Oslo Børs: Major Shortcomings In Interim Reporting

Listed companies in general show too little commitment to following the accounting standard for interim reporting. This is the conclusion reached following a survey carried out by Oslo Børs. A large proportion of companies do not satisfy the requirements for interim reporting, and Oslo Børs now expects companies to pay greater attention to the information they provide in their interim reports. In future Oslo Børs will apply sanctions to companies that publish interim reports with serious errors or omissions.

As part of its on-going monitoring of the accounting information published by listed companies, Oslo Børs has recently carried out a further survey to evaluate how well companies follow the standard for interim reports issued by the Norwegian Accounting Standards Board. Companies listed on Oslo Børs are expected to adhere to this standard as part of the requirement for good accounting practice set out in the Stock Exchange Regulations. Oslo Børs has reviewed the interim reports published by all listed companies for the fourth quarter of 2002, and its findings have revealed an unsatisfactory situation. In as many as 90 per cent of the companies, it was found errors or omissions in relation to the accounting standard. It seems that on the whole, companies have not responded to any material extent to the critical comments published by Oslo Børs following similar reviews of interim reports for the first and second quarters of 2002. Following these reviews Oslo Børs wrote to companies found to have shortcomings in their interim reports.

A study carried out earlier this year showed that investment analysts consider the information contained in interim reports to be more valuable than that contained in a company's annual report. Given the importance the market attaches to financial information published by companies as the basis for valuing their shares, it is clearly unacceptable that the standard of interim reporting has not improved.

Examples of shortcomings in interim reports for the fourth quarter of 2002 included the following (figures from the previous year's survey shown in brackets):

42 % of companies failed to provide a reconciliation of movements in equity (62) %
14 % of companies failed to provide information on earnings per share (15 %)
78 % of companies failed to state whether the interim report was produced in accordance with the accounting standard for interim reports (91 %)

The Norwegian accounting standard for interim reports was produced with a view to creating a uniform structure for reporting and to ensure that investors receive the information they need when valuing companies. Oslo Børs is therefore surprised that companies have not paid greater attention to the shortcomings uncovered by its previous survey. Oslo Børs has therefore decided that it will be necessary to impose appropriate sanctions, for example violation charges, on companies found to still have serious errors or omissions in their interim reports following a similar review of the reports for the third quarter of 2003. It should be noted in this respect that a satisfactory quality of interim reporting not only requires adherence to the accounting standard noted above, but must also provide sound and relevant information that enables investors to value the company in question correctly.

"Oslo Børs expects companies to adhere to the accounting standard for interim reports. We now also expect to see companies attach greater importance to the value of the information provided in their interim reports and place greater focus on the financial information they publish in order to give the market the best possible basis to price their shares", comments Henning Dokset, Senior Vice President responsible for the Equity Markets business area at Oslo Børs.

Oslo Børs has written separately to all the companies whose interim reports were found to contain errors or omissions in the recent 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. It is of course the case that some companies do a good job in this area, and the critical comments above are therefore not directed at all companies. 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.