What is a disclosure report?

In the simplest of terms, disclosure reports contain information about a company's business activities, financial condition, management compensation, operating performance and future direction. Public companies prepare disclosure reports for internal and external stakeholders to shine a light on the company's performance and operating activities.

While at times voluntary, there are mandatory reports that companies must submit to maintain their status as a public-traded entity. Regulators - like the Security and Exchange Commission, European Central Bank, European Banking Authority, and European Securities and Markets Authority — establish these disclosures.

What is a disclosure?

A disclosure is a release of company information that could influence investment decisions.

What is the purpose of a financial disclosure report?

In a word: fairness. The purpose of financial disclosures is to level the playing field for investors. With a clear view of a company's financials, strategy, and direction, investors have access to information that will help them make informed investment decisions.

Securities regulators have requirements for when and how information must be disclosed. This is to help provide investors with timely and accurate information.

Most disclosure documents must be filed with securities regulators. Some disclosure documents for investment funds do not have to be filed, but must be posted on the fund’s website or sent to investors free of charge. Examples of these documents are the quarterly portfolio disclosure and annual proxy voting records.

Examples of disclosure reports are:

  • 10K or annual reports
  • 10Q or quarterly reports
  • Proxy circulars
  • Financial statements
  • Prospectus
  • Management’s discussion and analysis (MD&A)
  • Annual information forms
  • Business acquisition reports

How are disclosure reports created?

Organizations create disclosure reports according to accounting standards or regulatory bodies set by their jurisdiction's regulatory authorities or accounting bodies. For example, in the US, the Financial Accounting Standards Board (FASB) determines many standards for businesses under the US generally accepted accounting principles (US GAAP) and the SEC mandates the disclosure of specific information by publicly owned companies.

International businesses, on the other hand, must follow the disclosure standards adopted by the International Accounting Standards Board (IASB) and create disclosures according to the International Financial Reporting Standards (IFRS).

Regulators have requirements for when, how much, and where the information must be disclosed. For example, the SEC requires that 10K reports must be filed with the SEC quarterly.
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