Evidence From France
The users of financial statements issued by French companies are able to analyse corporate performance and make better-informed decisions thanks to the higher level of disclosure required by the country’s financial markets supervisor. Could the benefits of France’s enhanced regulatory environment be leveraged to improve financial market communication more broadly?
Internationally, several standard-setters such as the US Securities and Exchange Commission (SEC), the European Securities and Markets Authority (ESMA) and the International Accounting Standards Board (IASB) are tackling the challenge of improving financial market communication.
Survey evidence provided by the IASB shows that more than 80% of respondents believe the way financial information is currently presented could be improved. The results further illustrate that instead of necessitating users to search through large amounts of data, the communication of relevant information in financial statements needs to be revised (IASB, 2013). In the same vein, a recent initiative of IASB Chairman Hans Hoogervorst aims to prioritise the effectiveness of financial market communication and to improve the quality and usefulness of financial disclosures (IASB, 2016). France is a good example of these ideas in practice.
The supervisor of the French financial markets, the Autorité des Marchés Financiers (AMF), has established a so-called ‘registration document’ that offers – as an optional supplement – advanced disclosures, which include additional information about a company’s business, financial position, earnings and prospects for various stakeholders. With respect to financial risk, for example, the AMF provides in position paper n°2009-16 (Autorité des Marchés Financiers, 2009) detailed guidance on extended corporate disclosures that go far beyond the governing reporting standards of International Financial Reporting Standards (IFRS) 7.33 and 7.34.4