Akhtaruddin, 2005, Corporate Mandatory Disclosure Practices in Bangladesh

40 (2005) 399–422

Corporate mandatory disclosure practices

in Bangladesh

M. Akhtaruddin

School of Management, University Science Malaysia, USM-11800, Pulau Pinang, Malaysia

Abstract

This study reports the results of an empirical investigation of the extent of mandatory disclosure

by 94 listed companies in Bangladesh. It also reports the results of the association between company-

specific characteristics and mandatory disclosure of the sample companies. The results indicate that

companies in general have not responded adequately to the mandatory disclosure requirements of the

regulatory bodies. It has been found that companies, on average, disclose 44% of the items of

information, which leads to the conclusion that prevailing regulations are ineffective monitors of

disclosure compliance by companies. Company age appears to be an insignificant factor for

mandatory disclosure. And there is little support for industry size as a predictor of mandatory

disclosure except where size is measured by sales. Then it is marginally significant. Profitability was

also found to have no effect on disclosure. And status, i.e., whether a company is modern or

traditional also has no effect on mandatory disclosure.

D 2005 University of Illinois. All rights reserved.

Keywords: Bangladesh; Mandatory disclosure; Annual report; Disclosure index; Regulatory framework;

Information; Listed companies

1. Introduction

In recent years, the issue of corporate disclosure has received a great deal of attention

frommany researchers (for example, see Benjamin & Stanga, 1977; Carol & Pownall, 1994;

Cooke, 1989; Forker, 1992; Inchausti, 1997; Ingram & Frazier, 1980; Lang & Lundholm,

1993; Singhvi & Desai, 1971; Wallace, 1988). Why corporations should and do disclose

information is articulated in various theories, namely, stakeholder theory, agency theory,

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M. Akhtaruddin / The International Journal of Accounting 40 (2005) 399–422400

legitimacy theory, and political economy theory (Choi, 1973). While different theoretical

perspectives make different arguments, they all agree that companies release information

mostly for traditional user groups such as shareholders, creditors, financial analysts, and

security consultants who find this information useful when making investment decisions

(Cooke, 1989). The agency theory implies that companies increase disclosure in order to

mitigate conflicts between shareholders and managers. In addition, companies wishing to

enhance their firm value may do so by increased disclosure (Lobo& Zhou, 2001). Corporate

disclosure is, however, subject to potential pressures from regulatory bodies.

Disclosure is generally made in company annual reports through the statements or

accompanying notes. Although other means of releasing information, such as medial

release, interim reporting, letters to shareholders, and employee reports, are used by the

companies, the annual report is considered to be the major source of information to various

user-groups (Marston & Shrives, 1991). Nevertheless, all parts of the annual reports are not

equally important to all users. The income statement is believed to be the section most

preferred by investors, whereas cash flow statement and balance sheet are the most useful

sections to bankers and creditors (Eccles & Mavrinac, 1995; Ho &Wong, 2001). Likewise,

users of accounting information weight audit reports, directors’ reports, accounting

policies, and historical summary differently. The annual report should contain information

that will allow its users to make correct decisions and efficient use of scarce resources.

Much prior research has focused on corporate transparency and capital market

development. Since the fall of Enron in the United States, there has been a wider

recognition of the importance of corporate transparency and disclosure. The effective

functioning of capital markets, however, significantly depends on the effective flow of

information between the company and its stakeholders. Information disclosure is seen as a

means to improve marketability of shares, to enhance corporate image, and to reduce the

cost of capital (Meek, Roberts, & Gray, 1995). Companies provide information on the

ground that such disclosure will not respond to the negative impact on the company image

(Choi, 1973). It is seen that a company discloses information in line with legislative

frameworks (Alam, 1989; Karim et al., 1998). Brownlee et al. (1990) argue that regulatory

agencies should be more concerned with the full and fair disclosure of information than

with the specific accounting methods used to measure or report economic transactions.

The Companies Act 1994 provides the basic requirements for disclosure and reporting

applicable to all companies incorporated in Bangladesh (Government of Bangladesh,

1993). The Act requires companies to prepare financial statements in order to reflect a true

and fair view of the state of affairs of the company. The Securities and Exchange

Commission (SEC), another regulatory body, requires all listed companies to comply with

accounting standards promulgated by the Institute of Chartered Accountants of

Bangladesh (ICAB), in addition to its own disclosure provisions (Government of

Bangladesh, 1993). Disclosure provisions of the Security Exchange Rules are, in fact,

restricted only to companies listed on the stock exchanges. It is often alleged, however,

that company annual reports do not comply with the disclosure requirements stipulated by

the regulatory agencies, resulting in poor disclosure compliance by the listed company

(Ahmed & Nicholls, 1994; Hossain, 2000; Karim, 1996).

Considerable research (e.g., Benjamin & Stanga, 1977; Cooke, 1989; Inchausti, 1997;

Lang & Lundholm, 1993; Meek et al., 1995; Singhvi & Desai, 1971; Wallace, Naser, &

M. Akhtaruddin / The International Journal of Accounting 40 (2005) 399–422 401

Mora, 1994) has been undertaken in the recent past to enhance our understanding of the

factors influencing disclosure practices in Western society. Little is known about this

phenomenon in developing countries, particularly in Bangladesh. Moreover, prior research

focuses mostly on voluntary disclosures. There is little empirical evidence that looks

explicitly at mandatory disclosures, especially since the 1994 Companies Act. Again,

Hossain and Taylor (1998) used company reports that were prepared before the enactment

of the Companies Act 1994. On the other hand, Hossain (2000) specifically investigated

the compliance of International Accounting Standards (IASs) adopted in Bangladesh. He

found that compliance with the disclosure practices mandated by the three regulatory

bodies (Companies Act 1994, disclosure requirements of the stock exchange, and the

approved IASs) in Bangladesh is rare.

This paper investigates the disclosure practices of listed companies in Bangladesh to

see how they comply with mandatory rules established by the three regulatory bodies. In

addition, it examines the association between company characteristics and the extent of

disclosure. The findings of the study would be of immense interest to listed companies,

investors, and those involved in standard setting processes.

The remainder of the paper is organized as follows. Section 2 discusses the regulatory

framework for disclosure in Bangladesh. Section 3 presents a review of the literature and

develops the study’s hypotheses. The research method is outlined in Section 4. Section 5

presents the results. Finally, Section 6 presents the conclusions, possible policy

implications of the results, potential limitations and directions for future research.

