Quality of Financial Disclosure & Reporting Analysis: Sing Pao Media - Case Study Example

Student’s Name Professor’s Name Course Date Quality of Financial Disclosure & Reporting Analysis: Sing Pao Media I. Corporate Governance & Financial Reporting A. Independence Of Directors There is sufficient evidence to indicate Sing Pao Media conforms to the guidelines requiring the independence of directors. There have been, at least, three independent non-executive directors within any given financial year. These directors do not have financial, business or even family relationships with one another. Each of these independent non-executive directors has all made annual conformation of their respective independences in relation to the guidelines set out within Rule 5.09 of the GEM Listing Rules. The firm ensures to maintain a balance board composition for purposes of enhancing a stronger and stable independency across the formation in order to conform to all recommended stipulations under the CG Code for the Board that requires at least a third of its composition made up of independent non-executive directors. The report further indicates that the three independent directors are selected from a composition of personnel with high levels of competence. Their independence in operations of the firm is gathered from their respective experiences gained from numerous sectors and their ability to uphold and support efficient discharge of their duties as well as responsibilities within the Board. To ensure that their reliability is not compromised, these independent directors are not appointed for specified period of times given that they can be retired anytime soonest in the course of Annual General Meetings or even allowed retirement rotation for at least one in every three financial years while adhering to the stipulations laid out within the Articles of the company. B. Evidence of Directors or Auditors Evaluations of Financial Information Provided The corporate governance section of the company’s annual report provides quite a good number of indications that directors have indeed analysed and queried the financial statements. These indications are discussed as below; It is important to note that the responsibility of the company’s directors has been clearly set out to involve the preparation of consolidated financial statements that portray a true and fair view in relation to the Hong Kong Financial Reporting Standards. These preparations should also be free from material misstatement regardless of it being fraudulent or error-related (Sao Pao Media Enterprises 44). Subsequently, the auditor’s responsibility is to vehemently express their opinions on these already prepared consolidated financial statements based on the standard audit procedures. The auditors have set out basis for disclaimer of opinion made so that there limitation is set within the borrowings under disputes. For instance, auditors have clearly indicated that there exists a dispute between the Group and the Company over balances relating to borrowings for the period between 2012 and 2013. The auditors straightforwardly indicate that the they were not able to access full representation from the directors on the immediate accuracy of the borrowings at hand that were rather carried forward since previous operational years. The auditors also identify a scope limitation in regards to directors using the going concern basis in the course of preparing the consolidated financial statements. For instance, the consolidation of loss, current and net liabilities in the financial period ending 2013 postulated the existence of material risk that could result to a substantial level of doubt in regards to the capacity to commence as a going concern (Sao Pao Media Enterprises 46). The Notes 2 of the consolidated statements indicate that the directors have employed or even planned to adopt such specific measures as entering into negotiations with a group of possible investors in regards to possibility of capital investment agreements into the overall group as well as embarking on definitive phases to restructure plans for the entire group as a way of improving its financial and cash flow positions hence sustain it as a going concern. The note further indicates that the firm’s director are of a strong opinion of the measures being implemented and also, formulated cash flow forecasts for the next 12 months or so based on the specific existing assumptions that involves accessing capital funding from loan facilities granted by the firm on joint measures. The auditors postulate that the validity of the consolidated financial statements prepared on a going concern basis would depend on the success or failure of the end results of the aforementioned measures put in place to satisfy the overall capital needs of the group improve on its cash flow position as well as showcase the capital deficiency of the operations. There exists insufficient information and thus, a guarantee on whether or not the Loan Provider will guarantee loans within the next 12 months or so. The auditors subsequently notes that there were not able to establish whether or not the existing assumptions made towards the forecast were indeed valid or even whether the capital injection as well as the restructuring plan could be successfully completed and so, whether it was quite appropriate to use the going concern basis in the preparation of the consolidated financial statements (Sao Pao Media Enterprises 48). C. Financial Qualifications & Experience For Board Members Some of the company’s board members that possess financial qualification and experience that can help to improve on its operations is listed below; Mr.Chong Cha Hwa who is both the chairman and CEO of the firm is a member of the Association of Chartered Certified Accountants as well as the Malaysian Institute of Accountants. He holds a degree in management with more than 20 years of experience working within the accounting and finance sector serving both public and private listed companies in Hong Kong and the entire Southern East Asia region. Mr.Chong Jian Peng is an executive director of the company who holds degree in BA (Accounting & Finance) from The Open University of Hong Kong. He is a member of The Hong Kong Institute of Certified Public Accountants as well as an associate member of The Institute of Chartered Accountants in England and Wales. He previously worked as a financial controller of certain firm listed in GEM and, also as a worker in other reputable international accounting companies for few years. Mr Murphy Kevin Michael has extensive