ASIC today released a regulatory guide to improve disclosure in annual reports of listed entities.
The operating and financial review (OFR) forms part of a listed entity's annual report and contains information investors would reasonably require to make an informed assessment of the entity's operations, financial position, business strategies and future prospects. It is a key part of annual disclosure by a listed entity.
ASIC believes OFRs can be improved and has released Regulatory Guide 247 Effective disclosure in an operating and financial review (RG 247) with the purpose of lifting the standard of disclosure. The guide aims to:
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promote better communication of useful and meaningful information to shareholders
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assist directors in understanding the OFR requirements.
'There is an opportunity for listed entities to make their operating and financial reviews more useful to investors,' ASIC Commissioner John Price said.
'This guidance will assist directors in providing an OFR that is tailored to the particular circumstances of each entity. Encouraging good, clear and insightful information furthers ASIC's aims of promoting confident and informed investors and financial consumers, as well as fair and efficient markets,' Mr Price said.
ASIC's proposed guidance is not intended to add unnecessary length to annual reports, but rather is intended to promote more meaningful information and analysis for investors.
'The focus is on quality not quantity' Mr Price said.
RG 247 also includes guidance on:
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appropriate standards of disclosure through the inclusion of worked examples
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the use of the 'unreasonable prejudice' exemption from disclosing specific business strategies and prospects; and
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presentation of the analysis and narrative relating to operations and financial position.
Background
ASIC issued Consultation Paper 187 Effective disclosure in an operating and financial review (CP 187) in September 2012. ASIC received 25 written responses to CP 187 which, together with meetings with interested parties, were valuable in developing RG 247. The submissions we received led to more focused guidance and examples of appropriate disclosure.