2. The legal framework for disclosure

Corporate reports generally include information in conformity with reporting and

disclosure laws, because laws require them to provide minimum amount of information

to facilitate evaluation of the securities. Every country, in general, has its own regulatory

framework that governs disclosure in corporate reports within that country. In

Bangladesh, corporate disclosure is governed by a number of statutes. For example,

companies limited by liabilities are guided by the Companies Act 1994. The extent and

nature of disclosures of the listed companies are influenced by Securities and Exchange

(SEC) Rules 1987 (Government of Bangladesh, 1987), the IASs adopted by the Institute

of Chartered Accountants of Bangladesh (ICAB) and the disclosure provision of the

Companies Act 1994 (Government of Bangladesh, 1994). These three regulatory bodies

provide the framework for corporate disclosures in Bangladesh. There is, however, no

one set of generally accepted standards based on these three sources. Again, industries

like railways, electricity, insurance, and banks have their own distinct regulations that

govern disclosures in their annual reports. Disclosures are also influenced by

Nationalized Order, 1972, Banking Companies Act (Government of Bangladesh,

1991), and Income Tax Ordinance 1984 (Government of Bangladesh, 1984). Like other

countries of this region, Bangladesh adopted the Companies Act 1913 of the then British

India. This Act was in force in Bangladesh before the promulgation of the Companies

Act of 1994, which is largely influenced by the British Companies Act. The Companies

Act 1913 required limited public companies to submit an annual balance sheet containing


a summary of their capital, liabilities, and assets. But no specific formats were

prescribed. Profit and loss accounts were prepared without mentioning the nature of

activities in detail. These two statements needed to be audited and presented at the annual

general meeting for approval prior to publication. The fundamental weakness of the

regulation is that it does not provide any guidelines regarding the contents or how the

value of the respective items has been arrived at. The Companies Act 1994 made major

alternations to the financial reporting practices and disclosures of limited liability

companies (Ahmed & Kabir, 1995). Under the new law both statements also have to be

audited and reported before the annual general meeting. The statements can be prepared

either horizontally or vertically. The law requires that fixed assets are to be shown at cost

or valuation. The provisions for depreciation are the annual charge to be disclosed

separately. The required disclosures are classified and specified in far more detail and

include reserves and the changes that occurred during the year, director’s remuneration,

commission, tax provision, and the flow of foreign currency. Section 185 of the

Companies Act provided mandatory items to be disclosed on the balance sheet and

income statement and Section 186 provides a list of information items that must be

disclosed in the director’s report (Government of Bangladesh, 1994). Legislative

requirements prior to 1994, however, failed to indicate the actual level of corporate

disclosure. No particular formats were prescribed and even the necessary contents of the

accounting reports were not specified. In contrast, the Companies Act 1994 included

many provisions, which are mandatory and, some of those are also required by the

approved IASs (Hossain & Taylor, 1998).

The accounting profession in Bangladesh is guided by two professional institutes,

namely, the Institute of Chartered Accountants of Bangladesh (ICAB) and the Institute of

Cost and Management Accountants of Bangladesh (ICMAB). The financial audit is done

by members of ICAB and the cost audit by members of ICMAB. However, both are under

the control of the Ministry of Commerce Bangladesh. The two institutes are run and

managed by council members, who are elected internally, and representatives from the

government. The council is responsible for the development of the accounting profession

in Bangladesh. Moreover, the ICAB has been given the sole authority to develop and issue

accounting and reporting standards and to monitor their application throughout the

country.

Stock exchange authority governs disclosure in company reports as a part of listing

requirements. At the time of independence in 1971, Bangladesh inherited only one stock

exchange, the Dhaka Stock Exchange (DSE). It was formed in 1954 and registered as a

limited liability company. The Chittagong Stock Exchange (CSE), another stock exchange

of the country, was set up in 1999 and functions in Chittagong. Both stock exchanges are

regulated under the Securities and Exchange Rules 1987 and the Companies Act. Stock

exchange companies must disclose the following information in compliance with SEC

regulations: company history, outline of business, profile of top employees, profile of

directors, information on capital, changes in share capital, number and types of

shareholders, audited financial statements, consolidated statements, post-balance-sheet

events, holdings in associate and subsidiary companies with relative percentage and

payment of dividends. The stock exchange thus places a continuing disclosure and

reporting obligation on listed companies. Security exchange authority has, therefore, a


positive role in determining the level of disclosure in company reports (Wallace & Naser,

1995).

It is recognized that IASs issued by the International Accounting Standards Committee

(IASC, 2001) have made important contributions toward harmonization in accounting and

reporting practices in individual countries. The IASC has, however, no authority to enforce

the accounting practices of its member countries. The implementation of accounting

standards is left to the local accountancy bodies. In countries where professional

accounting institutions are not strong, the implementation of accounting standards will not

be effective. The professional bodies may persuade the government to amend the law so

that the standards issued by the IASC can be adopted. It should be noted that IASC was

reconstituted (April 01, 2001) and is now known as the International Accounting

Standards Board (IASB). The Institute of Chartered Accountants of Bangladesh as a

member of this body (IASB) is entrusted with the task of adoption and enforcement of

standards in Bangladesh. The Technical and Research Committee of the ICAB selects,

reviews, and modifies the standards, where necessary, to conform to local requirements.

Members of the ICAB comply with the adopted accounting standards and disclosure

provisions of the Companies Act, as well as the disclosure requirements of the stock

exchanges. Like the IASC, the ICAB are, however, recommendatory in nature, as the

ICAB has no legislative power to enforce compliance with the disclosure requirements of

the accounting standards they issue (Hossain, 2000). Since members of the ICAB are kept

constantly aware of the development of accounting and auditing standards, they therefore

contribute to the improvement of financial reporting in Bangladesh. Once accounting

standards adopted by the ICAB gain mandatory status through the SEC’s directives they

become applicable to all listed companies. Specifically, all listed companies are to abide by

accounting standards adopted by the ICAB and hence, accounting standards are mandatory

only for the companies listed on the stock exchange.

