate internet disclosure of public and private sector companies in India, it is very informational, specifically for those working on Indian companies’ regulation, compliance, and research.

Investigating the disclosure compliance of Basel III in emerging markets: a comparative study between UAE and Indian banks

PurposeThis study aims at investigating banks’ compliance with the disclosure requirements of Basel III in two emerging market economies, namely, the United Arab Emirates (UAE) and India. This study also examines the impact of economic factors on the extent of disclosures.Design/methodology/approachThe authors compare the Basel disclosure practices between UAE and Indian listed banks and have used panel data regression models to investigate the compliance and level of reporting based on three market variables, namely, size, leverage and profitability of listed banks.FindingsAfter examining Basel reporting for each of three categories of independent factors, size was found to be the predominant factor influencing the Basel disclosures, followed by profitability and degree of financial leverage. It is prudent for all the banks irrespective of size to capitalize on themselves with an intent to tide over the frequent economic crises and prevent every economic crisis from becoming a full-blown financial crisis.Practical implicationsThe findings suggest that there is an urgent need for a high level of concerted action in the context of listed banks in the selected emerging market nations to direct more resources to ensure full compliance with Basel III. The findings inform practitioners in emerging countries of compliance and plan expanded future applications. Investors should consider the BASEL compliance level of Banks before parking their funds in the bank’s stocks. The banks having a higher degree of compliance are expected to be safer than their counterparts having lower Basel compliance.Originality/valueMany previous studies have examined the implementation of Basel III in general. This study is specific in assessing the compliance with disclosure requirements as prescribed by Pillar III of the Basel norms. To the best of the authors’ knowledge, this is the first research to compare market discipline in emerging markets. Existing studies have either assessed the level of compliance in one individual or similar types of markets. However, this study made a pioneering attempt to compare two different countries in the same category (emerging markets).

How financial information about joint ventures is being disclosed and processed by the market

Objective: This research aims to evaluate how the joint ventures’ financial information is being disclosed in the notes to the joint venturer’s financial statements and how this disclosed information is being processed by the market, exploring the mediating effect of investors’ level of sophistication.
 Methods: Using a sample of 1,858 financial statements from 551 firms from 26 countries, we hand collected the financial information of interests in joint ventures from the notes to the financial statements. Using a descriptive analysis, we first analyzed how firms are disclosing this information. Following, using a value relevance model, we evaluated whether this information is incorporated into stock prices.
 Results: We show that IFRS 11 adoption and the elimination of proportionate consolidation resulted in a loss of information given that firms are not disclosing in the notes the financial information of their joint ventures as required by IFRS 12, and, even for those firms that are disclosing (57%), this information is only absorbed by more sophisticated investors.
 Contributions: This research contributes not only to the previous literature (joint ventures’ accounting treatment, disclosure compliance and recognition versus disclosure), but also to the IASB during the Post-Implementation Review (PIR) of IFRS 11/12 and the Disclosure Initiative.

Sustainability Reporting of Indian Companies and the Adherence to GRI Disclosure Framework

Given that all significant stakeholders expect companies to be transparent with financial and nonfinancial disclosures, companies are under increasing pressure and are also morally obliged to adhere to voluntary disclosure frameworks. In this regard, the GRI disclosure framework (non-financials) has recently attracted a lot of attention, and listed Indian companies are about to comply with this disclosure framework. Accordingly, this study attempted to gain insights into the extent to which recorded Indian companies adhere to the GRI disclosure framework. For this purpose, we captured the sustainability reports of Indian listed companies from the GRI Sustainability Disclosure Database (SDD) for a span ranging from 20 years from 2000 onwards. The results from this study indicated that of the million listed companies in India, only a few (425 companies) submitted their sustainability reports with GRI in compliance with the guidelines. However, another interesting finding is that majority of these compliant companies are long-listed and from the ESSI industry classification. As GRI disclosure compliance gives away companies’ ethical solid governance practices, it is pretty surprising that exceptionally few Indian companies choose to do so consistently. In line with the findings of this study, we discussed practical and research implications.

What Lessons can the Luckin Coffee Scandal Offer to Australia–China Cross-Border Listed Companies’ Supervision? Problems and Reform Suggestions in China

The continuous disclosure compliance of Chinese cross-border companies listed in Australia has long been a concern, as Chinese companies are either frequently delisted or rejected by the Australian Securities Exchange. The particularity of cross-border listings generates information asymmetry between securities regulators based out of the host jurisdiction and the home jurisdiction. This then impacts the effectiveness of the host jurisdiction’s supervision of the cross-border listed companies and each company’s continuous disclosure compliance. The purpose of this article is to clarify the issues surrounding cross-border supervision by the securities regulators in China to shed light on current dilemmas and suggest possible reform proposals. Considering the similarities of the securities markets in the US and Australia, as a case study example, this article looks at Luckin Coffee, a US-listed Chinese company, which created a scandal in 2020 when it was accused of continuous disclosure fraud. The case points out relevant lessons for Australia–China securities cross-border supervision.

