Role Of Continuous Disclosure Framework †Myassignmenthelp.Com

Question: Discuss About The Role Of Continuous Disclosure Framework? Answer: Introduction The present report aims to demonstrate the importance and significance of continuous disclosure framework developed by the ASX. In this regard, the report will emphasize on the current financial position of Surfstitch Ltd through analyzing and evaluating its annual reports. Also, it depicts the necessity of implementing a continuous reporting regime for disclosure entities. Surfstitch (SRF), an online surfing retailing company has recorded huge profit and growth in the year 2015 but profit begin to fall in the year 2016 as analyzed from its annual reports. The massive growth recorded by the company in the year 2015 was due to its acquisition strategy with total revenue approximately to about $144m. However, the annual report of the year 2016 has revealed that its revenue growth has been decreased significantly as compared to that in the year 2015. The company had recorded a net loss after tax to about $154.7m due to failure in its aggressive acquisition strategy and its desire for increase in its revenue without paying much emphasis on the profitability. In year 2015, company has acquired many subsidiaries that raise the amount of goodwill and it has impacted the cash position a lot. During the financial year 2015, company has acquired subsidiaries such as SurfStitch Holdings Pty Limited, SurfStitch Pty Limited, SurfStitch (Europe) Limited, SurfStitch USA, Inc., Surfdome Shop Limited, Magicseaweed Limited, Metcentral Limited and some other. All these subsidiaries are marked as cash generating units and at the time of acquisition of these subsidiaries goodwill has comes into existence. Below chart shows the goodwill left after the deduction of impairment loss from each CGU. Amount of Goodwill for CGU at the end of FY 2015 Amount in thousand dollars SurfStitch Pty Limited $ 24,432.00 SurfStitch Europe Pty Limited Surfdome Shop Limited $ 30,557.00 SurfStitch USA, Inc. $ 9,866.00 Magicseaweed Limited $ 6,997.00 Rollingyouth Pty Ltd $ 1,980.00 $ 73,832.00 There has been great change in cash and cash equivalents due to acquisitions carried out by the company in year 2015. A sum total of 58633 thousand dollars has been used for acquisition of subsidiaries. Company has raised the cash through issues of shares capital of amount 125,693 thousand dollars. Company has shown the impairment loss of 88,999 thousand dollars in the profit and loss statement and it is due to write of complete goodwill amount that company has recognised in previous year. The impairment in goodwill occurs due to huge reduction in carrying value of CGU. The selling and distribution expense has increased from 44683 thousand dollars in year 2015 to 101268 thousand dollars in year 2016. After complete analysis of the company performance in current period and previous it is highly recommended to the clients to hold the shares for two years and give the company chance to rise again and earns the substantial profits. Importance of Continuous Reporting Regime Information disclosures have become an intensely significant part of an organization. In todays dynamic environment, it has become quite important to have accurate information so that future goals and strategies can be planned out. Investors that are investing in the company have their stake in the business organization (O'Brien, 2007). Thus in order to remain up to date they follow a broad and wide spectrum of information that discloses potentially relevant information. It is significant to know that the spectrum of information is quite wide and it also varies from time to time. The continuous disclosure regime has become important because it lays significant impact on the market and allocation of resources (Continuous Disclosure: an Abridged Guide, 2017). Australias business and economic environment has working in compliance with continuous disclosure regime. The companies that are listed in the Australian Stock Exchange are following the rules and norms in accordance to continuous disclosure process. The Australian Stock Exchange has been adopted the continuous disclosure regime as a way to achieve efficiency and stability in their operations (Australias continuous disclosure system: clear or confused, 2013). It is quite important for listed companies to follow the procedures according to continuous disclosure and disclose information about their earnings so that future market trends can be forecasted. In Australia, it is quite important for a company and its directors to have an effective continuous disclosure regime in order to avoid breach of Corporation Act. The continuous disclosure has become a legal requirement in Australia for companies, in addition to this it also helps in identifying the persons that have involved in allege d infringement of commitment for continuous disclosure. This concept has also provided defence shield to the business organization, section 674(2B) of the Corporation Act explains that if any person or business entity got involved in a issue which is related to infringement can prove its innocence by ensuring that they have compiled with the norms of continuous disclosure (Strengthening the financial reporting framework, 2017). Hence it is important for organization to adopt a robust compliance system in order to avoid potential infringement of continuous disclosure. In Australia, the continuous disclosures has been set out in section 674(2) of the Corporation Act which explains that every business organization that has been listed in Australian Stock Exchange is required to notify their market operator about varies kind of information that has been disclosed and the reason for not disclosing certain information (Explainer: Continuous disclosure obligations, 2013). It is also important for a business firm to disclose that the information is available at which platform so that general public can have a look at the entities market performance. In addition to this, the business organization is also required to disclose the value of information in the market ad its significant impact on the price of its securities and shares (Seeto and Howatson, 2008). The Australian Stock Exchange is quite particular about the continuous disclosures regime, and has serious punishments for the one who do not operate in compliance with the same. The continuous disclosure regime is in section 674(2), failure to comply with the section 674(2) my give rise to suit for an offence such as notice of breach by Australian Securities and Investment Commission or civil proceedings against the guilty. The Continuous disclosure regime is a positive change but it is quite hard to achieve because it involve various requirements. A continuous disclosure regime consists of a continuous disclosure policy approved by the board of the organization (Explainer: Continuous disclosure obligations, 2013). The regime should involve a senior officer to head its proceedings. The very first responsibility of the head of the regime is to identify the areas where the query for disclosure can arise so that proper strategies for the same can be planned out. It is important for business organization to include continuous disclosure their training and induction program for new recruits, managers and senior officials so that any they can easily understand the requirements of the regime the training program is required to be organized at regular intervals so that any new trend in the regime can be analyzed properly. Continuous