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21st Century Disclosure – Transparency

Catch up – that is what’s needed now to bring corporate and financial disclosure and reporting into the new century.  The original federal securities industry reform legislation of the 1930s mandated relevant and timely disclosure by public corporations to their shareholders.  These frameworks were greatly expanded over the decades through additional lawmaking and rulemaking changes. But through the years the fundamental basis of the corporate reporting was “forms-based” – the periodic reporting of corporate finances and other information was primarily by forms filed –  the 10-k, 8-k, S-1, etc. 

The financial reporting process did take great leaps forward with the “EDGAR” system of electronic form filing and retrieval.  But these and other important trends are amplifying the need to modernize and enhance corporate reporting – and bring the system into the 21st Century:

  • Advances in technology has enabled more types of disclosure, with greater volumes of information moving more rapidly to the end user, and with greater dimension for what is being reported (think of the World Wide Web capabilities).

  • Technology enables real-time continuous corporate reporting, which on a mandated basis remains a look back through documentation.

  • Corporate finance has become very complex; think of the telephone-book size of GAAP rules.  The rule makers and rule enforcers still lag real-world capabilities to make this complexity more understandable and transparent.

  • More recently we have two competing systems – “rules-based,” for the USA and “principles-based” much of the rest of the world.  At some point these systems will need to be harmonized and made more transparent – on a global basis.

  • The global financial system has become more interconnected, more complex, truly more “global” with events in one nation immediately affecting other nations – look at the carnage in the capital markets today, with the contagion of asset leveraging being of epidemic proportions.

Technology can help regulators, investors, analysts and researchers, asset manager, corporate managers and boards, and other stakeholders resolve many of these issues – and make corporate reporting more reliable, transparent, easier to understand, and more relevant to the user.  The first steps are being taken the Securities & Exchange Commission in its “21st Century Initiative,” which we bring you updates on in this Hot Topics section.

This initiative is a long and complicated journey for stakeholders, which is why we have created this Hot Topic for you.

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