Responding to a corruption crisis through disclosure and remedial action: The case of Petrobras

This case study adopts a positivist perspective to examine how Petroleo Brasileiro S.A (“Petrobras”), a high-profile company in its native Brazil with multiple listings including in Brazil and the US, responded to a major corruption scandal arising in 2014. We consider Petrobras's response both in terms of its visible activities – i.e. in relation to anti-corruption and compliance (“ACC”) disclosures in its annual report (AR) and sustainability report (SR), as well as actioned remedial policies that constitute the crisis plan – and how the company went about interacting with stakeholders during and after the immediate crisis period. We conducted a content analysis of ACC disclosures and assessed Petrobras's remedial activities in the eight-year period 2010–2017 as disclosed in its ARs, SRs and press releases. We find firstly that, consistent with legitimacy theory, Petrobras responded by voluntarily and substantially increasing its relevant disclosures so as to regain legitimacy, a finding which mirrors those found elsewhere following corruption and environmental crises. Secondly, the unique corporate governance situation at Petrobras combined with the fact that leadership was allegedly implicated in the scandal, led the post-crisis management team to undertake a series of remedial actions that prioritised the need to take and maintain executive control and independence from the government, whilst at the same time carefully managing the relationship with this influential stakeholder: - actions which argue strongly in favour of stakeholder-agency theory and multiple agency theory interpretations of the nature of stakeholder interactions that transpired during the crisis period of disequilibrium, and which precluded the type of stakeholder dialogue seen in some previous environmental crisis situations. Finally, we show that Petrobras's crisis management response actions align well with models of trust repair and legitimacy management, and suggest the company considered it had successfully regained legitimacy by 2017.

PENGARUH SHARIA COMPLIANCE TERHADAP KINERJA KEUANGAN DENGAN MEDIASI KINERJA MAQASHID SYARIAH PADA PERBANKAN SYARIAH

This study aimed to prove that the mediation of the performance of sharia maqashid affects sharia compliance with financial performance. The method used was a regression analysis based on Structural Equation Modeling with panel data available in the annual reports published by Islamic commercial banks in Indonesia for the period 2014-2019. The results of the study proved that sharia compliance has a direct and significant negative influence on financial performance. However, sharia compliance does not have a significant effect on maqashid sharia performance. Furthermore, maqashid sharia performance has a negative and significant effect on financial performance, but does not mediate the influence of sharia compliance on financial performance at Islamic commercial banks in Indonesia. This research recommends that policymakers confirm regulations regarding the implementation and disclosure of sharia compliance and maqashid sharia performance indicators in the annual reports of Islamic Conventional Banks (ICBs). In addition, it is necessary to design an integrated Islamic banking performance measurement model that includes conventional financial performance indicators with maqashid sharia performance indicators. In practical implementation, ICBs should increase the implementation of sharia compliance and maqashid sharia performance indicators.

Islamic Microfinance as a Poverty Reduction Tool in Terms of Islamic Finance: An Analysis of the Islami Bank Microfinance Scheme in Bangladesh

Although Microfinance is one of the essential parts of poverty reduction, however, there are so ‎many microfinance schemes that provided financial help under the various organization models ‎in the world. But a Muslim is not able to benefit from these schemes since most of the time, ‎microfinance schemes are provided into a conventional microfinance system which includes the ‎‎“interest (Riba)” that is strictly prohibited for Muslims. Nevertheless, this study constitutes a ‎linkage between Islamic Finance and IBBL Islamic microfinance scheme, whether it works for alleviating poverty in ‎Bangladesh. As it is known that Islami Bank Bangladesh Limited (IBBL) focused Shariah ‎compliance disclosure by establishing its reputation and differentiating itself from conventional ‎microfinance systems. Accordingly, this article will point out how Islamic microfinance follows ‎the Islamic Shari’ah in its operation and helps clients to improve their moral and ethical values ‎through Rural Development Scheme (RDS), which allows the rural Muslims in Bangladesh to ‎involve in the Islamic microfinance schemes. Applying performance analysis techniques, this ‎article analyzes the status of Rural Development Schemes (RDS) offered by Islami ‎Bank Bangladesh Limited, Bangladesh, where the specific objectives of this study include ‎analyzing the allocation efficiency of RDS, and financial performance (Risk and Return ratios) ‎of RDS of Islami Bank Bangladesh Limited and how it works as an alternative tool for poverty ‎reduction through their various investment models. With this method, this article mainly argues ‎whether Islamic microfinance provides an alternative to poverty reduction. ‎