experience in investment management especially within the private sector where he played the role of the fund investment manager for numerous companies established and operated within Hong Kong and abroad (Sao Pao Media Enterprises 18). These members have been involved greatly in the operations of other companies like RCG Holdings, China Mining Resources Group Limited, Boshiwa International Holdings among others. Most of these companies have experienced successful business operations within the very many years of activities. This is an indication that the composition of the board of directors is adequate and appropriate to trigger financial performance. There is no sufficient information provided to evaluate influence on individuals on the financial performance. On the contrary, they are performances are evaluated against the respective skills, knowledge, individual performances as well as imminent contributions all relating to the underlying market conditions. D. Internal Control The overall Board of the company is mandated with the responsibility of coming up with the entire firm’s system of internal controls as well as making sure to execute tasks related to annual evaluation of its efficiency. The responsibility ensures that this Board is able to supervise and monitor the entire Group’s financial position in a way that complements the interests of the distinctive shareholders. For this company, the system of internal control comprises of phases related to financial, operational, compliance and risk management sections of the entire business activities. In regards to the imminent procedures as well as internal controls made for the purpose of overseeing the handling and distribution of price-sensitive information, it involves the overall group being certain of its immediate commitments under the GEM Listing Rules, co-operations with close relation to the Guide on Disclosure of Price-Sensitive Information that was put forth by the Stock Exchange, and also the platforms related to financial reporting and public announcements, the group has further formulated and implemented policies related to fair disclosure by the pursuant board. II. Accounting Policies Analysis In 2012, the company implemented the resolution passed in April of that year with certain go ahead of the Registrar of Companies of Cayman Islands and Registrar of Companies of Hong Kong to change the company name from SMI Publishing Group Limited to Sing Pao Media Enterprises Limited. The statement of compliance for the company indicates that the financial statements have all been prepared and presented while still adhering to the applicable Hong Kong Accounting Standards as well as the applicable disclosures as presented within the Rules Governing the Listing of Securities on GEM of the Stock Exchange. The company’s basis of measurement and going concern assumptions indicates that the entire consolidated financial reports and statements have all been prepared in accordance with the historical cost convention. Significantly, in the financial year ending 2012, there were substantial amounts of adoption of Hong Kong Financial Reporting Standards that got implemented like interpretations 14, 19 and 24 that deal with prepayments of minimum funding requirement, extinguishing financial liabilities with equity instruments and related party disclosures respectively. The basis of consolidation for the three-year period between 2012 and 2014 indicates that the entire consolidated financial statements are made up of statements of the firm as well as its immediate subsidiaries. It is further established that any possible inter-company transactions and balances that exists between group companies and unrealised profits are all scrapped off in the course of preparing the consolidated financial statements. Any given unrealised losses are eliminated unless the transaction at hand is able to avail sufficient evidence on the immediate asset being transferred for which case the entire loss is established within the profit or loss statement. The consolidation of a subsidiary commences in the event that the firm acquires control over the subsidiary and stops immediately it is established that the control is lost. In essence, the income and expenses of a given subsidiary that has been repossessed or sold out in the course of the year are all included within the consolidated statement of profit or loss as well as other comprehensive income from the exact date whenever the Company stopped to control the subsidiary at hand. Whenever necessary, alterations are made to the financial statements of all subsidiaries in order to bring their accounting policies in line with the ones already adopted by the Group. III. Financial Information Analysis The company’s overall revenues increases significantly within the three-year period from HK$ 48.873M to 68.084M respectively(Sao Pao Media Enterprises 144) while its loss has increased significantly within the same period to a loss of HK$40.811M. Conclusion & Recommendation From the above discussion, it can be seen that Sao Pao Media Enterprise shows a strong and viable corporate governance structure that clearly conforms to the guidelines set by both the GEM and the Hong Kong Stock Exchange regulation frameworks. Despite the fact that the company has a board of directors with extensive skills, knowledge and experience, still, it makes substantial amount of losses. Potential investors should not invest in the company also because the directors have always recommended against distribution of interim dividends to the existing shareholders of the company. The firm has however; ensured that it operates under a stringent regulation policy that also relates clearly to the internal articles as a set out in different board meetings. The operations of the company have also been made effective and efficient due to the sufficient and well-laid out internal controls meant to oversee the financial activities of the firm. It also enjoys a great stride of independent auditors and non-executive directors who happen to prevent compromise to the underlying activities of the firm. Thus, it is important that potential investors like the suppliers of loan and other forms of borrowings to consider this aspect whenever making decisions for whether or not to provide Sao Pao Media Enterprises with credit facilities in the future. They should analyse the level of credit and currency risk within the market in order to justify of their decisions to provide imminent credit supply. Works Cited Sao Pao Media Enterprises. Annual reports. 2012-2014. Print Read More