As part of it on-going monitoring of the accounting information published by listed companies, the Supervision and Control division of Oslo Børs has recently carried out a further study to evaluate how well companies follow the standard for interim reports issued by the Norwegian Accounting Standards Board. Prompt publication of good quality financial information is essential for an efficient and well-functioning capital market, and represents one of the most important sources of information available to the market for pricing companies' shares.
When Oslo Børs last carried out a similar survey (September 2003) it concluded that on the whole companies showed too little commitment to following the accounting standard for interim reporting. The new survey shows a clear improvement, and this reflects the work carried out by Oslo Børs in this area. However Oslo Børs is still not satisfied with the overall standard of interim reporting since there are still too many companies that do not fully adhere to the accounting standard in various areas.
The purpose of the accounting standard is to ensure that companies provide the market with relevant information on their earnings and changes in financial condition in the period between annual reports. The standard sets out minimum requirements for the information to be provided in an interim report, dealing with the presentation of accounting figures and the additional information, commentary and explanation that should be provided. EU´s IFRS (International Financial Reporting Standards) from 2005 will contain the same requirements for interim reports.
The results of the most recent survey included the following conclusions: (figures from the autumn 2003 survey in brackets).
- 22 % of companies had shortcomings in the presentation of the balance sheet (34 %). Such shortcomings can make it difficult to evaluate changes in a company's assets and liabilities.
- 36 % of companies did not provide a reconciliation of movements in equity or had shortcomings in the reconciliation presented (61 %). Such shortcomings make it difficult to understand changes in a company's equity.
- 23 % of companies either failed to explain the accounting principles used to produce the interim report or provided inadequate information in this respect (56 %).
- 30 % of companies failed to include a statement on whether the interim report met the requirements of the accounting standard for interim reporting (78 %).
- Only 43 % of companies provided satisfactory segmental information by business area. While it will not necessarily be appropriate for all companies to provide segmental information, it is clearly the case that this will be relevant information for more than 43 % of companies.
Oslo Børs will continue to pay close attention to financial reporting by listed companies, and will now review individual reports in more detail and deal directly with companies whose reports fail to meet the accounting standard. Where there are serious and repeated shortcomings in a company's reporting, Oslo Børs will make use of the sanctions available as already announced in the report on the previous survey.
For the sake of good order it should be noted that the surveys carried out by Oslo Børs have concentrated on the degree to which interim reports have satisfied the relevant accounting standard, and they did not extend to evaluating the quality of the content of the reports. Oslo Børs has sought to provide a general overview of the current situation, and has therefore decided that the specific matters uncovered by the survey should remain confidential.
