Accountants call on firms to come clean on difficulties when reporting

PUBLISHED : Tuesday, 24 November, 1998, 12:00am
UPDATED : Tuesday, 24 November, 1998, 12:00am

Listed companies have been urged to include more negative information in their annual reports, giving greater details of potential risks they face.

The calls come in the Hong Kong Society of Accountants' (HKSA) latest publication on corporate governance, A Guide for Directors' Business Review in the Annual Report , issued yesterday.

The listing rules require all companies to include a business review in their annual reports but there are no guidelines on content.

'We have seen big differences among the business reviews of locally-listed companies as there is no benchmark for them,' HKSA corporate governance committee chairman Edward Chow Kwong-fai said.

'The HKSA guidebook aims to establish a benchmark for listed companies to follow, and to upgrade the standard of such reviews.' One of the key setbacks of the reviews was that companies usually reported only the good news and hid problems, Mr Chow said.

They also failed to disclose financial risks or operational difficulties.

'Usually small investors only know about the financial troubles of companies when they are on the verge of collapse, or only after they have collapsed. I think there are increasing demands for transparency of listed companies. Directors should tell the truth and give the full picture about the company in the business review.' The HKSA guidebook urges companies to offer a balanced view of their financial situation and business forecasts, giving investors a better understanding of performance and potential risks.

The convenor of the working group in charge of drafting the guidebook, Peter Nixon, said it would enable Hong Kong to achieve the highest standards in Asia.

'The guide provides a detailed framework for preparation of a comprehensive business review,' Mr Nixon said.

clean on difficulties when reporting