Financial disclosures
Credit to Author: EMETERIO SD. PEREZ| Date: Tue, 21 May 2019 16:18:47 +0000
Financial filings may not be enough to inform the public when listed companies report only their consolidated financial disclosures.
How about the Philippine Stock Exchange (PSE)? Perhaps, as one of the stock market’s listed stocks, it should also have imposed more strictly the rules governing issued common shares held by public investors.
But as the regulatory authority, the Securities and Exchange (SEC) exercises jurisdiction over the stock market, which, incidentally, also has its common shares listed on the PSE.
As Due Diligencer has titled its previous piece, listed shares do not make a company public. The very rich families who are the majority stockholders of listed companies are in the market to save taxes and not to share ownership of common shares with non-family members.
The stock market should make their financial filings more favorable to the public. The SEC officials can do this by requiring listed but not necessarily public companies to make their retained earnings more transparent and easily understandable.
Being more transparent means disclosing the individual retained earnings, particularly those units whose shares are listed.
In this case, family-owned and controlled companies should fully disclose the amount of retained earnings available for dividends either in cash or in stock. .
Go by the rules
If the parent company’s shares are PSE-listed, its quarterly financial disclosures and audited annual financial reports should separately report the amount of retained earnings that might be declarable as dividends.
In short, SEC officials may not be strict with their imposition of the rules, despite their power to require these family-owned and controlled listed corporations to follow the market’s regulations.
As posted on the PSE website, a listed company should disclose its financials not in consolidated form so it can include those of its subsidiaries and affiliates. It should also post on the PSE website how much belongs to its listed subsidiary or subsidiaries.
For instance, Oriental Peninsula Resources Group reported in its “consolidated statements of financial position” retained earnings of P3.144 billion as of March 31, 2019. Being “consolidated,” the company’s public stockholders would not know how much of said retained earnings are declarable as dividends either in cash or in stock.
If one were to dig deeper into the financials of each of Oriental Peninsula’s subsidiaries, he or she has to spend a lot of money by going over each of the financial filings of the company’s units, which are available at the SEC’s records department or division.
It is also unfortunate that Oriental Peninsula’s financial filings are not informative as to the number of its units or subsidiaries included in the consolidation.
True worth
The annual financial reports of listed companies may have been audited. Having been audited, these filings do not necessarily reflect their true worth to the public.
The public investors should have been told how much of these consolidated retained earnings belong to listed companies under a group of companies, and, more importantly, which among these subsidiaries contributed most to the parent.
No one among the public would know if most of a parent company’s retained earnings belong to non-listed subsidiaries. In this case, the stockholders would be in the dark and are left guessing the amounts declarable as dividends and which are not.
Of course, a consolidated financial filing is not a monopoly of Oriental Peninsula. Other listed companies that pretend to be public maybe guilty as well.
The poser here is why companies persist in using the public who own only a few common shares and are denied their membership in the board. Due Diligencer has already taken this up in previous pieces including Monday’s issue.
If Oriental Peninsula reported 2,878,500,005 as “share capital”, which, apparently refers to outstanding common shares, dividing its consolidated retained earnings of P3,143,579,050 would be equal to P1.092, which would be the amount that each holders of Oriental Peninsula’s stockholder would be entitled to receive.
Of course, this is only a computation which is not the way a company handles its surplus or retained earnings.
By the way, shouldn’t the public stockholders of listed companies be fully informed that they, too, have the right to information about the financials reported quarterly on the PSE website? Just asking.
Email: esdperez@gmail.com
The post Financial disclosures appeared first on The Manila Times Online.