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All New Disclosures should appear in the Management Discussion and Analysis Statement

All New Disclosures should appear in the Management Discussion and Analysis Statement. Presented by: Carrie Chiu (50191895) Erica Tsang (50194420) Sharon Cheung (50196817) Danny Tse (50196240). Agenda. Definition of MDA Objective of MDA Background on MDA

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All New Disclosures should appear in the Management Discussion and Analysis Statement

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  1. All New Disclosures should appear in the Management Discussion and Analysis Statement Presented by: Carrie Chiu (50191895) Erica Tsang (50194420) Sharon Cheung (50196817) Danny Tse (50196240)

  2. Agenda • Definition of MDA • Objective of MDA • Background on MDA • Disclosure requirements in the US • Definition of All New Disclosures • Advantages of MDA • Disadvantages of All New Disclosures • Recommendations

  3. Definition of MDA Discuss: • financial condition • changes in financial condition • result of operations • known trend, uncertainties material effect of the firm

  4. Objective of MDA • assists user to assess the future prospects of the firm make better decision

  5. Background on MDA MDA in other countries • compulsory component e.g. Australia, Japan, the USA • guideline e.g the USA: SEC Regulation S-K

  6. Background on MDA (Con’t) MDA in Hong Kong • voluntary disclosures • no guideline • may be disclosed in Chairman’s Report • may have other titles e.g. Corporate Governance • prepared by management & accountants

  7. Disclosure Requirements in the US • Liquidity • Capital Resources • Results of Operations

  8. Disclosure Requirements in the US (Con’t) Liquidity • know trends & other factors material affects liquidity • e.g. short-term, long-term needs indicators of liquidity: cash

  9. Disclosure Requirements in the US (Con’t) Capital Resources • commitments for capital expenditures • sources of financing • know trends in capital resources • changes between debt, equity, off-balance sheet financing

  10. Disclosure Requirements in the US (Con’t) Results of Operations • significant components of revenues & expenses • material nonrecurring events/ trends/ uncertainties affect the income • e.g. turnover, gross profit

  11. Definition of All New Disclosures Disclosures • no standard and regulations • depends on the company • any information • e.g. financial leverage, management level, human resources, risk & return, difference between the actual profits and budgeted profits, external environment • assumption: All new disclosure = ALL the NEW Information

  12. Advantages of MDA • more information for investment decision-making • securities market efficiency • better assessment of the company

  13. Advantages of MDA (Con’t) More information for investment decision-making • assist investors in assessing uncertainties • helpful in better enabling users to assess the probabilities of future profitability, cash flows, or dividend from their investments • forecast more accurately the company’s future earnings

  14. Advantages of MDA (Con’t) Securities market efficiency • improves the proper working of securities markets • potential to reduce inside information • raise the transparency of the company  facilitates the development of stock market

  15. Advantages of MDA (Con’t) Better assessment of the company • non-monetary information such as financial leverage, management level, human resources would be disclosed • provides a clear picture of the company • enables investors to assess the future prospects of the company

  16. Disadvantages of All New Disclosures Irrelevant information • discloses significant & non-significant information • e.g. employment benefit cannot help decision making cannot show clear and concise picture

  17. Disadvantages of All New Disclosures (Con’t) Information overload • relevant, in great details, much supply • important, may not be desired by investors e.g. Fixed asset investment is important report $500 purchase of a printer? report $20,000 refurbishment?

  18. Disadvantages of All New Disclosures (Con’t) • Repetition to show better performance e.g. turnover changes, % rise in gross profit redundancy cannot help decision making cannot show clear and concise picture

  19. Disadvantages of All New Disclosures (Con’t) Cost ineffective • monetary basis: hires staff to analyze irrelevant and redundant information • time basis: disrupts normal daily business operation

  20. Disadvantages of All New Disclosures (Con’t) Decline in competitive advantage • discloses operations to competitors • follows suits by competitors affects service/product differentiation decreases earnings

  21. Recommendations • Management Discussion and Analysis in every annual report • BUT not all new disclosures

  22. Recommendations (Con’t) • A new HKSSAP---governs the content of MDA • e.g. risk factors relating to specific company impact of technology development to the company industry development build up confidence of the investors improve corporate governance in H.K. maintain H.K. as an international financial center

  23. The End

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