The SEC in Bangladesh plays a central role in monitoring and enforcing mandatory

disclosure compliance of listed companies. Listed companies are required to prepare

financial statements in accordance with the approved IASs along with the disclosure

provisions of the Companies Act and the stock exchanges. The SEC also prescribes penal

provisions for non-compliance. These include: barring the auditor who conducted the non-

complying audit from acting as an auditor for a listed company for a period of up to five

years; fining the auditor and the company officer up to one thousand taka for non-

compliance with stipulated provisions under the Companies Act. Like the U.S. Securities

and Exchange Commission (SEC), the SEC in Bangladesh uses a review process to

monitor and enforce compliance with mandatory disclosure requirements. The primary

objectives of monitoring company annual reports are to examine whether they adhere to

regulatory frameworks and to encourage compliance. In contrast to the U.S. SEC that uses

a hard approach, the SEC in Bangladesh employs a lenient approach to enforce

compliance. The weak enforcement approach of the SEC may lead to the withholding of

mandatory disclosure information. To enforce existing rules, the SEC Bangladesh has the

power to suspend companies or remove their listing privileges if they do not comply with

the listing requirements. The power to reward the reporting entity is also embedded in the

enforcement process. Since the SEC Bangladesh hardly ever imposes sanctions for non-

compliance of mandatory disclosures, better enforcement procedures appear warranted.


3. Literature review and hypothesis development

The demand for published financial information of companies has increased worldwide

as users of the information becomemore aware. But often disclosure does not serve the need

of the users because managers are likely to consider their own interests when exercising

managerial discretion. In fact, this might enhance the disclosure gap—the difference

between expected and actual disclosures, also known as the principal–agent problems. In

other words, improved disclosure reduces the gap between management and the outside

world, enhances the value of stock in the capital market, increases liquidity, reduces cost,

and so on (Cooke, 1989; Hossain, 2000; Karim, 1996). One striking feature in corporate

reporting is that a company generally provides information to discharge specific

obligations: to society, investor, supplier, creditors, and legal authorities. However, the

decision to provide or not provide certain information is likely to be influenced by a variety

of factors. Prior research has examined factors like size, profitability, and listing status to

find out their links with disclosure. Cooke (1989), for example, examines three categories of

companies, namely, unlisted, listed, and multiple listed, and suggests that disclosure is

lower for unlisted companies than listed companies, and that disclosure by listed companies

is lower than that of multiple listed companies. Lang and Lundholm (1993) suggest that

disclosures are higher for larger firms. Lobo and Zhou (2001) demonstrate that companies

that are performing well are likely to provide more information than poorly performing

companies. Also, cultural value is no less important a determinant of disclosure. For

example, in countries, which support a culture that has a high sense of secrecy, management

is less likely to pursue a high level of disclosure (Gray & Vint, 1995). Earlier research has

examined various company attributes and their association to the levels of disclosure. The

present study focuses on the level of disclosure in relation to the age, size, status, and

profitability of the companies. Additionally, prior studies (Owusu-Ansah, 1998; Wallace &

Naser, 1995) define mandatory disclosure as the presentation of a minimum amount of

information required by laws, stock exchanges, and the accounting standards setting body to

facilitate evaluation of securities. Similarly, the present study concentrates on mandatory

disclosure for items of information required by the Companies Act 1994, the listing rules of

the stock exchanges, and the approved IASs that listed companies in Bangladesh to disclose

those in their annual reports.

3.1. Size

Prior studies have identified size as significantly associated with the level of disclosure

(Cooke, 1989; Hossain, 2000; Lang & Lundholm, 1993; Owusu-Ansah, 1998). The size

variables considered in these studies include sales, total assets, number of employees, and

number of shareholdings. In the present study, the size of the company was determined by

taking into account the capital employed and the annual sales of the company. Capital

employed is the total of net worth and long term loans. Alternatively, it is defined as total

of fixed assets (net of depreciation) and net working capital, or total net assets less current

liabilities. Sales as a proxy for size, is equal to net annual sales.

Consistent with prior research, it is hypothesized that there is a significant association

between company size and the extent of disclosure. Larger companies may tend to disclose


more information than smaller companies in their annual reports due to their competitive

cost advantage (Lang & Lundholm, 1993; Lobo & Zhou, 2001).

3.2. Age

For this study, I conjecture that company age is a critical factor in determining the

level of corporate disclosure. Older companies with more experience are likely to

include more information in their annual reports in order to enhance their reputation and

image in the market. Thus, I infer a positive association between the age of the

company and the level of disclosure. That is, old companies disclose information to

a greater extent than that of new companies. Companies are classified into three

categories for this variable: companies registered prior to 1 January 1972 are grouped as

bvery oldQ companies; companies registered after 1 January 1972 but before 1 January

1986 are boldQ companies; and companies registered after 31 December 1985 are bnewQcompanies.

3.3. Industry type

Association between the level of disclosure and industry types provides mixed

evidence. Cooke’s (1989) findings report that manufacturing companies disclose more

information than other types of companies. But the findings of Inchausti (1997) and

Owusu-Ansah (1998) provide no evidence of this association. I use industry type as an

explanatory variable in this study, because disclosures differ from one industry type to

another. For this study, companies have also been divided broadly into two categories:

traditional and modern. Traditional companies are food, textile, jute, synthetic, paper,

cement, and sugar. Bangladesh has a long history in these industrial activities which use

old technologies for the most part. Financial institutions tend to place the companies in

the traditional. Modern companies, which tend to place use new technologies include

engineering, pharmaceuticals, chemicals, and metal alloys. The hypotheses drawn for

this variable would be: A particular type of company discloses different amount of

information than that of other types of company.

3.4. Profitability

Previous research (Hossain, 2000; Inchausti, 1997; Karim, 1996; Owusu-Ansah,

1998; Wallace & Naser, 1995; Wallace et al., 1994) use profitability as a determinant

of disclosure in corporate annual reports. However, empirical results from the research

are mixed. Findings of Wallace et al. (1994), Karim (1996), Owusu-Ansah (1998), and

Hossain (2000) suggest that companies having higher profitability disclose more

information than those with lower profitability. Also, the relationship between these

two variables is found to be positive in a study by Wallace and Naser (1995).

Additionally, researchers have used net profit to sales, earnings growth, dividend

growth, return on assets, and return on equity as proxies for profitability. In the present

study, the rate of return on capital employed and sales have been used as a measure of

profitability. It is hypothesized that companies with a higher rate of return (either on


capital employed or sales) disclose information to a greater extent than companies with

a lower rate of return on capital employed. Thus, the hypothesis developed for the

study is as follows:

H1. There is a significant positive association between a number of company characteristics

in respect of size, age, industry type, profitability and the extent of mandatory disclosure.

