C When should listed companies release audited financial statements?

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FEATURE
The Malaysian Accountant
3
Getting the timing right –
When should listed companies release
audited financial statements?
By Pauline Ho and Regina Fikkers, PwC
urrently for listed entities, unaudited results are required
C
in timing between issuance of interim and audited results too
to be lodged with Bursa Malaysia Securities Berhad
great? Or does the timeliness of information outweigh reliability of
(“Bursa Malaysia”) 2 months after the end of the financial
information? What other safeguards are there for investors?
year. These include results for the interim 4th quarter as well as the
We are concerned that a 2 months deadline for issuance of
annual results for the full year. The annual audited results and full
the full audited financial statements pushes the pendulum too far
financial statements must later be lodged with Bursa Malaysia at 4
and will impede the reliability of the information. As outlined in our
months after year-end. Concerns have been raised over the impact
survey below, if we look around at the requirements of other stock
on investors if these results vary, coupled with the relevance of
exchanges, the deadlines for submitting audited financial
financial information if they are not available on a timely basis.
statements have reduced over the years and are now usually 3
In responding to investor concerns and to improve
months. Often unaudited results are required at 2 months with the
governance, Bursa Malaysia has proposed that the timeline for
audited full financial statements to follow at 3 months. Sometimes
releasing audited financial statements by listed companies be
the results announcement can be marked as audited, but this is not
reduced from 4 to 2 months. There is always a balance to be
mandatory.
achieved between timeliness and reliability, thus this is an
The exhibits below provide an overview of the statutory
important question to be addressed. Consider if a profit is reported
requirement on the timeline for announcement of financial
in February and later in April it is revised to a loss. What protection
statements in some jurisdictions:
is there for investors? What information do they rely on? Is the gap
High Income
Economies
Upper Middle
Income Economies
2 months+
• United States for companies
with a public float of $700
million or more is 60 days
• United States <$700m &
>$75m is 75 days
3+ months
• Australia
• Canada
• Hong Kong S.A.R
• Japan
• New Zealand
• United States for companies
have less than US$75 million
public float
• Singapore (105 days)
4+ months
• France
• United Kingdom
•
•
Thailand (if fourth quarter
result is submitted)
•
•
•
•
Indonesia
Vietnam
Philippines (105 days)
Thailand (if fourth quarter
result is not submitted)
Lower Middle
Income Economies
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FEATURE
The Malaysian Accountant
We believe reducing the deadline of releasing audited financial
have the ability to offer more competitive salaries and better work
statements should be determined only after giving due
life balance to talented Malaysians. Many of them take up positions
consideration to the costs, benefits and other issues that need to
overseas as a result. The shortage of professionals impacts the
be addressed before the change occurs.
resourcing of listed companies. Many preparers of financial
reports struggle to have the ideal number of accounting staff to
More timely information
complete their reporting tasks. While large listed entities are better
Undoubtedly, timeliness is an important characteristic of
resourced, the medium or smaller listed companies often rely on
usefulness of financial information to decision makers. If there is
their auditors to assist them when they lack the staff with the
undue delay in the reporting of information it may lose its relevance.
technical expertise.
In reviewing the table above it is clear that for many countries 3
The lack of professionals also available to audit all listed
months is seen to be more timely information for listed companies.
companies within 2 months cannot be under estimated. The vast
For large US companies and some listed companies in Thailand 2
majority of companies have December 31 year-ends, so there is
months has been determined to be appropriate. Investor’s
already a strain on the profession in the January to April period. If
preference is for information to be prepared as soon as possible to
the deadline for audited financial statements was reduced then
assist in decision-making.
something else would need to give way. Without more staff audit
firms will either need to audit less listed companies or audit quality
Reducing potential for differences between audited and
may be impacted. We are concerned this will not result in more
unaudited results
reliable information.
A long delay between unaudited results announcements and the
audited financial report can make the audited information less
Spreading the audit across the year
relevant. It may also reduce investor confidence if there are large
Our comparison shows that in high-income countries with a tight
differences between the two sets of information. Decisions will
deadline, reviews of interim financial information are often required.
have been made based on unaudited results, which can’t be
For example in the US interim reports are required for quarters 1, 2
reversed if the audited result is inconsistent. Reducing the gap will
and 3 only and these are required to be reviewed. In Australia a half
undoubtedly reduce this risk.
yearly report is required to be reviewed by the auditors. In very
systems based audits this may spread the audit workload, but it
Listing rules currently require the market to be kept
depends on the sophistication of individual companies. Reviews of
informed
interim financial reports also facilitate discussion and timely
Other jurisdictions have also had to grapple with the same problem
consideration of issues as they occur in each interim period, and
of a gap in timing of the unaudited and audited information.
avoid year-end surprises. They also reduce the workload of issues
Malaysia and others have dealt with it by “continuous disclosure
to be considered at the year-end peak period. In other countries the
requirements” where the market must be informed promptly if
requirements for audits and reviews are tiered, such that small
either the expected results change or a major event happens like a
companies do not require an audit, and only listed entities are
transaction. Continuous disclosure means there should be “no
required to have an interim review. This reduces some of the
surprises” in the year-end results.
pressure on the profession.
Complexity of the new wave of reporting standards
Point of view
There is a new wave of reporting standards due to apply between
2013 and 2015. While the rules are more complex, they reflect the
We believe releasing annual audited financial statements 3 months
increased sophistication of doing business. Understanding new
after year-ends is an option more in-line with regional markets. A 3-
rules takes time and consideration. Time for industry discussion
month deadline represents a good balance of timeliness and
also promotes greater consistency. Shortening the deadlines may
reliability. Bursa Malaysia should also consider a tiered approach in
impact the reliability of preparation of financial statements under
adopting this tighter timeline with the top tier companies
the new rules.
implementing this requirement first. For overall improvement in
financial information reliability and governance, a review should be
Shortage of accounting professionals in the market
performed on the half yearly financial results. This requirement
Similar to many other countries, the accounting profession is
coupled with the continuous disclosure requirements in the current
currently under-resourced in Malaysia. Neighbouring countries
Listing Rules, will be a positive step towards investor protection.
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