Increasing Trend among the Businesses in Hong Kong to Publish Nonfinancial Information - Essay Example

Essay, Finance and Accounting Contents Introduction 3 Discussion 3 Benefits of non financial information 4 Regulatory Framework of HSBC 5 s and Guidelines 6 Disclosure of Non Financial information 7 Usefulness of non financial information 9 Conclusion 10 References 12 Introduction In conducting the business activities the investors generally requires correct, accurate and timely information in order to make an effective and efficient investment decisions. The related information is required to be collected in different ways and one of the most vital and important activity is publishing and preparation of annual reports. The main and important responsibility of the annual report is providing useful, relevant and reliable financial and non financial information to the shareholders investors and the person who are interested in gathering the financial information and assessing the financial position of the business and the entity and also interested in assessing and evaluating the performance of the business and the future prospective of the business in order to assist and guide the users of the non financial information in the process of decision making. The information that is being provided by the annual report towards its shareholders and stakeholders mainly comprises of two types that is compulsory disclosure and the voluntary disclosure. The mandatory disclosure includes the market demand arising due to the information that is needed by different regulatory bodies and rules and regulations which is considered through the regional and local level through the government authorities and the professional organizations. The proper and accurate non financial and the key performance indicator is significant and important to a particular business which mainly includes the information that is related to the employee and environmental matters. The disclosure of the non financial information increases the efficiency and improves the transparency of the companies or the organizations. Discussion There is an essential requirement and the increasing trend among the businesses or the organizations in Hong Kong to produce, develop and publish the non financial information such as environmental, social and the different sustainable aspects of the related operations carried out by the businesses in Hong Kong. The disclosure of such non financial information is mainly disclosed through the corporate social responsibility and sustainability in the report. The companies established and carrying out its operation in Hong Kong market find it interesting to disclose the various voluntary and non financial information that is particularly designed and formulated as a part of the company’s package in order to develop and improve the acceptance and credibility in the Hong Kong market place and it enables the companies in Hong Kong to conduct the operation and the business effectively and successfully. The disclosures are mainly dominated by big multinational companies and the disclosure of this information is considered as an important and key factor for driving the operation or the business in Hong Kong (Binh, 2012). Benefits of non financial information The benefits of publishing or the application of non financial information in the annual report of the companies are: It increases or develops the ability or capacity of carrying out the business operations, It develops and improves the brand image of the company, It develops and provides transparency in reporting of the financial information, It increases the credibility and reliability of conducting the business or operations in Hong Kong and disclosure of non financial information assists in attracting more suitable and better employees in the organization. When the internal benefit of disclosing the non financial information in the annual report is taken into consideration it mainly includes identifying, monitoring and controlling of the risk that is considered and regarded as an important and vital for all companies. The improvement and the development of the internal culture of the organization are considered as an important for the companies and it will benefit the organizations in Hong Kong. Regulatory Framework of HSBC The governments of Hong Kong has formulated and established certain rules and regulations that have direct interest and motive in the sustainability reporting (Camfferman, 1997). The policy, rules and regulations generally assist or guide the government to perform its function effectively and efficiently which mainly drives towards the success, progress and also sustainable development of the goals and objectives. The increase in the development of the rules and regulations generally promotes and assist in the sustainability reporting. The initiatives that are taken for the disclosure of the non financial information mainly include the government initiatives which include or emphasizes on the government that play an important and vital role in the sustainability disclosure at the national and international level. The government is taking this initiative in order to promote and emphasize on the transparency of the non financial information. The market regulators which include the stock exchanges that discloses and reveals the non financial information of the companies in Hong Kong (Roy, 2001). The other initiative that is been taken for the disclosure of the non financial information which includes or deals with developing and enhancing the sustainability reporting and will encourage or motivate transparency in the information of the related companies throughout the world. The other initiatives are generally and normally taken or adopted by the accountancy associations, research and academic institutes and