Measurement and Analysis of Disclosure Level: The Case of Bangladesh
Measurement and Analysis of Disclosure Level: The Case of Bangladesh
Introduction
Disclosure refers to revealing facts to others. The concept of disclosure has grown and expanded considerably in diverse ways in response to the evolution of corporate form of business organization, the statutory requirements to prevent fraud and manipulation and to protect the interest of innocent shareholders. Disclosure of financial and non-financial information about the operating performance and the financial position of the companies are universally considered as the prerequisite for efficient functioning and fairness of capital market. Sometimes, in order to be successful in securing capital, a company provides more information in its annual report voluntarily than that required by statutes as mandatory. For making full, fair, and adequate disclosure of information in the annual reports, financial reporting and disclosure are regulated by different authorities and statutes. In Bangladesh, disclosure in company reports are mainly regulated by the Companies Act 1994, the Securities and Exchange Rules 1987, DSE Listing Rules, 2006, Income Tax Ordinance 1984 and BAS and BFRS (IAS and IFRS that are adopted by ICAB) In fact, disclosure of information through annual reports has been an emerging issue in the field of financial accounting and reporting.
According to a dictionary of accounting edited by R.Hussey,1999, disclosure is defined as :
“The provision of financial and non-financial information, on a regular basis, to those interested in the economic activities of an organization. The information is normally given in an annual reports and accounts, which includes financial statements and other financial and non-financial information. The annual report and accounts of a limited company is regulated by company legislation, accounting standards, and, in the case of quoted company, by stock exchange regulations” (page 131,2ed.).
Reporting of information in annual report is practiced in different ways. Style and forms of annual reports varies from country to country and from company to company. It varies due to different reasons. It may be due to the rules and regulation, may be due to the need of “user group” or it may be due to the willingness of the management of the company.
Methodology of the study
Step – 1
Disclosure Checklist is a list of items to be disclosed in the annual reports. Draft disclosure checklist is a disclosure checklist which is prepared by the researcher for the first time in order to conduct the study. Before going to prepare a draft checklist for the study, a researcher studies previous research work done by others, different and relevant rules and regulation such as Company Act, Securities and Exchange Commission Rule, International Accounting Standard, International Financial Reporting Standard etc., and different company annual reports in order to build up a sense or knowledge regarding to the items of disclosure which is used to develop a good design for draft disclosure checklist. In this way, a draft disclosure check list has been prepared.
Step – 2
A questionnaire (containing all the items in the disclosure checklist) is prepared for doing survey in order to make the research indifferent (unbiased). Questionnaire can be prepared in two ways, i.e., Yes/No format or using 5 point likert type scale. Example is shown below:
Yes / No format
Serial No.
Disclosure Items
Y for Yes
N for No
Comments
1
Company Profile
Y
Here, the respondent typed Y; it means that the Company item should be disclosed in the company annual report. Thus, after completing survey, researcher counts Y and N for every item. If total number of Y is more than total number of N then the item is included in the final disclosure checklist against which the annual reports are examined to establish the extent of disclosure by the sample companies. This method was used in the current study.
5 point likert type scale Format
Serial No.
Disclosure items
5
4
3
2
1
1
Company Profile
√
1. = Not at all Important i.e., Should not be disclosed
2. = Not important i.e., Should be disclosed but is of minor importance
3. = Less importance or Unimportant i.e., intermediate importance.
4. =