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Full Disclosure Paper Full disclosure principle is an accounting rule demanding that financial reports, notes and explanatorily enclosed to them, include all the information necessary for understanding of a state of affairs in the organization by users of the financial reporting. Security Exchange Commission of the USA, SEC, proposed the change of corporate financial information disclosing rules which were accepted and functioning in 2004 - 2005. In opinion of regulating authorities and legislators of the USA, changes in system of the financial reporting became an absolute necessity in connection with scandalous bankruptcy of Enron Corporation. Accounting shifts and unclear reporting of Enron kept with investors a belief about financial well-being of the company when it already had very serious problems.
The thunder burst after the publication of Enron's report for III quarter in which the company had to recognize large losses. The report was published on October, 16 th, and on December, 2 nd Enron already submitted documents about bankruptcy. Actions of the company completely depreciated in short term, and the number of investors had significant losses. In order to improve system of the corporate reporting and to warn new unexpected bankruptcies, SEC offered a complex of measures, including reduction of corporate financial documents representation terms. According to the law accepted in 1934, the public companies represented the annual reports to SEC (the form 10 K) within 90 days after the end of the fiscal year. SEC suggested reducing this term till 60 days.
Term of representation of the quarterly account is offered to be reduced from 45 till 30 days. In reports more concrete disclosing of the information are required. The example of company Enron shows, what even the best administrative structures do not guarantee protection against abusing if the problems are hidden in the culture of company ." Corporate ethical standards play the important role in administrative abusing prevention but only provided that these norms are really observed by all, and first of all management of the company. Ideally the corporate culture should stimulate the board of directors members to act with criticism of the decisions accepted by the agency and to encourage the activity of observation body in the control over the operative activity. Journal The Economist (together with the company KPMG) carried out the investigation on the questions of corporate management which included interview with top-managers of the largest firms and the review of the advanced world experience of corporate management. As a result of the research it was revealed that only legislative measures are not enough for the improvement of corporate management quality, the initiative inside the company and corporate culture is important.
One of the most important points connected to corporate management is the full disclosure. However simple fuller disclosing of the information is not enough, it is necessary the given information should really reflect the processes of companys activity. There is a danger that the requirement of the fuller disclosing of the information may be interpreted as the necessity of providing greater volume of the reporting that will not raise knowledge of shareholders, but will only confuse them. Besides real reflection of companys processes does not mean absolute accuracy of all figures in the reporting. In modern business it is practically unreal to achieve that as there is a set of such specific actives estimation methods as a trade mark, an intellectual property, and expenses on the bargains organization. Reporting is not so important as openness of the company, providing the information in the most convenient format.
The complex policy of information disclosing, directed on duly granting of objective data about the company and on the safety of confidential information is necessary for all the interested parties. However corporate culture is not enough for the construction of modern corporate management. It is necessary to build appropriate strategy, a general policy of the company and procedures which will allow to guarantee its efficiency. Bibliography Baynes, Leonard M. Just Pucker and blow: An analysis of corporate whistleblowers, the duty of care, the duty of loyalty, and the Sarbanes-Oxley Act. St.
Johns Law Review 76. 4 (2002) Berenbeim, Ronald. Improper Corporate Behavior: Enron's Syllabus of Errors. Vital Speeches of the Day 68. 10 (2002) Cover, Brian. Anatomy of Greed: The Unshredded Truth from an Enron Insider. New York: Carroll and Graff Publishers, 2002 Far, Paul. A Whistle That Can Pierce the Glass Ceiling.
Washington Post 6 July 2002.
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Research essay sample on Corporate Culture Financial Reporting
