Continuous Disclosure and Market Transparency

This assignment delves into the concept of continuous disclosure in Australia, examining its role in ensuring market transparency. It analyzes various academic articles that investigate the impact of continuous disclosure on price run-up before takeovers, analyst forecasts, compliance with disclosure requirements, and the effectiveness of corporate governance in facilitating disclosure. The research also explores the challenges and opportunities associated with disclosure practices in Australia's financial markets.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Part I.................................................................................................................................................1
Answer to Question 1..................................................................................................................1
Answer to Question 2..................................................................................................................1
Answer to Question 3..................................................................................................................2
Answer to Question 4..................................................................................................................2
Part II...............................................................................................................................................3
Introduction..................................................................................................................................4
Literature Review........................................................................................................................4
Australian Disclosure Regime.................................................................................................4
Continuous Disclosure Principles............................................................................................5
Selective Disclosure.................................................................................................................7
Surveillance.............................................................................................................................8
Conclusion...................................................................................................................................8
References......................................................................................................................................10

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Part I
Answer to Question 1
It can be seen in the recent times that Bellamy’s Australia Ltd has been going through
major financial turmoils and some specific reasons can be held responsible for that. Certification
and Accreditation Administration of the People’s Republic of China (CNCA) affected the
financial position of Bellamy’s Australia Ltd by suspending their license for exporting milk
formula from Melbourne plant. As a result of this, CNCA had halted the share trading of
Bellamy’s Australia Ltd that has major negative effect on the financial position of Bellamy’s
Australia Ltd. Moreover, it can also be observed that Bellamy’s Australia Ltd did ask to the
Australian authority to suspend their shares that have a major negative impact on the financial
position of Bellamy’s Australia Ltd. The company took this decision due to the non-compliance
with the standards of continuous disclosure framework. However, Bellamy’s Australia Ltd is
considering this suspension as a positive aspect as they would get time to comply with the
obligation of contiguous disclosure framework.
Answer to Question 2
According to the annual report of Bellamy’s Australia Ltd, there is not any mention about
goodwill in the financial statements of 2016. The company has mentioned about three major
acquisitions of business assets in the year 2016. First, they acquired segment asset worth $
719,000 in Australia; second, they acquired assets worth $ 25,000 in China and Hong Kong;
third, they acquired segment assets worth $ 8000 in East Asia (annualreports.com 2018). The
annual report of Bellamy’s Australia Ltd also states the presence of cash and cash equivalent
worth $ 32,295,000 in 2016 and $ 32,035,000 in 2015. It indicates that there is a minor increase
in cash and cash equivalent in 2016 than 2015 (annualreports.com 2018).

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Answer to Question 3
A decreasing trend in the profits in 2017 can be from the analysis of the financial
statements of 2017 than 2016. The annual report states that amount of gross profit decreased in
2017 as compared to 2016; that is $ 91,521,000 in 2017 and $ 101,228,000 in 2016
(investors.bellamysorganic.com.au 2018). In addition, it can also be seen that there is a major
decline in the net profit of Bellamy’s Australia Ltd in 2017 from 2016 as net profit in 2017
became negative; that is net loss of $ 809,000 in 2017 and net profit of $ 38,328,000 in 2016.
The company has impairment losses in 2017 and 2016; they are $ 424,000 in 2017 and $ 36,000
in 2016. There has also been increase in administrative and other cost of the company. In
addition, the company received suspension from Bellamy’s Australia Ltd on milk-exporting
license (investors.bellamysorganic.com.au 2018).
Answer to Question 4
The above discussion shows the weak financial condition of Bellamy’s Australia Ltd in
the year 2017. The financial position of the company has been badly affected with share trading
halt and suspension of license. All these aspects together contributed towards decreased gross
profit and net loss in the year 2017. Thus, it is recommend to the clients to sell the shares of
Bellamy’s Australia Ltd in this situation.

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Part II
Executive Summary
The main aim of this report is to analyse and evaluate various aspects of the continuous
disclosure regime in Australia. The main role of continuous disclosure regime is to establish a
strong securities market by acquiring the confidence of the shareholders and investors. Different
part of this report show different aspects of continuous disclosure like the importance of having
continuous disclosure regime and others. A conclusion has been provided based on the whole
discussion.

