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Privately owned firms look for greater transparency
Years of investor and regulator demands for greater transparency in financial reporting among listed companies has affected attitudes of privately held businesses, according to a survey conducted by Grant Thornton, an international consultancy group.
Fifty-two per cent of leaders of privately held businesses (PHBs) globally believe that greater transparency is a key benefit of financial reporting, according to latest research from the Grant Thornton International Business Report (IBR) 2010.
The research covers the opinions of more than 7,400 business owners across 36 economies.
Businesses in Ireland, the Philippines and Taiwan were most enthusiastic about greater transparency with 85 per cent of businesses citing greater transparency as a key benefit, while 75 per cent of business leaders in Viet Nam had the same strong opinion.
"These results indicate that even though PHBs are often under no obligation to report information about their financial results or legal structures, business leaders are increasingly recognising that in order to compete and grow they need to be more transparent and more readily comparable with competitors," said Nguyen Vinh Ha, audit partner of Grant Thornton Vietnam.
Transparent financial reporting means being sufficiently open with those who may rely on the financial statements to give them confidence to invest or to develop a business relationship.
Vietnamese businesses recognise that financial reporting will help them grow their business, with 56 per cent citing easier access to capital as a key benefit along with facilitating cross-border trading (13 per cent).
The International Financial Reporting Standards for Small and Medium sized Enterprises (IFRS for SMEs) provides a substantially simplified set of internationally recognised accounting principles specifically for PHBs, according to Ken Atkinson, managing director for Grant Thornton Vietnam.
"The adoption of IFRS for SMEs will allow PHBs to be more transparent and directly comparable with similar businesses around the world, a global solution to their increasing desire for greater transparency," he said.
Where business owners were already aware of IFRS for SMEs, they were asked if they would like their country to adopt the standard.
Globally, 52 per cent of business owners said they would like their country to adopt IFRS for SMEs, with businesses in Mexico (89 per cent), the Philippines (85 per cent), Chile (84 per cent) and Viet Nam (81%) the most supportive.
Theo Laverty, senior audit manager of Grant Thornton Vietnam, said: "In Viet Nam many companies with overseas interests are required to produce financial statements under full IFRS. This is a complex and time-consuming process for smaller businesses. IFRS for SMEs is less complex but still provides comparable financial information that will allow convergence across all entities interacting with the financial sector."
Reduced costs are also regarded as a benefit of financial reporting by 44 per cent of businesses globally, while less complexity is cited by a third of businesses globally as a benefit of financial reporting.
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