the non government organizations. The non financial information disclosure of Hong Kong can be explained with the help of the example of the company in Hong Kong that is Hong Kong Shanghai Bank it explains and deals with the business that is related with or is connected with the environmental, social and economic which operates in the organization (KPMG, 2013). The long term sustainability of the companies in Hong Kong can be explained by the achievement of sustainable amount of growth and profitability. The non financial information mainly deals with the reward that is provided to the employees and the shareholders and developing and building long and ever lasting relationship with the suppliers and the customers of the company and also the payment of taxes in the countries in which the company is responsible for carrying out its operation and the investment that is done for the growth and development in the future. The non financial information includes all the information that is related to the responsibilities and the duties that the company or the organization has towards its shareholders, employees and the customers and also towards the communities and the countries in which the company operates for becoming profitable (HSBC Holdings plc, 2013). Codes and Guidelines There are certain performance indicator that are being used by the companies in order to disclose the non financial information such as the environmental impact which includes the decrease and the reduction in the consumption of energy, providing social benefit to the people, providing and expanding the social and economic benefit that is provided to the people. The human rights which includes the target on the age and gender distribution, the product liability which includes the increasing the number of fair trade products, the health and the safety products, the improvement or the development in the code of conduct and the rules and regulations of the company and the economic impact which mainly includes the increase in the extent of the responsible investment of the company, the distribution and redistribution of the economic value of the company (Henriques, 2010). Disclosure of Non Financial information The exchange has undertaken or has taken into consideration for reviewing the rules and regulations of listing the rules and regulations for the disclosure of the non financial information in the annual report of the company. The main objective or the aim in providing the disclosure of the non financial information in the annual report of the company is to provide the reference to the issuers of the information the disclosure of the valuable and the useful information to the users of the annual report for taking correct and appropriate decision. The reference for the disclosure of the non financial information generally includes the consistency and the understanding of the common terms and the alternatives that are available in order to develop and improve the efficiency and comparability of the information in different companies established in Hong Kong. The main focus or the aim of the non financial information is highlighted or reflected more on the prime users of the annual reports which include the creditors and the investment public for taking appropriate and accurate investment decisions (Smith, 2012). The disclosure of the non financial information reflects the opportunities and the risk of the companies or the industries that is included in the annual report of the company. The disclosure of the non financial information assists or helps the users of the annual report to identify and assess the risk and the opportunities that are related to the operational environment of the company. The non financial information will assist the investors to make and adopt proper investment decisions. The non financial disclosures mainly includes the legal and the statutory requirement of the company , environmental concerns, government policy and the threat towards the new technology and products and the change in the trend of the company or the industry, the product lines, organization structure and the methods that is being adopted for the production and the distribution of the market in Hong Kong and the method or the process that is adopted or selected for financing the operations and expansions of the business of the companies, the relationship that is developed and established between the customers and the suppliers, determination of market share and competition and the conduct of research and development of the company, the details or the description of the investment or significant asset of the company, and the risk that is arising out of the business and the operations that is carried out by the company and the monitoring or management of such risk by the companies (International Accounting Standards Board, 2007). While preparing the annual report of the company it is required to include the disclosure of the non financial information for the disclosure that is required to comply with the accounting standards, the rules for listing and meeting or fulfilling the legal and statutory requirements (Stittle, 2003). The issuers of the non financial information are required to keep in mind and must be attentive that the prompt and the timely disclosure of the information is considered as an important factor for identifying and assessing whether the non financial information that is disclosed in the annual report is useful to the users or not. The issuers are expected to refer to the various relevant accounting standards, legal and the statutory requirements and the listing rules that is required to be covered in the annual report (Strategy and evaluation services, 2011). The example of non financial disclosure can be explained by the values which is considered as an important for taking decision