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Introduction
The main aim for the preparation of continuous disclosure framework is to develop
strong and efficient equity market in Australia. The main reason is that complying with the
regulations of continuous disclosure framework helps the companies in disclosing price sensitive
information about shares in order to provide assistance to the investors in the decision making
process (Aspris, Foley and Frino 2014). The recent investigation of Newcrest in the role of
corporate regulator for the investigation of the violation of continuous disclosure obligation has
shown a major lesson for the Australian Stock Exchange (ASX) listed companies related to
continuous disclosure framework. The main aim of this report is to analyse and evaluate various
aspects of continuous disclosure framework in relation with the Australian companies. More
specifically, this report aims to discuss the necessity and effectiveness of continuous disclosure
framework.
Literature Review
Australian Disclosure Regime
The continuous disclosure requirements are not new for the Australian Company Law
and there has been an urgent necessity of continuous disclosure requirements. The current
continuous disclosure framework was proposed in 1994 and it can be seen in “Chapter 6CA
(Sections 674 – 678) Corporations Act” through “ASX Listing Rules (Chapter 3)”.
This particular section states that it is the responsibility of the Australian companies to
disclose the price sensitive share information having material effect on the price of shares and
securities. According to Guidance Note 8, companies have the obligation to disclose the price
sensitive information when they become aware of it (Chang and Wee 2014).

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According to the regulations of Principle 5 in ASX Corporate Governance Principles
and Recommendations, continues disclosure plays an important role in minimizing the
information asymmetry between the companies and investors and is also considered as a mean
for effective governance. There are various enforcement alternatives through which companies
can breach the continuous discloser obligation. Some major forms of these alternatives are civil
penalty up to $1,000,000, undertakings of enforcements, different types of criminal penalty and
many others (Fu, Carson and Simnett 2015).
In this context, it needs to be mentioned that ASIC has the authority to take legal actions
against the companies violating the obligation of continuous disclosure and it does not have any
influence on the third party being affected by the violation of continuous discloser requirement.
Even though companies can handle the infringement notices rapidly, big organizations have the
scope to evade these notices in the cheap way with minimum effects on their goodwill (North
2014).
The policing activity of ASIC is very useful in order to judge the extent of continuous
disclosure. In a presentation to the Australian Investor Relations Association (AIRA), the
commissioner of ASIC mentioned that 28 insider-trading actions is thee, in which 18 have been
solved and 5 yet to be solved. Moreover, the current ASIC conviction rate has become almost
double in compared to 2009. Currently, ASIC has 25 investigations in their hands that include 11
infringement notices and 9 cases of failing to satisfy the obligation of continuous disclosure
(Chapple and Truong 2015).
Continuous Disclosure Principles
The main principles of continuous discourse regime of Australia are discussed below:

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 It is essential for the Australian companies to disclose sufficient information so that the
investors can make right judgment about the share prices by using this information and
the investors have the right to make distinct judgment by using this information (Di
Lernia 2014).
 The companies are also required to disclose the price sensitive share information to the
market when they become aware about it. In addition, the need to disclose information
on prompt basis when it is evident that disclosure could not be withheld legitimately
anymore.
 It is required for the companies to disclose the prise sensitive information on an equal
basis so that they become advantageous for the investors. In this context, it needs to be
mentioned that it is essential not to have selective disclosure in order to maintain the
integrity of share market as selective disclosure has the potential for the development of
insider trading where the material price sensitive information leads the trade of the
investors. In this aspect, continuous disclosure framework reduces the risks of insider
trading (Di Lernia 2014).
 The continuous disclosure framework has an important role to play in developing a
balance between the timely disclosures of price sensitive information about the shares
and restricting the aspect of earlier disclosure of such information. Apart from this, it is
the restriction on the employees to develop any speculative information including
volatility in the share prices with the assistance of frequent conflicting announcements
about the share prices (Hermalin and Weisbach 2012).
 It is the responsibility of continuous disclosure regime to make an appropriate balance
between the timely disclosures of prise sensitive share information and to protect the

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commercial benefits of the disclosing Australian companies. Business organizations have
the authority to provide information to their advisors and the parent firms; but the
business partners and the advisors cannot use this information for trading in the share
market.
 It is the responsibility of the business organizations to maintain the confidentiality of the
prise sensitive information to the investors. It is needed for the companies to disclose the
price sensitive information based on their time and equality (Hsu, Lindsay and Tutticci
2012).
 As per continuous disclosure framework, it is the right of the companies to get effective
guidance related with the continuous disclosure obligation of price sensitive information.
Selective Disclosure
Close association can be observed between selective disclosure and insider trading. The
dependency of market can be seen on the flow of information; but it cannot be at a cost of
equality and efficiency. Moreover, it must not affect the confident of the investors. For this
reason, selective hinders in bringing loyalty in the analysis, restricting the investors from
obtaining equal access to the share information, affecting the transparency of share market and
spoiling the confidence of the investors (Russell 2015). Selective disclosure could lead to a cruel
cycle where business organizations disclose the chosen share information in order to gain their
favourable results that have no association with the goals and objectives of the companies. In
addition, the process of selective disclosure makes the institutional investors able to extract
preferential access to their preferred information for listed organizations with the help of private
briefing. In spite of that, there is still need for selective briefing for the companies as they play an
integral part in filling the gap in the analysis of share prices. This has relevancy as the investors

