Financial and Non-Financial Disclosure

1. Financial and Non-Financial Disclosure Rita Ilisson IAS Manager, Deloitte & Touche CE Member, IASC Standards Advisory Council 19.02.03- Rita Ilisson - Deloitte&Touche

2. Corporate Governance  accountability! •  create value -  return on capital • gov regulations + culture of self-policing! • good corporate  economic efficiency • structures relationship between • management • board • shareholders • stakeholders • provides incentives for pursuing the interest of the company and its shareholders • facilitates effective monitoring 19.02.03- Rita Ilisson - Deloitte&Touche

3. Corporate Governance • ! 19.02.03- Rita Ilisson - Deloitte&Touche

4. OECD Principles of Corporate Governance • 1998 – good corporate governance • framework • + business ethics • + corporate awareness • environmental interest • societal interests • no single model • two-tiered – supervisory + executive board • unitary – board overseen by internal auditor 19.02.03- Rita Ilisson - Deloitte&Touche

5. Management? 19.02.03- Rita Ilisson - Deloitte&Touche

6. OECD Principles of Corporate Governance • I. the rights of shareholders • secure methods of ownership registration • right to convey and transfer shares • obtain relevant information on timely basis • receive notice of meetings • vote in absentia • elect members of the board • share in profits • protection during mergers • anti-take-over devices - shield management from accountability 19.02.03- Rita Ilisson - Deloitte&Touche

7. OECD Principles of Corporate Governance • II. equitable treatment of shareholders • foreign and minority • procedures - not unnecessarily difficult •  insider trading and self-dealing • management/board – disclose related party transactions • III. role of stakeholders in corporate governance • rights protected by law • performance-enhancing mechanisms for stakeholder participation i.e. employee share schemes 19.02.03- Rita Ilisson - Deloitte&Touche

8. OECD Principles of Corporate Governance • IV. disclosure and transparency • timely and accurate disclosure • all material matters • dissemination and access • disclosure (minimum) • financial and operating results • high quality accounting standards • financial and non-financial disclosure • off-BS guarantees within group • company objectives • material foreseeable risks • material issues regarding stakeholders 19.02.03- Rita Ilisson - Deloitte&Touche

9. OECD Principles of Corporate Governance • financial and non/financial disclosures • governance structures and policies • members of board, key executives and their remuneration • incentive schemes, stock option schemes, pensions, guarantees, etc • audit committee ? • nominations committee ? • remunerations committe ? • major share ownership and voting rights • audited – FS or FS and MD&A 19.02.03- Rita Ilisson - Deloitte&Touche

10. OECD Principles of Corporate Governance • V. responsibilities of board • integrity of accounting and financial reporting systems • independent auditor • controls for monitoring risk, financial control and compliance with law • effectiveness of governance practices • oversees process of disclosure and communication • board members – with sufficient time? remuneration? – access to information? 19.02.03- Rita Ilisson - Deloitte&Touche

11. OECD Principles of Corporate Governance • V. responsibilities of board • steer in best interest - company and shareholders • compliance with laws • review/guide strategy, set performance objectives • monitor implementation • select, compensate and monitor key executives • review key executive and board remuneration • monitor and manage potential conflicts of interest of management, board and shareholders 19.02.03- Rita Ilisson - Deloitte&Touche

12. Management? 19.02.03- Rita Ilisson - Deloitte&Touche

13. Directors’ Responsibility for the Financial Statements • management responsible for preparing FS • present true and fair view of financial position and performance • prepared under IFRS or other GAAP  FS reflect events which occur btw balance sheet date and authorization date ...., which affect the valuation of assets and liabilities • authorisation vs. approval date? • events after the balance sheet date, which do not affect notes or MD&A • (IAS 10 Events after the Balance Sheet Date) 19.02.03- Rita Ilisson - Deloitte&Touche

14. Directors’ Responsibility for the Financial Statements assets/liabilities valued on a prudent basis FS preparation requires judgement estimates up-to-date information up to authorisation actual outcome may not coincide disclaimer! management cannot be held responsible for future changes in market or ec environment the company is a going concern if not going concern? 19.02.03- Rita Ilisson - Deloitte&Touche

