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Applied Legal

Firms disclose information to stakeholders. The stakeholders include:

Certainly consumers' rights are constantly under threat. Research the organisation of The Consumers Association in particular their campaigns. Pick one they are currently pursuing and follow it through. Keep a diary and assess whether their campaign is successful and the impact this will have on consumers.

For advantages of forming a company see here.

The nature of the firm's business may affect the need for disclosure. But there are problems with disclosure - too much disclosure will give competitors an edge. Take for example the launch of a new product. To some extent, surprise is lost through test marketing but if the plans for a new product are announced a year in advance - to the glee of the work force and the competitors - there will be time for those whose market is under attack, to defend perhaps through product innovation.

Certain information must be disclosed by law. Using the Internet research what information is required.

Equally certain information would never be disclosed e.g. confidential personnel records.

It is now possible to access over 1 million companies on the web by going to Companies House.

Dr. Kim Howells, Minister for Competition and Consumer Affairs, at the DTI, said "Consumers are often caught in a web of difficulties when they have insufficient information about companies they are dealing with. By putting some of its information on the World Wide Web, Companies House is helping to make it easier for people to be fully informed before committing themselves to large scale expenditure.

More than 2 million hits have been recorded on the Companies House web site, since its re-launch in June this year. This reflects the central role played by the companies register in maintaining confidence in British business, and I am very pleased at the steps Companies House is taking to make access to its information easier for everyone."

That said, firms are now being prosecuted for Internet libel, read this report.

Often the firm sees its first loyalty to the shareholders - after all they have the right to appoint and dismiss directors.

Shareholders want an increase in the market value of their shares, a high profit and thus high dividends. They want there to be confidence in the company - they may also want to make sure that their own involvement is not with a company that behaves unethically e.g. invests in markets dominated by oppressive regimes.

The direct or indirect economic support provided by individual companies doing business in or with oppressive regimes can help to prolong the political status quo and reduce the impact of consumer boycotts and economic sanctions intended to influence the behaviour of the authorities. The human rights organisation, Amnesty International, have criticised regimes for the following: torture, extra-judicial executions or disappearances, prisoners of conscience, and for frequent official violence against the public.

In a recent campaign, Amnesty International recently selected the most 'oppressive' 40 regimes based on those activities for special attention. Although there is obviously valid dispute as to exactly what can be defined as an oppressive regime (human right abuses are carried out in the majority of countries to a lesser or greater extent), it seems reasonable to conclude that those most criticised by Amnesty International are among the most brutal and oppressive.

Go to Amnesty International's website to see more of their activities.

Why would a firm give more than the bare minimum of information to their employees?

Much of what is finally received depends on the style of leadership.

LEGAL REQUIREMENTS

Go to this site for details of possible changes to Company Law.

The disclosure requirements for private and public companies differs. To meet Stock Exchange requirements public companies must produce certain details which include an explanation if actual and forecast results differ significantly, details of subsidiary companies, a geographical breakdown of trading results for operations abroad, details of borrowing and information on the financial state of directors.

Look here at this company and then look at the problems that have befallen it here and here.

Using this report as a starter, examine how company behaviour is being investigated by the government.

This is also an opportunity for a firm to use the publication of accounts as a marketing opportunity!

Check out this site for marketing activities.

KEY ITEMS IN THE ACCOUNTS

  1. The Chairman's Statement

Commentary on the year just finished and the year ahead. Comments on any major changes in personnel.

  1. The Financial Review

Statistical information about the performance of the company

Go to this site and outline the main financial information about that company.

  1. Review of Operations

Coverage of the main trading activities of the company.

Go to this site and outline the main trading activities of that company.

  1. The Directors' report

 

  1. In summary the Director's report will contain:

The information may be disclosed under three headings:

(a) General disclosures (1 - 5)
(b) Specific disclosures (6 - 10)
(c) Disclosures in respect of directors

Employee involvement

The directors of any company employing on average more than 250 people each week must state in their report what action has been taken in the financial year to introduce, maintain or develop arrangements aimed at the following:

(a) Providing employees with information
(b) Employee consultation
(c) Employee involvement e.g. through a share scheme
(d) Achieving common awareness of a company's performance on the part of all employees (and of the financial and economic factors affecting the performance of the company).

  1. The Auditor's report

A statement that the accounts represent a true and fair view of the company affairs

  1. Statement of accounting policies

This details the assumptions and methods under which the accounts have been prepared. This will include the method used to depreciate fixed assets, the method of stock costing, the method used to accommodate the impact of inflation on the accounts.

  1. The financial statements This includes the Profit and Loss Account, the Balance Sheet and the Cash Flow Statement.

The problem has been that accounts may be misinterpreted. For example, the profits of a company may be interpreted in different ways by:

(a) Shareholders - dividends?
(b) Employees - higher wages?
(c) Creditors - a going concern?
(d) Management - expansion?

The aim of a cash flow statement is to assist users to assess:

(a) The enterprise's ability to generate a negative cash flow in the future
(b) Its ability to meet its obligations. This would include the payment of dividends and the repayment of loans
(c) The differences between reported profit and cash flows
(d) The effects on its finances of major transactions in the year

  1. Notes to the Accounts

An expansion on the information already stated.

Outline the main aspects of corporate governance using this site.

This site gives you a guide to events in USA.

A note on concepts ...

The Financial Reporting Council is responsible for monitoring the way that accounting data is compiled/reported. The FRC has two bodies responsible to it:

  1. The Accounting Standards Board (develops new standards)
  2. The Financial Reporting Review Panel (ensures companies comply with the 1985/9 Companies Acts)

The net effect has been to:

Before reading the accounts of a company, you should read the Accounting policies. These policies will explain the approach of the company to its particular circumstances within the framework of relevant accounting standards.

THE PROFIT AND LOSS ACCOUNT

The key format for the profit and loss account is contained in FRS3 (as laid down by the Financial Reporting Council).

Read this report and consider whether or not profits are too high for supermarkets.

THE BALANCE SHEET

The most commonly used format is that specified under the Companies Act 1985. Go to this site and complete all questions illustrating the balance sheet.

THE CASH FLOW STATEMENT

Companies must present a cash Flow Statement (as stated by FRS 1 in 1991).

FRS3

Under FRS3 companies must also include:

Often the accounts are used as a basis for raising further funds.

Raising the finance ...

How much money do you need?

Should you go for more than you need?

Large sums of money are easier to raise ...

Success depends on sufficient funds, a strong management team and a sound market.

What is it for?

HOW CAN WORKING CAPITAL BE INCREASED?

What type of money do you want?

What about a remortgage?

Liability?

Loan from a partner - tax relief

Problems

Government help

Bank?

LINC (Local Investment Networking Company)

Venture Capital

Funds from

Venture Capital funds are looking for companies with very good management, operating in a large, growing market. It is likely that the investors will sell their share and make a profit.

Things to consider:

Finding a fund

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