4. Method

4.1. Selection of sample

This study covers companies listed both on the Dhaka Stock Exchange (DSE) and the

Chittagong Stock Exchange (CSE). The total number of companies listed on either stock

exchange at the end of 1999 was 212. These companies fall into 11 categories: banks,

engineering, food and allied products, pharmaceuticals and chemicals, paper and

printing, fuel, jute, service and real estates, insurance, and miscellaneous. As the study is

limited to only non-financial manufacturing companies, the companies under the

categories of banks, insurance, service and real estates were excluded. The number of

companies was thus reduced to 174. The addresses of these companies were collected

from the DSE and letters were prepared and sent to the 174 companies requesting them

to send a copy of their annual report published in the year 1999. Responses from the

company offices were very poor. Only seven annual reports were available by post. I

then decided to visit the company head offices in order to obtain reports. This yielded

another 87 annual reports of non-financial companies. These 94 (7+87) companies

whose annual reports were collected, constitute the sample of the study. Hence, the

actual sample represents about 54% of population of non-financial companies listed on

the stock exchanges.

The comparative distribution of the companies in the population and the sample are

given in Table 1.

Table 1

Distribution of sample by industry type

Industry type Population Sample

Number % Number %

Engineering 22 12.6 19 20.2

Food and allied product 33 19.0 16 17.0

Fuel and power 4 2.3 2 2.1

Jute 7 4.0 0 0.0

Textile 42 24.1 24 25.5

Pharmaceutical and chemicals 25 14.4 16 17.0

Paper and printing 8 4.6 1 1.1

Cement 5 2.9 4 4.3

Miscellaneous 28 16.1 12 12.8

174 100.0 94 100.0


4.2. Construction of the disclosure index

Although there are several ways of communicating company information, such as

interim reporting, press releases, letters, etc., the annual report is still considered the

major medium disclosing information. It has been argued that the information

contained in the report usually differs from company to company. Selection of proper

items of information that are expected to be disclosed in the annual report is not an

easy task. I consulted the mandatory disclosure checklist used in prior studies while

preparing the disclosure index for this study. However, the disclosure index employed

in this study is based mainly on the three regulatory sources in Bangladesh. They are,

as previously stated, the Companies Act 1994, disclosure requirements of the stock

exchanges, and the approved IASs. As each source is separate, I included most of the

requirements of each source in the disclosure index. The disclosure index was

finalized after consultation with the relevant experts. Appendix 1 presents the disclosure

index.

Table 2 shows the distribution of 160 items of information across the annual report:

balance sheet items 41%, income statement 28%, accounting policies 14%, historical

summary 12%, and directors’ report 5%.

4.3. Scoring the disclosure items

There are two methods for determining the level of corporate disclosure: weighted

and unweighted approaches (Cooke, 1989). The weighted approach allows distinctions

to be made for the relative importance of information items to the users (Inchausti,

1997). The advocates of this approach are of the opinion that all items of information

are not equally important and, therefore, allocation of weights is done somewhat

arbitrarily by the researchers. Another approach and the one adopted for present study is

the unweighted approach. This approach is based on the assumption that each item of

disclosure is equally important. Additionally, all disclosure items are equally important

to the average users (Wallace, 1988). Specifically, attention is given to all users of

annual reports rather than particular user groups. Here items of information are

numerically scored on a dichotomous basis. Score one is assigned if a company

discloses an item of information. In the case of non-disclosure the score is zero. An

unweighted index is defined as the ratio of the number of items a company actually

Table 2

Distribution of index items

No. of Items %

Balance sheet items 66 41

Income statement items 44 28

Accounting policies items 23 14

Directors’ report items 08 05

Historical summary items 19 12

160 100


discloses to the total that it could disclose. The total disclosure (TD) score thus arrived

at for a company is additive as follows:

TD ¼Xn

i¼1

di

Where, d=one if the item d1 is disclosed; zero, if the item d1 is not disclosed;

n =number of items.

A major issue for the weighted approach is that if different user groups are asked to

weight the importance of various items, they may give weight the same items of

information differently. The weighted approach has, in fact, encountered several

problems. Prior studies, which have examined both weighted and unweighted

approaches, draw similar conclusions about the methods (Choi, 1973; Inchausti,

1997). The equal weighting system is, therefore, viewed to be superior to the differential

weighting system (Owusu-Ansah, 1998) and for that reason this study uses the

unweighted disclosure index approach to measure the level of corporate mandatory

disclosures. Similar studies in other countries also have used the unweighted disclosure

index approach (Owusu-Ansah, 1998; Wallace & Naser, 1995). But the unweighted

approach should be employed with a caveat. One main problem of this approach is that

a company may be penalized by assigning a score of zero for the absence of an item of

information that is not applicable to it. In order to overcome this problem, the relevance

of each absent item needs to be investigated and then classified as non-disclosure for a

relevant item of reporting and non-applicable otherwise. For companies having non-

applicable items, the use of a relative index is suggested (Owusu-Ansah, 1998). The

relative index approach is the ratio of what a particular company actually disclosed to

what the company is expected to disclose. In spite of the subjective discrimination

between non-disclosure and non-applicable items, this approach is considered to be a

more accurate measure than one that assumes that all companies are identical and,

therefore, no difference need exist in disclosure requirements. This approach has been

employed in several prior studies (see, e.g., Cooke, 1989; Inchausti, 1997; Owusu-

Ansah, 1998; Wallace & Naser, 1995; Wallace et al., 1994).

4.4. Test of hypothesis

In order to test the hypothesis I used both non-parametric and parametric statistics.

Cooke (1989) used these two approaches in his study. A non-parametric analysis was

used for measuring the disclosures of an individual company based on indexes and the

level of disclosure practices. This approach used chi-square, and Lambda. Another

approach used based on the mean of each category of company, is the contingency

coefficient of the correlation. The contingency coefficient of the correlation along with

chi-square is considered useful to measure association. When the expected value of

one or more cells in the table is less than five, however, chi-square is not a

meaningful way to measure association. In that situation, an alternative measure,

Lambda, overcomes the limitation of the expected frequencies (Cooke, 1989, p. 201).

Lambda varies between zero and one, where zero indicates no association and one


indicates that the variables are perfectly associated.The regression technique used to

test H1 is as follows:

TDE ¼ aþ B1Sizeþ B2Ageþ B3Profitþ B4Industryþ e

Expected sign (+) (+) (+) (+)

Where:

TDE =total disclosure score received from each company

a =the constant, and

e =the error term

5. Results and discussion

5.1. Level of disclosure and disclosure performance by age

The study reveals that disclosure compliance is poor among listed companies. They

disclosed an average of 43.53% of the items selected. The minimum score found in the

study is 17.3% and the maximum is 72.50%, showing a decreasing trend in the level of

corporate disclosure with an increase in the disclosure score. This finding compares

favorably to Hossain and Taylor’s (1998) findings where the mean score is 29.33.

