Benefits of Disclosing Non-Financial Information
Introduction
In the last three decades, there has been an increasing trend for companies to publish or produce
a wide range of information on environmental, social and sustainable nature of their business
operations. Some of the disclosures are made on the official company reports but the reports on
Sustainability and the CSR (Corporate Social Responsibility) are reported on separate company
reports. Some countries have official guide lines that guide the legal requirements of such reports
production. In some countries such reports are mandatory but in others they are optional.
(Elshandidy, Fraser and Hussainey, 2011)
Disclosures of non financial information on financial statements as required by the International
Financial Reporting Standards are basically designed as a common financial global language for
business operations so that a firm accounts are interpreted and compared uniformly all over the
world. (IASB, 1998) GAAP is an acronym for generally accepted accounting principles. It’s
made up of a series of commonly used accounting rules and practices for financial reporting. The
objective of GAAP and IFRS is to ensure that there is a standard in all companies concerning
financial reporting which should be transparent and consistent from one company to the other.
Benefits of Disclosing Non-Financial Information 2
(Economist, 2008) The major reason for inclusion of non-financial information in financial
statements is to ease comparability.
Some firms may disclose information on the company’s Corporate Social Responsibility
voluntarily especially when they have been designed to as a package to improve the company’s
credibility, reputation and acceptance in particular markets. Large Multinational Corporations
utilize the disclosures to present their social achievements in a way that promotes the company’s
image. Disclosures are business drivers for certain companies. Balance Score cards represent
standard measure of a company’s performance. (Einhorn, 2005)
Disclosures of non financial information enhance a firm’s credibility and reputation. It also
increases the firm’s ability to do business and by marketing its strong aspects and utilizing its
good relations in the society. It may lead to increased sales and enables attraction of better
customers, improves transparency in its reporting.
The costs of including non financial information in financial are the costs of collecting the data,
the internal processes of organizing the information into meaningful data and the consolidation
of internal control systems, staff training and capacity building among the employees and the
development of particular tools that are applicable in the processes.
To conclude, the major benefits of the disclosures are the positive results relating to the increased
transparency, branding, improved opportunity to analyze the company’s performance, improved
credibility and reputation and the ability of consumers and potential investors to evaluate the
company’s achievements.
Benefits of Disclosing Non-Financial Information 3
References
Einhorn, E. (2005). The nature of the interaction between mandatory and voluntary
disclosures. Journal of Accounting Research, 43(4), 593-621.
Elshandidy, T., Fraser, I. and Hussainey, K. (2011).Aggregated, voluntary, and mandatory
risk disclosures incentives: evidence from UK FTSE all share. working paper, Stirling
University, Stirling.
Economist (2008) Economist.com, “Closing the GAAP: America embraces international
accounting standards. Economist 2008
IASB (1998) International Accounting Standard 34, International Accounting Standards
Board, IFRS Foundation
