Continuous Disclosure and Corporate Governance

This assignment explores the relationship between continuous disclosure practices and corporate governance in Australia. It examines how investor relations disclosure affects analysts' forecasts, analyzes the influence of corporate governance on continuous disclosure compliance, and investigates the overall impact of continuous disclosure on market transparency. The analysis draws upon academic literature and case studies, including a review of Bellamy's Organic annual reports.

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.................................................................................................................................................2
Answer to Q1...............................................................................................................................2
Answer to Q2...............................................................................................................................2
Answer to Q3...............................................................................................................................2
Answer to Q4...............................................................................................................................3
Part II...............................................................................................................................................4
Introduction..................................................................................................................................5
Literature Review........................................................................................................................5
Disclosure Regime of Australia...............................................................................................5
Principles of Continuous Disclosure.......................................................................................6
Selective Disclosure.................................................................................................................8
Surveillance.............................................................................................................................9
Conclusion...................................................................................................................................9
References..................................................................................................................................10

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Part I
Answer to Q1
Some major financial difficulties have hit the business of Bellamy’s Australia Ltd in the
recent years. Certification and Accreditation Administration of the People’s Republic of China
(CNCA) has put trading halt on the shares of Bellamy’s Australia Ltd as the Chinese authority
has imposed a suspension on the milk-exporting license from the Melbourne plant. This aspect
has hit the financial position of Bellamy’s Australia Ltd badly. Apart from this, the management
of Bellamy’s Australia Ltd has asked the Australian authority to suspend their share trading
process, as the company has not been complied with continuous disclosure regulation. However,
the company has mentioned that they would get enough time to comply with the continues
disclosure framework in this suspension period.
Answer to Q2
In the financial statements of 2016, Bellamy’s Australia Ltd has not reported about
goodwill. As per the annual report, Bellamy’s Australia Ltd acquired major segment assets in
2016 (annualreports.com 2018). In the year 2016, the company acquired segment assets worth
$719,000 in Australia, $25,000 in China and Hong Kong and $8000 in East Asia. Apart from
this, increase in the cash and cash equivalent can be seen in 2017 as compared to 2016 for
Bellamy’s Australia Ltd. The cash and cash equivalent position of Bellamy’s Australia Ltd in
2016 was worth $32,295,000 and worth $32,035,000 in the year 2015 (annualreports.com 2018).
Answer to Q3
According to 2017 profit and loss statement of Bellamy’s Australia Ltd, the decrease in
profit can be seen in every aspect of their business in 2017 as compared to 2016

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(investors.bellamysorganic.com.au 2018). In the year 2017, the company registered decreased
level of gross profit as compared to 2016; that is $91,521,000 in 2017 and $101,228,000 in 2016.
Apart from this, Bellamy’s Australia Ltd has also witnessed massive dip in net profit as the
company registered met loss in the year 2017; that is $(809,000) in 2017 and $ 38,328,000 in
2016. Moreover, the company registered impairment loss of $(424,000) in 2017 and $(36,000) in
the year 2016. Increase can be seen in every cost of the company. It needs to be mentioned that
the CNCA has put a suspension on the milk-exporting license of the company from Melbourne
plant (investors.bellamysorganic.com.au 2018).
Answer to Q4
The above discussion show that Bellamy’s Australia Ltd is going through major financial
difficulties due to two specific reasons. First, CNCA put a trading halt on the shares of Bellamy’s
Australia Ltd followed by the suspension of milk-exporting licence from Melbourne plant.
Second, the company itself requested Australian authority to suspend their share trading due to
non-compliance with the regulations of continuous disclosure regime. These two aspects has hit
the financial position of the company so hard that the company registered losses in every aspect
of their business and the company will take some times to recover from this situation. For all
these reasons, it is advised to the shareholders of Bellamy’s Australia Ltd to sell their shares as
the company’s financial position can become worse in near future.

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Part II
Executive Summary
The main aim of this report is to analyse and evaluate various aspects of continuous disclosure
regime for the ASX listed companies in Australia. The first part of the report shows details about
the continuous disclosure regime of Australia. The second part shows the principle of continuous
disclosure regime of Australia. The next part shows the facts about selective disclosure and
ASIC surveillance. A conclusion has been drawn based on the whole analysis.