Compliance with accounting standards disclosure by listed companies was better in

another study by Hossain (2000), where the average compliance level is 69.05% with a

minimum and maximum level of 35.85% and 94.34%, respectively. Nevertheless,

conformity with mandatory disclosure by Bangladeshi firms is low compared to firms

in other countries. For example, the average mandatory disclosure for Zimbabwe firms is

74.43% (Owusu-Ansah, 1998).

Whether or not company age influences the level of disclosure is examined by using

lambda analysis (Table 3). For purposes of this analysis, the sample companies are

Table 3

Disclosure of information by age

Disclosure index Age of the company Total

Very old company Old company New company

Up to 20 1 1

21–30 1 3 4 8

31–40 4 14 16 34

41–50 1 8 12 21

51–60 4 10 5 19

61–70 2 7 1 10

71 and above 1 1

Total 12 43 39 94

v2 Significance Contingency coefficient k

12.213 .429 .0339 .000

Table 4

Disclosure of information by status

Disclosure index Status of the company Total

Traditional Modern

Up to 20 1 1

21–30 7 1 8

31–40 17 17 34

41–50 11 10 21

51–60 9 10 19

61–70 2 8 10

71 and above 1 1

Total 46 48 94


10.162 .118 .312 .000


classified as very old, old, and new companies depending on when they first registered

with the Registrar of Companies. The results did not support the hypothesis that old

companies will provide more information than new ones.

5.2. Disclosure performance by status

Disclosure was expected to depend on the status of a company. Modern companies are

likely to disclose more information than that of traditional companies. Table 4 shows that

out of 94 companies, 49% falls in the category of traditional companies and the remainder

51% in the category of modern companies. It can also be seen from the table that 24% of

traditional and 40% of modern companies have a score of more than 51%. Lambda reveals

no association between disclosure and status of the companies.

5.3. Size-wise disclosure

Corporate size can be represented by many different indicators. Karim (1996) uses

annual sales, total assets, and market value of the firm to measure size, whereas Hossain

(2000) uses sales turnover and total assets as size variables. In this study capital employed

and annual sales are used as the measures of company size. The relationship between size

and disclosure is shown in Tables 5 and 6.

Larger companies are expected to disclose more information. As can be seen from

Table 5, at 51–60% the disclosure level of 21% have capital employed of Tk. 100 to 200

million. The same percentage was also found for companies with Tk. 200 to 400 million,

whereas 53% of the companies have capital employed at the Tk. 400 million and above

level. Again, for ten companies at the 61% to 70% disclosure level, 50% have capital

employed of Tk. 200 to 400 million, 20% of Tk.400 to 800 million, and 30% of Tk.1600

million and above.

From Table 6 it can be seen that no company with sales of less than Tk. 100 million

51% to 60% level. Out of the 19 companies at this level, 37% had sales of Tk. 200 to 400

million, and 37% had sales of 400 to 800 million. Three companies had sales of Tk. 800 to

Table 5

Disclosure of information by size

Disclosure Total capital employed Total

indexUp to 50 50–100 100–200 200–400 400–800 800–1600 1600 and above

Up to 20 1 1

21–30 3 1 2 1 1 8

31–40 7 7 6 9 3 1 1 34

41–50 1 1 8 3 8 21

51–60 1 4 4 7 3 19

61–70 5 2 3 10

71 and above 1 1

Total 12 9 19 23 21 5 5 94


64.631 .002 .638 .183


1600 million and one company had sales of Tk. 1600 million and above. At the disclosure

levels of 61% and above there are no smaller companies.

This analysis indicates that the size of the company in regard to capital employed and

sales does have a little impact on the disclosure of information. Lambda, too, reveals the

same conclusion. However, the influence of size was found to be significant in the studies

of both Karim (1996), and Hossain (submitted for publication).

5.4. Profitability and disclosure

The profitability variable is used by many researchers (Hossain, 2000; Inchausti, 1997;

Karim, 1996; Owusu-Ansah, 1998; Wallace & Naser, 1995; Wallace et al., 1994), although

the measures of profitability were not similar in all these studies. These studies used net

profit to sales, rate of return on assets, earnings growth, and dividend stability. The two

profitability measures used in this study are net profit on capital employed and net profit

Table 6

Disclosure of information by size

Disclosure Annual sales Total

indexUp to 50 50–100 100–200 200–400 400–800 800–1600 1600 and above

Up to 20 1 1

21–30 4 1 3 8

31–40 12 2 9 9 2 34

41–50 2 4 3 4 6 2 21

51–60 1 7 7 3 1 19

61–70 4 2 1 3 10

71 and above 1 1

Total 19 7 13 24 20 7 4 94


79.592 .000 .677 .217

Table 7

Profitability and the level of disclosure

Disclosure Net profit on capital employed Total

indexLoss Up to 2 2–4 4–8 8–16 16–32 32 and above

Up to 20 1 1

21–30 8 8

31–40 11 9 4 7 3 34

41–50 3 3 3 4 7 1 21

51–60 1 1 4 7 5 1 19

61–70 2 6 1 1 10

71 and above 1 1 1

Total 23 14 8 17 23 7 2 94


77.950 .000 .673 .167


on sales. The relation between net profit on capital employed and the disclosure index is

presented in Table 7.

About 25% of the companies under study suffered losses, whereas 32% enjoyed profits

between 8% and 32% on capital employed. At these profit levels, 20% of the companies

fall at the 60% and below disclosure level, and 12% face at the disclosure level of 61% and

above. Thus, analysis indicates a very low degree of association between net profit on

capital employed and corporate disclosure.

An examination of the association between net profits on sales and the disclosure level

also reveals that associationwas not significant enough to reject the null hypothesis (Table 8).

