FINANCIAL REPORTING IN EMERGING CAPITAL MARKET

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FINANCIAL REPORTING IN EMERGING CAPITAL MARKET

• CHAPTER 6
• Some tables and comparisons adopted from I.A. by
  Doupnik Perera and other sources.

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The author commented on the definition and the
classification of emerging capital market as An
emerging capital market is a stock market located
in a developing country. and The capital
markets classified as emerging are quite diverse
in terms of their size and history. Several
lending institutions agreed on the followinggt
It is important to have in place a set of
corporate reporting policies procedures to
provide information necessary for making
investment decisions.
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• gt In order to be traded companies are
• required to submit a detail pamphlet of the
• offer and to satisfy listing requirements of
• the domestic SE.
• gt To ensure that only companies that satisfy
• minimum quality requirements are allowed
• to issue publicly traded securities.
• gt Financial reports should provide important and
  useful information that could include a
  combination of the Blue Chip and Second-Tier
  type of stocks.

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• CHARACTERISTICS OF FINANCIAL REPORTING
• Availability of adequate financial and non-
• final information on publicly listed
• companies (Exhibit 6-3 is a good example).
• Reliability has to meet two conditions
• a- Financial reports should be prepared on the
• basis of sound accounting requirements.
• b- Adequate steps should be taken to ensure
• adherence to these requirements (Exhibits 6-5
• to 6-8) see slides 5,6 7

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• CHARACTERISTICS OF FINANCIAL REPORTING
• Reliability has to meet two conditions
• a- Financial reports should be prepared on
• the basis of sound accounting
• requirements.
• b- Adequate steps should be taken to
• ensure adherence to these requirements
• (Exhibits 6-5, -6, -7 6-8.)
• Comparability of financial information
• within the same industry. There are two
• measurements for comparability

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• CHARACTERISTICS OF FINANCIAL REPORTING
• Comparability (contd)
• 1- Comparability of specific accounting
• policies used in financial statements
• preparation
• 2- The clear understanding of the
• environmental factors of each country and
• industry. This is a significant element
  to
• comparison of financial information from
• two or more countries.
• Case in point

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• FINANCIAL REPORTING POLICY ISSUES (I)
• Both the author and investing institutions could
  not over emphasize the seriousness and the
  importance find common ground resolution to the
  following issues
• Information Availability
• Availability of all relevant information
• (financial and non-financial) are essential
  to
• ECM. Also, they acknowledge that it has
• not been an easy task.

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• FINANCIAL REPORTING POLICY ISSUES (II)
• Finally, it should be noted that availability of
  information would facilitate the process of
  identifying and understanding the differences as
  well as the comparability process.
• Strengthening Enforcement Capabilities
• Availability of information does not mean that
  the Reliability of information is automatically
  assured.
• As a result, enforcement of rules, regulations
  and standards as well as strengthening
  enforcement capability would give a higher degree
  of Reliability to information provided to the
  users.

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• FINANCIAL REPORTING POLICY ISSUES (III)
• Harmonization of Accounting
• Standards
• As discussed in previous chapters harmonization
  of accounting standards, (common ground for
  accounting standards), would ease comparability,
  enhance the prospect of attracting new investors
  are among the benefits of harmonization of
  accounting standards.

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• FINANCIAL REPORTING POLICY ISSUES (IV)
• Forewarning on Recent Developments
• The author discussed the effect of the recent
  events and news that came out of USA ( and other
  develop countries), (re Enron, WorldCom) on the
  perception of the superiority of U.S. accounting.
  
• These events have created pressures to re-examine
  the perceived superiority of US accounting and
  the allowance of aggressive accounting practices
  as well as the quality of earnings (as a result
  of these practices) reported by U.S. companies.