15. IAS 1 – Presentation of Financial Statements • financial statements = BS, IS, CFS, in OE • notes • a) compliance • b) accounting policies • c) supporting info for items on face of each financial statement • order in which line items presented • d) other disclosures – contingencies and non/financial disclosures 19.02.03- Rita Ilisson - Deloitte&Touche

16. IAS 1 – Presentation of Financial Statements • notes • numerical breakdowns and narratives • compliance • all IFRSs (IAS) • present fairly – “true and fair” override • change in accounting policies  retrospective restatement (Imp Project) • ED 1 First-Time Application of IFRS • explicit and unreserved statement in those financial statements of compliance with IFRSs 19.02.03- Rita Ilisson - Deloitte&Touche

17. IAS 1 – Presentation of Financial Statements • accounting policies • change in accounting policies  retrospective restatement (Imp Project) • measurement basis • other – elucidated in standards • under accounting policies or in the notes • judgements made in applying accounting policies (Imp Project) • key measurement assumptions about the future (Imp project) • dividends proposed of declared 19.02.03- Rita Ilisson - Deloitte&Touche

18. IAS 1 – Presentation of Financial Statements • encouraged to present a financial review • main features of financial performance and position • principle uncertainties • main factors determining performance • changes in operating environment • responses to these changes and effect • policy for investment to maintain and enhance performance • dividend policy • sources of funding – policy on gearing • risk management policies • strengths/resources not in BS? • environmental reports 19.02.03- Rita Ilisson - Deloitte&Touche

19. European Directives • annual Report (MD&A) • fair review of the business and position • important events since the end of fin year • activities in the field of R&D • likely future development • information about own shares • notes • # employees and staff costs • emoluments to members of administrative, managerial and supervisory bodies • any commitments – retirement pensions • advances/credits – interest %, amounts repaid • guarantees 19.02.03- Rita Ilisson - Deloitte&Touche

20. Board? 19.02.03- Rita Ilisson - Deloitte&Touche

21. European Directives • Report of the High Level Group of Company Law Experts on a Modern Regulatory Framework for Company Law in Europe – Oct 2002 • alternatives for primary legislation • secondary legislation –standard setting • company law should be flexible • listed companies - required to maintain and continuously update company information on website • other proposals 19.02.03- Rita Ilisson - Deloitte&Touche

22. IOSCO • Principles for Ongoing Disclosure and Material Development Reporting by Listed Companies – X.02 • key elements • information material to investor • comprehensive list or general obligation • timeliness - immediate and periodic • simultaneous and identical disclosure • multiple listings • dissemination • disclosure criteria • fair + no material omissions • equal treatment of disclosure (not to certain) • allocation of accountability 19.02.03- Rita Ilisson - Deloitte&Touche

23. Auditor? 19.02.03- Rita Ilisson - Deloitte&Touche

24. IOSCO • Principles of Auditor Independence and the Role of Corporate Governance in Monitoring an Auditor’s Independence – X.02 • auditor independence • governance body independent of M selects auditor • audit committee • key body which interacts with auditor • mandate – without restraint • meet on regular and frequent basis • evaluate audit fees in relation to work required to support audit opinion • monitor independence • discuss findings of quality control inspections 19.02.03- Rita Ilisson - Deloitte&Touche

25. Sarbanes-Oxley Act of 2002 • SEC – right to bar executives convicted of fraud from serving as officers • auditors • restriction on nonaudit services to listed clients • retention of audit/review workpapers – 7 yrs. • certain partners on team must rotate after 5-7 yrs. • sharpened independence rules • partner may only procure audit, review and attest services • must report to audit committee • “critical” accounting policies • independent oversight board foraccounting profession 19.02.03- Rita Ilisson - Deloitte&Touche

26. Sarbanes-Oxley Act of 2002 • disclosure of • corporate audit committee financial experts • understands - FS (financial statements) • GAAP (generally accepted accounting principles • internal controls and procedures • audit committee functions • ability to assess application of principles – accounting estimates, accruals and allowances • experience in preparing, auditing, analysingFS and supervising these activities • code of ethics • written standards – public copy • full, fair and timely disclosure 19.02.03- Rita Ilisson - Deloitte&Touche

27. Management? Board? Auditors? Analysts? Legal Advisors? Bankers? 19.02.03- Rita Ilisson - Deloitte&Touche