Lambda accepts a low level of association between disclosure and profitability in terms of

both net profits on capital employed and net profits on sales. Both Karim (1996) and Hossain

(2000) found a positive association between profitability and disclosure. The finding of the

present study is not incongruent with them; it shows a low level of association between

profitability and disclosure. According to Zubaidah and Koh (1999), a more profitable

company could have disclosed more information in order to improve its image. The standard

Table 8

Profitability and the level of disclosure

Disclosure Net profit on sales Net profit Total

indexLoss Up to 2 2–4 4–8 8–16 16–32 32 and above

Up to 20 1 1

21–30 8 8

31–40 11 8 4 5 4 1 1 34

41–50 3 3 5 5 1 4 21

51–60 2 2 7 7 1 19

61–70 2 6 2 10

71 and above 1 1

Total 23 14 11 19 18 8 1 94


75.337 .000 .667 .150

Table 9

Descriptive statistics

Mean Std. deviation N

Disclosure index 3.88 1.23 94

Age of the company 2.29 .68 94

Status of the company 1.51 .50 94

Total capital employed 3.71 1.61 94

Size of annual sales 3.60 1.74 94

Net profit on capital employed 3.34 1.79 94


deviation of each group is approximately equal suggesting that the equal variance

assumption is met (see Table 9, descriptive statistics).

The degree of variability in the case of age and status of the company is much lower

compared to other variables in the study. Thus we can reject the null hypotheses that there

is no association between disclosure and size and between disclosure and profitability.

5.5. Multivariate test

Regression analyses were run using ordinary least squares (OLS) estimates and are

reported in Table 10. Estimates of regressions are substantially better than that of

univariate analysis. Regression has been used in much previous research (e.g., Cooke,

1989; Owusu-Ansah, 1998; Wallace & Naser, 1995; Wallace et al., 1994). The results of

the estimation procedure report that company size, profitability, and the intercept have a

statistically significant effect on the extent of mandatory disclosure, but at different levels.

Table 10

Regression results

Coefficient of multiple regression .759

Coefficient of determination (R2) .577

Adjusted R2 .547

Standard error .830

Analysis of variance

Sum of squares df Mean square F

Regression 81.711 6 13.619 19.746

Residual 60.002 87 .690 –

Variables in the equation

Unstandardized coefficients Standardized coefficients t Sig.

b Std. error b

(Constant) 1.789 .537 3.328 .001

Age of the company � .195 .136 � .108 �1.431 .156

Status of the company .298 .184 .121 1.614 .110

Total capital employed �3.603�4 .100 � .005 � .036 .971

Size of annual sales .307 .108 .432 2.833 .006

Net profit on capital employed .170 .120 .246 1.420 .059

Net profit on sales .134 .107 .189 1.254 .213


The intercept is significant at the .001 level. Company age is significant at the .15 level,

whereas profitability is significant at .05 level.

The disclosure score, a continuous variable, is used as the dependent variable. The

disclosure score for each company is related to company characteristics, the independent

variables for the study, such as age, status, size and profitability. The four company

attributes were measured on a continuous scale. The explanatory power of the OLS model,

as indicated by the adjusted R2, is 54.7% ( p b .001). The R2 is .577, which reveals that the

model is capable of explaining a 57.7% variability in disclosing information in the annual

reports of the selected companies. The F statistic indicates that the model employed to

explain the variations in mandatory disclosure in company annual reports is significant at

the conventional levels ( p b .01).

The results show that some variables are significant in explaining disclosures. Companies

that are larger in size measured by annual sales ( p b .01) are likely to disclose more

information. The positive association between company size and mandatory disclosure is

consistent with prior findings (see, e.gAhmed & Nicholls, 1994; Cooke, 1989; Meek et al.,

1995; Owusu-Ansah, 1998;Wallace &Naser, 1995). Lang and Lundholm (1993) also report

that disclosure is higher for larger firms. It is argued that larger firms provide more

information because they are likely to face lower cost of disclosure (Ho & Wong, 2001).

Furthermore, since larger firms tend to disclose more to meet the increased demand in

reducing uncertainty about quality and expected return, they arguably face lower

competitive cost of disclosure (Ferguson, Lam, & Lee, 2002).

The hypothesis that companies having higher profitability disclose more information

than companies with lower profitability is supported ( p b .05). Lang and Lundholm (1993)

suggest that well-performing firms providemore information in the annual report than do the

poor-performing firms. The positive effect of profitability on financial disclosure is con-

sistent with Wallace et al. (1994), Karim (1996), Owusu-Ansah (1998), and Hossain (2000).

The managers of profitable firms are motivated to disclose more information to appease

shareholders, to enhance company image leading to marketability of shares, and above all to

justify their compensation (see Meek et al., 1995; Zubaidah & Koh, 1999).

The t-statistic of industry type is insignificant, indicating that it has a negligible effect

on the mandatory disclosure practices of the sample companies. It is consistent with results

of Owusu-Ansah (1998), where firms are classified into four broad heads, namely, mining,

conglomerate, manufacturing, and others. Inchausti’s (1997) findings also do not support

an association between industry type and level of disclosure.

Similarly, company age was not found to be as significant a predictor of compliance

with mandatory disclosure as expected. An older company was expected to disclose more

mandatory information than a younger one. For this study company age is measured from

the date of registration with the Registrar of Companies not from the listing date. A listed

company has to comply with disclosure and reporting regulations and may require some

time to adapt to the new disclosure environment. Public companies having pre-listing

experience may, therefore, have no link to a specific level of disclosure. This needs further

investigation. Owusu-Ansah (1998) finds a positive association between company age and

mandatory disclosure. He defines company age as the experience gained by public

companies during the listing periods. Thus, the possible explanation for his findings is

that company age in terms of listing status is related to mandatory disclosure.


6. Conclusions, limitations, and suggestions for future research

The aim of this study is to examine the level of mandatory disclosure made by listed

companies in Bangladesh. It also investigates the factors that influence mandatory disclosure

practice. The findings would be used to improve the quality of corporate disclosure by

Bangladeshi companies. The study finds that many corporate annual reports do not meet the

disclosure requirements of the regulatory bodies in Bangladesh. On average, the sample

companies disclose information on only 43.53% of the items asked for indicating poor

compliance with the mandatory rules. This result is better than the findings of Hossain and

Taylor (1998), where the mean score is 29.33%. A later study, Hossain (2000), is more

encouraging, with average compliance rates for accounting standards disclosure reported at

69.05% with a range of 35.85% to 94.34%. These results indicate that listed companies in

Bangladesh place more emphasis on IASs disclosures. This may be the result of the ICAB’s

efforts to persuade its members who work as either professional accountants or auditors to

comply on the results of the ICAB’s monitoring. Nevertheless, the available literature

reveals that overall compliance with mandatory disclosure by Bangladeshi firms is low

compared to firms from other countries. For example, the average mandatory disclosure for

Zimbabwe firms is 74.43% (Owusu-Ansah, 1998). The lack-lustre disclosure performance

by Bangladeshi firms can be attributed to organizational culture, poor monitoring, and lapse

in enforcement by the regulatory body. Disclosure decisions are culture-driven (El-Gazzar,

Philip, Finn, & Jacob, 1999). Ho and Wong (2001) argue that in countries where the culture

supports a high level of secrecy, managements become less transparent and are less likely to

favor a high level of disclosure. Further analysis is required to impound cultural factors.With

regard to regulations, Karim et al. (1998) suggest that at present they are ineffective when it

comes to monitoring disclosure practices in Bangladesh. Again, regulations alone,

according to Ho and Wong (2001), can do little to ensure disclosure because companies

view that disclosure excellence lies in the hands of regulatory bodies who work for

safeguarding the company’s value for shareholders. What the regulatory bodies need to do is

to create an environment that helps become aware of the companies consequences of non-

disclosure of adequate information in the annual reports.