Pengaruh Sosioekonomi terhadap Tingkat Kepatuhan Pengungkapan Laporan Keuangan di Pemerintahan Provinsi Sumatra Barat

The purpose of this study is to identify socio-economic factors on the level of compliance with financial statement disclosures in the West Sumatra Provincial Government. In particular, this study examines the effect of regional independence, Prosperity level, and region's size on the level of compliance with the disclosure of regional government financial statements. The unit of analysis in this study is the regional government of West Sumatra, totaling 19 cities/districts in 2018-2020. The results of this study indicate an influence of regional independence, level of welfare, and regional size on the compliance of regional financial statement disclosures in city/district governments in West Sumatra. These results indicate that the socioeconomic factors can be used as a benchmark for disclosure compliance with local government accounting practices.

Leveraging Big Data to Study Information Dissemination of Material Firm Events

ABSTRACTCould real‐time big data help unravel material firm events? How would it compare with firm disclosure and traditional media in terms of timeliness and completeness? Could big data provide incremental value‐relevant information for investors? With these questions in mind, we use a novel data set of cell phone “pings” (i.e., geolocation signals from mobile devices) to track production disruptions (outages)––material events for U.S. oil refineries. We first validate the construct by examining the effects of outages on local gas prices and firms’ accounting performance. Our main analyses show that (1) refining firms do not voluntarily disclose refinery outages identified by cell phone pings; (2) traditional media cover only a small portion of ping‐based outages; (3) the stock market finds ping‐based outages to be value relevant but incorporates the information with delay. Further analysis suggests that given the incomplete media coverage and lack of firm disclosure, investors appear to learn the financial impact of such outages through subsequent earnings announcements. Our evidence has implications for regulators such as the U.S. Energy Information Administration and the Securities and Exchange Commission as they continue to evaluate both the compliance and usefulness of disclosures for material firm events such as production disruptions.

Carrot or Stick? The Impact of Regulatory Amnesty on Municipal Disclosure Compliance

Carrot or Stick? The Impact of Regulatory Amnesty on Municipal Disclosure Compliance

Pengaruh Corporate Governance terhadap Compliance of Mandatory Disclosure

Abstract Tujuan (Purpose): The purpose is to determine the effect of the corporate governance on compliance of mandatory disclosure in public companies listed on the Indonesia Stock Exchange. Metodologi penelitian (Research methodology): This research is a quantitative type of research. The population are the property, real estate, and building construction sector companies listed on the IDX in 2015-2019. The data were analyzed using multiple linear regression analysis processed with the SPSS 25.0. Hasil (Results): The results showed that the audit committee independence had no effect on compliance of mandatory disclosure, while the board of commissioners, women commissioners, audit committee, managerial ownership and public ownership had an effect on compliance of mandatory disclosure. Limitasi (Limitations): The corporate governance variables refers to the amount of value in quantity, not quality and the measurement of the dependent variable cannot be a definite indicator. Kontribusi (Contribution): The implication is it can be used as a reference for further research and convey the company to pay attention to components that have the potential to affect the company's compliance with applicable regulations.

The Effect of Full Disclosure Policy Compliance on Financial Performance of Local Government Units Moderated by Opinion in the Independent Auditor’s Report: A Study Conducted in the Province of Bataan, Philippines

This study was conducted to examine the effect of Full Disclosure Policy (FDP) compliance on financial performance as moderated by audit opinion. The sample of the study was the twelve (12) city and municipal Local Government Units (LGUs) in the Province of Bataan within two years’ time or fiscal year 2018-2019. Descriptive research design was utilized. The researchers used secondary data, particularly the Statement of Receipts and Expenditure (SRE) and Auditor’s Reports of selected local governments. The data were analyzed with SPSS results using multiple linear regression analysis. Disclosure compliance was measured through the availability of fourteen (14) financial documents queried at the FDP portal, while financial performance was measured by the computation of ten (10) financial indicator ratios using the formula extracted from SRE manual published by Bureau of Local Government Finance (BLGF). Audit opinion was used as a moderating variable and it was measured using proxy for each type of opinion. The findings of the study revealed that FDP compliance has no significant effect on financial performance. Moderation analysis also showed the absence of correlation between the variables examined. Hence, audit opinion has no moderating effect on disclosure compliance and financial performance. The outcome of the study is beneficial not only to LGUs but also to agencies and attached bureau for local governments to use as a guide for material considerations in determining future initiatives to improve the policy on government financial reports. This study is also useful for citizens and interest groups to have an idea as to the control efficiency and fiscal discipline of LGUs towards the provision of public services. Lastly, the result may provide empirical evidence for conducting further studies and it can develop existing accounting literature to strengthen the research related to the possible effects of the level of disclosure compliance and influencing factors of financial performances.