In order to enhance the effectiveness and usefulness of the information in the annual reports of listed companies, the company management department of the Shanghai Stock Exchange has recently issued the "Memorandum No. 5 of Listed Companies' 2011 Annual Report-Preparation Requirements for Management Discussion and Analysis" to listed companies. The memorandum emphasized the importance of narrative information disclosure in the annual reports of listed companies, and further standardized the disclosure content of "management discussions and analysis". The relevant person in charge of the Shanghai Stock Exchange said that this part of the content will be the top priority of the 2012 annual report post-examination work.
Narrative information disclosure refers to all non-financial information other than financial information in the annual report. "Management discussion and analysis" is the core of non-financial information disclosure. It is a necessary and useful supplement to financial reports, which can enhance the transparency and transparency of information disclosure. Effectiveness.
Looking at the memorandum, the Exchange listed in detail the main objectives of the "management discussion and analysis", the overall requirements of the preparation and the points that should be paid attention to. The memorandum requires that listed companies in the "Overview of the company's overall operating conditions during the reporting period" in the preparation of the company, if the company's profit composition or profit source has changed significantly, it should specify the specific changes. The company should summarize the realization or implementation and adjustment of the development strategy and business plan disclosed in the previous period. If the company ’s actual operating performance is more than 20% lower or more than 20% lower than the publicly disclosed profit forecast or operating plan for the year, The reasons for the differences should be specified.
At the same time, the company should explain the composition of the main business income and main business profit during the reporting period by industry, product or region according to its actual situation. For business operation activities and their industries that account for more than 10% of the company's total revenue or operating profit, as well as major products that account for more than 10% of the total revenue or operating profit, the revenue, cost, and gross profit margin should be listed separately, and Analyze its changes. At the same time, the company should disclose changes in the market of its main business and changes in the composition of operating costs. If the relevant data changes by more than 20% compared with the previous annual reporting period, the reason shall be explained.
On this basis, the memorandum also requires listed companies to disclose the situation of major suppliers and customers; if the company ’s asset composition changes significantly year-on-year, the main influencing factors for the change should be explained; there is a significant cash flow and net profit generated by the company ’s operating activities during the reporting period The reasons for the differences should be explained; in addition, the memorandum has made detailed requirements for the preparation of the operating conditions and performance analysis of the main subsidiaries and joint stock companies of the listed company, the special purpose subject controlled by the company, and the "prospects for future development".
While clarifying the content, the memorandum set out detailed requirements for the preparation details.
First, the listed company is required to provide dynamic information, that is, the use, sources, and major financial issues of the main business and funds should be fully discussed and analyzed from the perspective of the company ’s management to provide investors with a correct understanding of the company ’s financial status, operating results, and cash. The dynamic information necessary for the flow situation allows investors to learn more from the company management about the company's current status and future development trends, as well as possible risks and uncertainties.
Secondly, it requires highlighting important information, which should include the company's future short-term and long-term analysis, highlighting the information that management believes is the most important, focusing on major events known to management that may make it difficult for financial reports to show the company ’s future operating results and financial status And uncertain factors, including matters that have had an important impact on the reporting period but have no impact on the future, and matters that have not affected the reporting period but have an important impact on the company ’s future development.
In addition, the listed companies are required to focus on analysis, highlight the company's personality, concise and easy to understand, and management to participate in the preparation.
For this memo, market professionals and investors have given a very high rating. Some professionals said that emphasizing the content of narrative information disclosure will help to increase the usefulness of annual report information to investors' decision-making. "Financial reports reflect historical information. 'Management Discussion and Analysis' emphasizes the disclosure of forward-looking information. Through textual interpretation of relevant financial data of the company's financial statements, reminders of inherent risks and uncertainties in operations. The development trend of the company's industry, the company's response measures, development strategy and business plan are elaborated to reveal to investors the management's evaluation and analysis of the company's past operating status and the judgment and expectations of the future development trends and development prospects. Build a bridge with the future. "
Many investors also believe that financial reports reflect quantitative information, and “management discussion and analysis†supplemented by qualitative information is a further analysis of the relevant information disclosed in the company ’s financial statements, especially through the risks faced by operations Factors and uncertainties are explained to fully reveal the risks to investors. More importantly, this information helps reduce the information asymmetry of institutional investors and retail investors, and increase the fairness of information disclosure. At the same time, it also provides a platform for listed companies to proactively disclose information, which helps to improve the relevance of information disclosure and allow the market to fully reflect the value of the company.
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