and the interaction of the company with its customers and also establishment of relationship with the top important or the top priority group in framing, designing and shaping the business. It can be explained with the help of the values that is adopted by the HSBC. HSBC considers the values as an important and integral part of the company for the assessment, recognition, selection, training and remuneration to the employees (Nicholls and Opal, 2005). The company expects that its employees and its executives will perform and act with integrity and courage for performing and executing the duties and responsibilities of the company. In order to disclose the non financial information it is required to disclose the long term sustainability of the company. HSBC also conducts the long term sustainability for establishing, developing and building long term sustainability with its employees and customers. The non financial disclosure and the codes and conduct that is to be included in the annual report of the company includes social, economical, environmental , fraud and corruption and the human rights (Armstrong and Stephens, 2005). The leading companies of the Hong Kong market generally includes developing and gaining the trust of the shareholders and also improving the performance of the business by measuring and analyzing the non financial indicator of the company which mainly includes the social responsibility, environmental management and the relation with the workers . The non financial disclosure helps the company in gaining the competitive advantage by establishing and building the connection of the value and the values and also providing or benefitting the companies to position themselves as the most suitable and preferable company among its employees, customers, suppliers, business partners and also local communities of the company (Tritschler, 2013). Usefulness of non financial information The usefulness or the importance’s of the non financial information in the annual report of the company are as follows: The non financial disclosure in the annual report mainly includes the independence of the auditor in preparing the report, the issuance of the corporate governance, dealing with the social issues of the company which includes the human rights and the labour policies of the company. It reflects or deals with the environmental issues of the company which mainly includes the contaminated land and the global warning and the ethical issues related to the company which mainly includes the activities such as corruption and bribery, codes of conduct that is established by the company and is expected to be abided by everyone in the company and the activities such as money laundering (Macdonald, 2013). The non financial disclosure or the non financial information includes the implementation of the corporate social responsibility of the company which is very useful for the investors and the accountability mechanism is regarded as an important part of the non financial disclosure. The companies in the Hong Kong market are required to identify the various contracts that are mainly responsible for carrying out the CSR activities. The audit of the companies in Hong Kong is carried out in accordance with the Hong Kong Institute of Certified Public Accountant and it is expected that the companies in Hong Kong will abide and comply with the ethical requirements in order to plan and perform the audit of the company (Ball, 2006). Conclusion The non financial information and the disclosure of the companies are mainly analyzed in order to provide the information that is required for carrying out the corporate and social responsibility of the company. Many companies in Hong Kong uses and applies the framework that has been established for developing and improving the preparation of annual report of the company. The non financial information generally includes the corporate social responsibility report and the sustainability report of the company. The non financial disclosure is more emphasized and prioritized by the larger firms in Hong Kong as compared to the smaller firms in Hong Kong. The non financial reporting or the disclosures also includes the concern towards the employees working in the organization and the environment where it performs its business or its operation. The main aim of the companies in preparing and including the non financial disclosures in the annual report of the company is to increase the transparency and also improving the credibility of the company and it also improves the brand image of the company and most important purpose for the non financial disclosure is identifying and controlling the risk of the company. Therefore the factors that is required for the non financial disclosure of the information is to be taken into consideration which includes the features and characteristics in maintaining corporate governance, the characteristic of the company, the CSR activities and the ownership structure. References Armstrong, M. and Stephens, T., 2005. A handbook of employee reward management and practice. London: Kogan Page Publishers. Ball, R., 2006. International Financial Reporting Standards (IFRS): Pros and cons for investors. Accounting and Business Research, 14(2), pp. 956-960. Binh, T.Q., 2012. Voluntary disclosure information in the annual reports of nonfinancial listed companies: The case of Vietnam. Journal of Applied Economics and Business Research, 2(2), pp. 9-90. Camfferman, K., 1997. Voluntary annual report disclosure by listed Dutch companies. New York: Taylor & Francis. Henriques, A., 2010. The reporting of non-financial information in annual reports by the FTSE100. [pdf] Available at: [Accessed 29 January 2015]. HSBC Holdings plc. 2013. Annual Report and Accounts 2013. [pdf]. 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