Business corporations, cannot escape their responsibility by not preparing a `quality' and
`fair' report using the accounting principles and techniques of disclosures they are provided
with, by the conventional and the regulatory bodies. Practitioners in this field have
the obligation to the public, their profession, the organization they serve and to themselves, to
maintain the highest standards of reporting practices. Although the goal of any firm should be to
increase its owners' wealth, to do so, it requires public trust. Corporations with fuller disclosure win
trust from investors more as reliable and relevant information may be translated into lower cost
of capitalthe foundation, the higher valuation is built upon. However, companies often resort
to OBS vehicles to present their economic status fraudulently through the attractive financial
ratios. Introducing International Financial Reporting Standards (IFRS), the principles-based
accounting pronouncements, a rein is expected to be imposed on OBS vehicles. In spite of entering the
IFRS era, a question that resonates in the corporate sector is whether IFRS's principle-based
accounting can plug these OBS loopholes at times when frauds are mushrooming in the corporate world
or there still remains the cleft through which unethical practices in accounting ooze.
To be useful and timely, financial information must be reliable, comparable, consistent
and transparent, having a match in the changed corporate reporting environment. The
present environment dictates reporting not to restrict itself to the financial statements, but pesent
a broad array of additional matters in the disclosure. Disclosure of a growing number of
non-financial performance matrices is imperative at present. And all the accounting is an attempt
at describing the situation in the best possible way. Reporting practices fostering
transparency improve the ability and willingness of an investor to take an investment decision. Attempts
to suppress information, the investors deserve to get an access, will simply erode market
confidence with investors applying a healthy risk premium or seeking investment opportunities
elsewhere. Investors continue to punish companies failing to disclose their true economic position
or maintaining a deceptively flamboyant look of the reports and reward those having all of the
bad news out of the table. The best definition of
`transparent' in business circles is financial statements of high
quality that allows for effective, informative
fundamental analysis. The irony is that some companies
prepare financial reports, which are the tools for giving insight
to the investors, in such a way that, rather than
providing required information correctly, they skillfully hide
the facts while some other release information, which
is misleading but technically conforms to legal
standards. OBS transactions are such types of practices
the companies resort to. |
