Wednesday, December 21, 2011

Disclosures of Forward-Looking Facts | MYACCOUNTINGINFO.NET

Disclosures of forward-looking information are regarded as highly relevant in equity markets worldwide. For instance, the EU’s Fourth Directive states that the annual report ought to involve an indication of the company’s most likely future developments. The SEC’s Regulation S-K calls for firms to disclose presently identified info that will materially impact future liquidity, capital resources, and operating outcomes. As a third example, the Tokyo Stock Exchange “requests” management of listed firms to give forecasts of sales, earnings, and dividends in their annual and semiannual press releases. As applied here, the term forward-looking data contains
    disclosure of forward looking

  1. forecasts of revenues, income (loss), cash flows, capital expenditures, along with other economic items;
  2. prospective information about future economic performance or position that is less definite than forecasts with regards to projected item, fiscal period, and projected quantity; and
  3. statements of management’s plans and objectives for future operations.

These three categories of forward-looking data turn out to be more common as we move from

  1. forecasts to
  2. potential facts to
  3. plans and objectives.
Given that a primary aim of investors and analysts is assessing a be expected, vaguer types of forward-looking details are additional prevalent. A study of 200 massive public companies in France, Germany, Japan, the United Kingdom, and United States discovered that the majority of them disclosed information and facts about management’s plans and objectives. Softer, prospective information was also fairly popular, but forecasts were much less prevalent. An example would be the forecast disclosure of Daimler, the German car corporation, in its 2008 annual report:

Daimler anticipates a substantial lower in business volume in 2009. From the beginning point in the at present projected unit sales, income is most likely to be lower th n in 2008 in all the automobile divisions. Within the year 2010, we then anticipate at the least slight growth in our enterprise volumes, supplied that the projected revival of automotive markets basically occurs. . . . . We anticipate additional substantial burdens on the earnings with the Daimler Group and it  divisions. . . . . With the assist of our intensified efficiency-improving actions plus the market place achievement of our new solutions, we must be able to improve our earnings again in 2010.

See Also:
International Economic Analysis
Voluntary Disclosure

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