disclosure regime helps in identifying information which can aid the general public to analyze the performance and growth of the organization in relation to prevailing trends in the market (Australias continuous disclosure system: clear or confused, 2013). Apart from this it also helps the investors to analyze the future effects of information on the shares and securities of the firm. The Corporation Acts section 677 refers to determine whether the information provided is market sensitive or not so that it can be disclosed or not. The information so disclosed aids the general individual to expect material effect on the price or value of the shares of the company. These kinds of information also help a person to decide whether the shares of the business organization should be acquired or to be disposed off. In continuous disclosure regime, the information disclosure is a continuous and interdependent process; information thus disclosed have certain kind of effect on other information that has been disclosed earlier by the firm (Continuous Disclosure: an Abridged Guide, 2017). The Australian Stock Exchange a maintained a time period under which the listed entities or firms are required to disclose the information and if the business entities find that the information is market sensitive they can resist from disclosing the same, but in such cases they have to disclos e the reason behind not providing information to the stock exchange under a given time slot. However the way through which information will be disclosed to Australian Stock Exchange can be decided by the business entity. It can also disclose information in the form of market announcement. Certain information is required by the Australian Stock Exchange on immediate basis while it may take longer time in case of making market announcement (Seeto and Howatson, 2008). The significant point is that companies are required to follow the continuous disclosure regime and they are also required to take the procedure quite seriously and not postponing the same for later time period. The Australian Stock Exchange has made it mandatory for firms which are listed in the stock exchange to follow the rules and guideline for continuous disclosure of information which can have impact on the market value of the firms shares and securities (Explainer: Continuous disclosure obligations, 2013). The continuous disclosure regime has proved beneficial for business organizations, general public and investor as well. When an investors plans to invest in any organizations, the process undergoes a lot of research and findings. An investor believes in a large set of information which is available on public platform. The continuous disclosures of information by the firm are an effective and efficient practice which helps the business entity in increasing their goodwill in the market, which in turn attracts more investors (Strengthening the financial reporting framework, 2017). The continuous disclosure regime makes an organization responsible towards the general public. The Australian Stock Exchange believes that an information should be quickly announced which can damage the value of shares and securities of the business organization. In any circumstances in which the business organization fails to make an announcement of information that it can request the stock exchange in haltin g their trading for some time until the information is announced (Australias continuous disclosure system: clear or confused, 2013). In todays competitive environment, information sharing has become a vital part for organizations that are functioning internationally as well as in their domestic region. Investors search various kinds of information before investing in any firm. Thus continuous disclosure has become a significant aspect in proper functioning of a business organization. Its role has become quite vast and important that an organization cannot avoid to continuous disclosure regime. It has direct and indirect effect on the business and its goodwill in the market (Chan, Faff, Ho and Ramsay, 2017). The Australian Stock Exchange has regulated the same aspect quite efficiently in their operations. They have made it a legal obligation for all the firms that are listed in the Australian Stock Exchange to comply their operation and functions with continuous disclosure. The Corporation Act of the country specifies its norms and guidelines which are required to be followed by every business firm (Latimer and Mau me, 2014). As per my opinion this procedure is quite effective in understanding the market value and market trends for a business organization. This procedure allows business firms to disclose information which can have an impact on the market value of the shares and securities (Clarke, Dean and Egan, 2014). In my opinion it is important for any investor to know the market performance of a business organization in order to make right decision as to invest or not to invest. The Australian Stock Exchange has made the compliance process quite flexible for the business entities. This is quite interesting to know that business organizations if felt that the information is market sensitive they can avoid disclosing the same to the Australian Stock Exchange. The procedure is quite effective as it is abided legally and if not followed properly or if a firm is engaged in the infringement of law, then it can be prosecuted for the same by the Australian securities and investment Commission (Beaton-Wells a nd Fisse, 2011). Thus the continuous disclosure regime is quite effective because it helps the business organizations to forecasts the market trends so that they can plan out their future prospects. Apart from this, an organization that discloses information on regular basis has improved goodwill in the market. Conclusion It can be said from the overall discussion held in the report that continuous disclosure forms an essential part of reporting standards for the Australian business entities. The Surfstitch Company is recommended to adopt the reporting framework of continuous disclosure to enhance their financial reporting quality and regain the goodwill in the market position. References Australias continuous disclosure system: clear or confused. 2013. Corporate Advisory. [Online]. Available at: file:///C:/Users/user/Downloads/1665963_889467059_147834Australiascontinuousdisc.pdf [Accessed on: 11 September, 2017]. Beaton-Wells, C. and Fisse, B. 2011. Australian Cartel Regulation: Law, Policy and Practice in an International Context. Cambridge University Press. Bragg. S. 2010. Wiley GAAP: Interpretation and Application of Generally Accepted Accounting Principles 2011. John Wiley Sons. Chan, H., Faff, R., Ho, Y.K. and Ramsay, A. 2017. Management earnings forecasts in a continuous disclosure environment. Management earnings forecasts. Clarke, F., Dean, G. and Egan, M. 2014. The Unaccountable Ungovernable Corporation: Companies' use-by-dates close in. Routledge. 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Seeto, G. and Howatson, G. 2008. Compliance with continuous disclosure obligations. [Online]. Available at: https://www.claytonutz.com/knowledge/2008/january/compliance-with-continuous-disclosure-obligations [Accessed on: 11 September, 2017]. Strengthening the financial reporting framework. 2017. Part 8: Continuous disclosure. [Online]. Available at: https://archive.treasury.gov.au/documents/403/HTML/docshell.asp?URL=Ch8.asp [Accessed on: 11 September, 2017]. SurfStitch Group. 2015. Annual Report. SurfStitch Group. 2016. Annual Report