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become benefitted from the expert analysis. Level the playing field refers to the process of
webcasting and getting access to the relevant documents by using the website of the companies.
For this reason, most of the businesses organizations prefer to use adopt this process for the
analysis of information. Recently, ASIC has taken the initiative of surveillance for the various
aspects of selective disclosure of price sensitive information (Riaz et al. 2013).
Surveillance
The recent initiative of ASIC for carrying out the spot check process of selected
organization is still overdue. The main reason of this is the presence of complexities in the
process of successful monitoring along with the process of criminal prosecuting (Tran 2015). In
addition, the total cost of ASIC is another significant matter to consider. For this reason, there is
a need for strict laws. Apart from this, corporate governance is considered as another major
aspect that needs to be implemented along with the required regulations. For all these reasons,
the program of surveillance by ASIC has a great importance in the total process (Seamer 2014).
Conclusion
From the above discussion, it can be observed that the continuous disclosure regime is a
good aspect for the Australian companies. However, in this aspect, it is required for the
authorities like ASIC to participate in this matter in order to balance the whole initiative of
continuous disclosure framework. As per the above discussion, different layers of continuous
disclosure regime in Australia are enforcements, regulations and guidance aiming towards the
development of a strong and effective share market in Australia. Apart from this, the initiative of
ASIC business surveillance is considered as another major step towards strengthening the equity
market of Australia. For all these reasons, it can be concluded that the continuous disclosure

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regime is an effective tool for Australian companies in disclosing price sensitive timely
information about the shares.

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References
Annualreports.com. (2018). Annual Report 2015-16. [online] Available at:
http://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_BAL_2016.pdf [Accessed
16 Jan. 2018].
Aspris, A., Foley, S. and Frino, A., 2014. Does insider trading explain price run‐up ahead of
takeover announcements?. Accounting & Finance, 54(1), pp.25-45.
Chang, M., Hooi, L. and Wee, M., 2014. How does investor relations disclosure affect analysts'
forecasts?. Accounting & Finance, 54(2), pp.365-391.
Chapple, L. and Truong, T.P., 2015. Continuous disclosure compliance: does corporate
governance matter?. Accounting & Finance, 55(4), pp.965-988.
Di Lernia, C., 2014. Empirical Research in Continuous Disclosure. Australian Accounting
Review, 24(4), pp.402-405.
Di Lernia, C.A., 2014. Faith/less? Market integrity and the enforcement of Australia’s
continuous disclosure provisions.
Fu, Y., Carson, E. and Simnett, R., 2015. Transparency report disclosure by Australian audit
firms and opportunities for research. Managerial Auditing Journal, 30(8/9), pp.870-910.
Hermalin, B.E. and Weisbach, M.S., 2012. Information disclosure and corporate
governance. The Journal of Finance, 67(1), pp.195-233.

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Hsu, G.C.M., Lindsay, S. and Tutticci, I., 2012. Inter‐temporal changes in analysts’ forecast
properties under the Australian continuous disclosure regime. Accounting & Finance, 52(4),
pp.1101-1123.
Investors.bellamysorganic.com.au. (2018). Annual Report 2017. [online] Available at:
http://investors.bellamysorganic.com.au/FormBuilder/_Resource/_module/
hwGxZyb3NkyBtC5tw1kqzQ/docs/reports/Bellamys_Annual_Report_2017.pdf [Accessed 16
Jan. 2018].
North, G., 2014. Listed Company Disclosure and Financial Market Transparency: Is this a Battle
Worth Fighting or Merely Policy and Regulatory Mantra?. Browser Download This Paper.
Riaz, Z., Ray, S., Ray, P.K. and Kirkbride, J., 2013. Collibration as an alternative regulatory
approach for remuneration governance: A contextual analysis of Australia. International Journal
of Disclosure and Governance, 10(3), pp.246-260.
Russell, M., 2015. Continuous disclosure and information asymmetry. Accounting Research
Journal, 28(2), pp.195-224.
Seamer, M., 2014. Does Effective Corporate Governance Facilitate Continuous Market
Disclosure?. Australian Accounting Review, 24(2), pp.111-126.
Tran, A., 2015. Can taxable income be estimated from financial reports of listed companies in
Australia?. Browser Download This Paper.

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