To disclose or not to disclose ...

09th July 2009
There has been a lot of comment in the financial and accounting press recently about the amount and frequency of financial disclosure by companies.

It all seems to come down to the "perception" about credit ratings, and as a consequence the impact of the insurability of a business by the credit insurers. I have commented previously here about the credit insurance issues, and no doubt will again. However the interesting issue now that is being raised is: are smaller businesses credit ratings being adversely impacted by the amount of financial disclosure there is in the public domain and is this creating big problems for them?

It's an interesting call. I have to freely admit we at Insight Associates can be rather hypocritical on the matter in dealings with our clients. Our general feeling with our clients is that (if they can) we would normally encourage them to file abbreviated accounts (and give the minimum amount of information that they are legally able to), but is this really helping them? Then when we are looking for financial information on their trading partners (customers and suppliers) we get frustrated that there is little information available!! Are we by our own actions making matters worse?

Recent research from Graydon UK suggests that two thirds of UK small firms are carrying a credit rating which may negatively impact their ability to obtain credit. That seems a bit extreme to me, and it is not just about accounts disclosure but also the accuracy of other information which can often be inaccurate. However it does highlight it is an issue.

Just to add to the debate it appears that it is Government policy - in the interests of reducing red tape - to reduce still further the obligation on companies to publically file information! And then there is the whole issue on providing management accounts to external parties - but that is for another item later on!

Overall it would appear that perhaps it is in businesses best interests to be prepared to disclose more information, but then you have to make sure it is accurate!

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