Reference no: EM132046077
Do you agree or disagree with the benefits and costs to a business. Explain your position.
Most often, non-financial information is presented as a complement to financial information or is assimilated to social and environmental information or is apprehended through its characteristics. Robb et al. state that nonfinancial disclosure refers to qualitative information included in company annual reports, but outside the four financial statements and related footnotes (2001).
Investors, financial analysts and other stakeholders increasingly need "non-financial" information to estimate companies' future cash flows and how they create value: financial and non-financial information now play a central role in efficient functioning of the financial markets. Non-financial information is intended to better evaluate future performance, from a prospective perspective. The majority of studies show that the main societal information is most often narrative and relates to the environment and relations with civil society and human resources. Thus, for the United States, Holder-Webb et al. (2009) studied societal information from the main communication media of a sample of 50 companies. They observe that almost the entire sample (44/50) publishes societal information and that the most widely distributed items or groups of items relate to relations with civil society (24% of CSR data), resources human resources (23%) and health / safety (15%). Another advantage is the growing interest in intangible or intellectual capital. This is due, on one hand, to the weight of intangible assets in the valuation and performance measurement of companies and; on other hand, to the inability of the accounting normative framework to recognize, evaluate these assets and report them in a satisfactory manner. This explains why a large part of corporate reporting relates to this category of non-financial information.
Disclosure of information is then considered as one of the balancing mechanisms that can reduce information asymmetry between managers and shareholders. The information disseminated is, in this perspective, both a cost of monitoring / control, because it allows shareholders to increase their information on the action of the leader, and as a cost of customs clearance, because leaders can use it to defend their own interests and show shareholders that their management is effective (Oxibar et al., 2003). This results in a reduction in agency costs (through lower monitoring costs) and an increase in the value of the firm.