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Discusing Transparency and Disclosure

Transparency and Disclosure: A company's overall policy for controlling and disseminating inside information must meet the standards for transparency and disclosure. However, if a company is in a highly competitive industry "where it has a close rival competing on price, quality, and service".

(1) What would the company's specific financial reporting objectives be with respect to disclosures?
(2) How does the company decide how much disclosure to provide to investors?

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A company policy in the manner in which it controls and discloses internal information is supposed to meet the standards for transparency and disclosure. However, companies that operate in a very competitive industry where there are close rivals competing on price, service, and quality, then a company is often faced with a dilemma on exactly how much of its internal processes, or business segments information to disclose. This paper looks at the specific financial reporting objectives with regard to disclosures of a company that operates in such a highly competitive industry and how a company decides how much disclosure to provide to investors.

Specific Financial Reporting Objectives of the Company with Respect to Disclosures:

For a company that is operating in a highly competitive industry such as Pepsi and Coca Cola, there are a number of specific objectives with respect to disclosures that such companies develop in their company policy. As noted in the section 404 of Security Exchange Commission, it is imperative that Companies report their internal control and disclose any material weaknesses in the internal controls of the company (Chadbourne & Parke LLP, 2004; Securities and Exchange Commission, n.d.). In addition, SFAS 131 requires that the internal organization and the manner in which management thinks in making decisions for overall production of the business operating segments should be disclosed in order to provide insight into management's view and perspective of the internal processes and performance of the company (Schiff, 2006; PWC, 2008). It essence it requires that other important stakeholders in the business such as shareholders be able to see the business through the eyes of management. This implies that the company's specific reporting objectives need be in compliance within these requirements, yet still not keep the competitors in ...

Solution Summary

The solution discussed transparency and disclosures.