This study examines the relationship between mandatory disclosure and four corporate

attributes; i.e., company age, status, size, and profitability. The four company attributes

were measured on a continuous scale. Analysis reveals that the age of the company is not a

factor for disclosure. The investigation did not support the hypothesis that old companies

will provide more information than new companies. Similarily, company status has no

effect on disclosure. Contrary to prior findings (Cooke, 1989; Meek et al., 1995; Owusu-

Ansah, 1998), this study finds little support for the relationship between size and the level

of disclosure, however, except in respect to sales, where size is marginally significant. The

same result is found in the case of disclosure and profitability.

Based upon the findings of this study, the following observations and recommendations

have been outlined which may be useful to company managers, financial analysts,

investors, and policy makers for the capital market development of the country:

! Companies disclose more information on the cost of sales, providing details of

expenses, but there is less compliance with disclosure regulations. Steps should


be taken to ensure that mandatory information items are covered in the annual

report.

! The Securities Exchange Commission has already introduced a reward–punishment

program to ensure that listed companies disclose adequate information in their annual

reports. The enforcement program, however, has not been effective. A committee could

be formed representing investors, financial institutions, and academicians to appraise

the published accounts and give their observations.

! The Companies Act 1994 does not include a provision for publication of either a

Statement of Sources and Application of Funds or a Statement of Cash Flow. The IAS-

7, however, adopted a cash flow statement for use in Bangladesh. This standard allows

a cash flow statement to be prepared in two ways, viz. the direct or indirect method.

The Companies Act should also include a provision about the preparation of cash flow

statements.

The Bangladeshi capital market is not efficient and well structured. An increase in the

flow of free and accurate disclosure would help the capital market develop. Government

needs to come forward to protect the interests of the different user groups.

! The responsibility of the auditor is to check whether the accounts are prepared in

accordance with accounting policies and requirements of the Companies Act 1994. He

or she has to state his or her opinion that the audited accounts give a true and fair view

of the state of affairs of the company. Audit reports should also state whether or not

disclosure rules are properly complied with.

! With a view to improving disclosure level, an Accounting Board should be set up by

the Government with members from both from the Institute of Chartered Accountants

of Bangladesh and the Institute of Cost and Management Accountants of Bangladesh.

In addition to the adoption of accounting standards and the development of accounting

in Bangladesh, the board should have the responsibility of determining the degree of

compliance with the disclosure regulations.

! An accounting court could be created to deal with litigations regarding the

disclosure of information. An individual who has a direct interest in the annual

reports of a company could bring a charge of non-compliance with the disclosure

requirements.

! The present study is limited to only 54% of the companies listed on the stock

exchanges. Future research could investigate disclosure performance of all the listed

companies. Research could also explore the variations in disclosure between listed and

unlisted companies. Examining similar research issues within different industry sectors

would also be an interesting extension of this study. This might reveal interesting

results in terms of variations within the industrial sectors.

! Any opinion survey of users of company annual reports could be conducted. Such a

survey would provide additional insights on corporate disclosure practices in

Bangladesh.

! Finally, this study covers the annual reports for a single year only. Additional research

is needed to assess the trends of disclosure and to know whether the quality of

disclosure has improved over time.


Appendix A. Disclosure index

Historical summary

1. A brief description of the nature and principal activities of the company and its subsidiaries

2. The country of incorporation and the address of the registered office

3. Names of the top employees, lines of authority and their remuneration

4. List of directors

5. Outside affiliations of the directors

6. Audited financial statements (balance sheet and profit and loss account)

7. Audit report

8. Report of the chairman or CEO

9. Statement of cash flows

10. Holdings in associates and subsidiaries with the relative percentage

11. Statement of changes in the share capital

12. Number and types of shareholders

13. Names and size of holdings of largest shareholders

14. Significant changes in the company’s or its subsidiaries’ fixed assets and the market value of land,

if the value differs substantially from the book value

15. The date when the financial statements were authorized for issue and who gave that authorization

16. Post-balance-sheet events

17. Discussion of major factors which will influence next year’s results

18. Forecast of company performance

19. Comparative balance sheet for two years

Balance Sheet Items

20. The total carrying amount of inventories

21. Inventories are sub-classified as merchandise, production supplies, materials, work in progress,

and finished goods

22. Inventories carried at net-realizable value

23. Amount of inventories pledged as security for liabilities

24. Cash and cash equivalents

25. The components of cash and cash equivalents should be disclosed and a reconciliation of the amounts in

the cash flow statement with the equivalent items reported in the balance sheet should be presented

26. Trade and other receivables

27. Receivables are analyzed by amount from trade customers, from other members of the group,

and from related parties

28. Advances and loans to staff or directors

29. Advances and loans to partnership firms in which the company or any of its subsidiaries is a partner

30. Advances recoverable in cash or in kind or for value to be received, e.g., rates, taxes, and insurances, etc.

31. Interest accrued on investment

32. Provision for provident fund scheme

33. Secured short-term borrowings

34. Unsecured short-term borrowings

35. Unpaid dividends

36. Provision for doubtful debts

37. Trade and other payables

38. A brief description of the nature of the contingent assets/liabilities

39. Provision for taxation

40. Provision for proposed dividends

41. Provision for gratuity

42. Provision for contingencies

43. Provision for insurance, pension, and similar staff-benefit schemes

(continued on next page)

44. Provision for liabilities

45. Deferred tax liabilities

46. Classification of assets and liabilities

47. Aggregate value of intangible assets

48. Breakup of intangible assets

49. Aggregate amount of investments

50. Investment in subsidiary companies

51. Investment in associated companies

52. Investment in quoted and unquoted shares other than group

53 Investment in government securities

54 Value of land and buildings

55. Amount of the leasehold property

56. Reconciliation between the total of minimum lease payments at the balance sheet date and their present

value

57. Cost of furniture and fittings

58. Expenditure upon development of property

59. Patents, trade marks, and designs

60. A company with subsidiaries should annex a set of consolidated financial statements to its own

financial statements

61. Minority interests in the consolidated financial statements to be shown separately

62. Total carrying amount of property, plant, and equipment

63. The measurement bases used for determining the gross carrying amount of property, plant, and equipment.

When more than one basis has been used, the gross carrying amount for that basis in each category

should be disclosed

64. A reconciliation of the carrying amount of property, plant, and equipment at the beginning and end of the

period showing additions/disposals/acquisitions/impairment losses

65. The existence and amounts of restrictions on title, property, plant, and equipment pledged as security for

liabilities

66. Accumulated impairment losses at the beginning and end of the period

67. The amount of commitments for the acquisition of property, plant and equipment

68. In case of revaluation of property, plant, and equipment it should include: the firm’s policy on

revaluation; the basis used to revalue the assets; and the effective date of revaluations

69. Research and development costs recognized as an asset

70. The amount of goodwill/negative goodwill arising on the acquisition

71. The gross amount of depreciable assets and the related accumulated depreciation

72. Non-current interest-bearing liabilities

73. Loans from directors

74. Long-term liabilities are disclosed separately showing the nature of the recipients such as secured

loans, unsecured loans, inter-company loans, and loans from associated companies

75. The amount of borrowing costs capitalized during the period

76. The capitalized rate used to determine the amount of borrowing costs eligible for capitalization

77. Share capital: authorized, issued, subscribed, called up and paid up

78. Number of shares hold by directors

79. A reconciliation of the number of shares outstanding at the beginning and at the end of the year

80. Par value per share, or that the share have no par value

81. The rights, preferences, and restrictions for each class of share including restrictions on the distribution of

dividends and the repayment of capital

82. Shares in the enterprise held by the enterprise itself or by subsidiaries or associates of the enterprise

83. If any shares or debentures have been issued, the number, class, and consideration received and the reason

for the issue

84. Particulars of any option or unissued share capital

85. A description of the nature and purpose of each reserve

Appendix A (continued)


Income Statement

86. Sales/revenue, aggregate amount

87. Amount of revenue in each significant category of revenue

88. The cost of inventories sold during the period.

89. Finance costs

90. Share of results of jointly controlled entity and associates

91. Profit or loss from ordinary activities

92. Any exceptional or unusual credits or charges

93. Profit or loss arising from sale or disposal of fixed assets

94. Break up of income from investments

95. Directors’ remuneration

96. Auditors’ remuneration for services as auditors

97. Amount paid to or receivable by third parties in respect of services rendered by any past or present

directors to the company or its subsidiaries

98. Recognition and depreciation/amortization of tangible assets

99. Recognition and depreciation/amortization of intangible assets

100. The amount adjusted to net profit or loss due to change in accounting policy

101. The amount of the correction recognized in net profit or loss for the current period

102. The effect of the acquisition/disposal of subsidiaries on the financial position

103. The net profit or loss for the periods

104. The tax expense (income) related to profit or loss from ordinary activities should be presented on the

face of the income statement

105. The major components of tax expense (income) should be disclosed separately

106. Tax expense relating to extraordinary items

107. Brokerage and discount on sales other than the usual trade discounts

108. The amount set aside to any reserve but not including provisions made to meet any specific liability,

contingency, or commitment

109. Amount set aside or provisions made for meeting specific liability, contingency, or commitment

110. Workmen and staff welfare expenses

111. Separate disclosure of staff remuneration not less than Tk. 36,000

112. Commission or other remuneration payable separately to a managing agent or his associate

113. Research and development costs recognized as an expense

114. Disclosure of pension costs

115. Payment for gratuity

116. Information regarding the licensed capacity, installed capacity, and actual production

117. Expenditure in foreign currency on account for royalty, know-how professional consultation fees,

interest, and other matters

118. Value of percentage of all imported and local raw materials, spare parts, and components consumed

119. Amount remitted in foreign currencies on account of dividends to non-resident shareholders, the number

of shares held by them, and the year for which the dividend is being paid

120. Foreign exchange earnings for export of goods (FOB price, royalty, know-how professionals and

consultation fees, interest and dividends, other income and its nature

121. Advertisement expenditure

122. Social security costs

123. Pension costs contribution plan

124. Contributions in excess of Tk. 50,000 made to government approved charities or other charities

125. Basic earnings per share

126. Diluted earnings per share

127. The amounts used as the numerators in calculating basic and diluted earnings per share, and a

reconciliation of those amounts to the net profit or loss for the period

128. The weighted average number of ordinary shares used as the denominator in calculating basic and

diluted earnings per share, and a reconciliation of these denominators to each other

129. Comparative profit and loss accounts for two years

(continued on next page)


Accounting Policies

130. The measurement basis used in preparing the financial statements

131. The reason and nature of a change in an accounting policy

132. Statement of compliance with approved IASs

133. Basis of consolidation

134. The accounting policies adopted in measuring inventories, including the cost formula used.

135. The accounting policies adopted for the recognition of revenues

136. The accounting policies adopted for research and development costs

137. The amortization methods used and the useful lives or amortization rates used for research and

development costs

138. Disclose firm policy for foreign currency risk management

139. The depreciation methods used

140. The useful lives or the depreciation rates used

141. Method of valuing goodwill

142. The methods used to account for investments in associates

143. Accounting policy for borrowing costs

144. Accounting policy for actuarial gains and losses

145. Treatment of retirement benefits

146. Treatment of preliminary expenses

147. Methods of advance payments

148. Purchase policy

149. Sales policy

150. Deferred taxation system

151. Conversion or translation of foreign currencies

152. Treatment of contingent liabilities

Director’s Report

153. The state of the company’s affairs

154. Amount proposed to carry to any reserve

155. Recommended dividend

156. Material changes and commitment affecting the financial position of the company that occurred between

the year and the date of report

157. Changes in the nature of the company’s business during the year

158. Changes in the company’s subsidiaries or in the nature of their business

159. Changes in the classes of business in which the company has an interest

160. Explanation and information of every reservation, qualification, or adverse remark in the auditor’s report

Appendix A (continued)


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