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Introduction
The continuous disclosure regime of ASX plays an important role for the listed
companies of Australia. The continuous disclosure regime states that it is the obligation of the
ASX listed companies to disclose price sensitive information about securities to the investors and
shareholders under the Lasting Rules of 3.1 and 3.1A (Hsu, Lindsay and Tutticci 2012).
According to Australian Securities and Investment Commission (ASIC), the inclusion of
continuous disclosure regime helps in the restoration of efficiency and integrity of share market.
However, in the recent years, many questions have been raised regarding the necessity and
effectiveness of continuous disclosure regime for the Australian companies. For establishing the
necessity and effectiveness of continuous disclosure regime, it is required to analyse and evaluate
different substance of continuous disclosure regime (Matolcsy Tyler and Wells 2012). This
report takes an honest attempt to establish the importance of continuous disclosure regime for
Australian companies by analysing various aspects of it. In this process, this report highlights the
main principles of continuous disclosure regime for the ASX listed companies.
Literature Review
Disclosure Regime of Australia
In the recent years, both ASIC and ASX have felt the necessity of establishing continuous
disclosure regime for the ASX listed companies. In the year 1994, the inception of the existing
continuous disclosure regime can be seen and it can be spotted under Chapter 6CA (Sections
674 – 678) Corporations Act through ASX Listing Rules (Chapter 3) (Lumsden 2012).
According to this particular legislation, it is the obligation of all ASX listed organizations for the
disclosure of prise sensitive share information that have material effect o the share and securities

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prices. More specifically, under this act, Guidance Note 8 states that it is the obligation of the
ASX listed organizations for the disclosure of price sensitive information as soon as they become
aware of it. Under the same act, the Principle 5 in ASX Corporate Governance Principles and
Recommendations states that complying with the continuous disclosure regime is an important
aspect for the minimization of information asymmetry between the investors and managers of the
organizations (Tricker and Tricker 2015). In addition, it is also required for establishing effective
governance in the share market.
In the whole process of continuous disclosure regime, the important role of ASIC cannot
be ignored. It is crucial to mention that it is under the authority of ASIC to take effective legal
actions against the companies responsible for the violation of the principles of continuous
disclosure regime (Worthington 2013). Companies under ASX have the authority to handle the
rapid infringement notices; but organizations know the way to evade these notices in the cheap
way by minimally affective their market reputations. For this reason, the policing activities of
ASIC have much importance for judging the extent of continuous disclosure regime for the
Australian companies. In this regard, the commissioner of ASIC said in a presentation to
Australian Investor Relations Association (AIRA) that ASIC has presently 28 cases of insider
trading in which they have been able to solve 18 cases and there are still 5 cases yet to be solved
(Chang, Hooi and Wee 2014). Apart from this, ASIC has mentioned that the number of the cases
of insider trading has increased rapidly and thus, continuous disclosure regime has an important
role to play in the minimization of insider trading.
Principles of Continuous Disclosure
The major principles of continuous disclosure regime are mentioned below:

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 It is required for the ASX listed companies to disclose adequate amount of share
information for the shareholder and investors so that they can effectively judge the price
of the shares and securities (Seamer 2014).
 It is the responsibility of the ASX listed business organizations to disclose the price
sensitive information that can have material impact on the price of the shares and the
companies are required to disclose them as soon they receive them. It needs to be
mentioned that the companies are required to release them when it is evident that
disclosure could not be withheld anymore (Chapple and Truong 2015).
 It is required for the ASX listed business organizations for the disclosure of price
sensitive share information on an equal basis so that the investors and shareholders can
take advantage from them. In this context, it is essential to remove selective disclosure in
order to retain the integrity of share market (Kent and Zunker 2013).
 The presence of continuous disclosure regime plays an important role in striking an
appropriate balance between the release of adequate share information and the restriction
of earlier disclosure of this important share information. On the other hand, it is the
restriction on the companies for the development of speculative environment with the
help of various conflicting information of share prices (Watarai 2013).
 The continuous disclosure regime also an important tool for developing a balance
between the disclosure of price sensitive share information and protecting the commercial
interest of the investors and the shareholders. In addition, the business partners and
advisors cannot use the earlier obtained information in order to trade in the share market
of Australia (Chang, Hooi and Wee 2014).

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 Most importantly, the continuous disclosure regime plays an integral part in maintaining
the confidentiality of the information of investors and shareholders. It needs to be
mentioned that it is the responsibility of the ASX listed companies to release the share
information of the investors and shareholders on a timely basis and the quality of
information must be there (Kathy Rao, Tilt and Lester 2012).
 It is the right of the ASX listed companies for getting continuous guidance in order to be
associated with the principle and regulations of continuous disclosure regime. Apart from
this, there is a mention of effective penalty for the companies responsible for the vilation
of the principles of continuous disclosure regime (Chang, Hooi and Wee 2014).
Selective Disclosure
There is a close association between insider trading and selective disclosure. Share
market is largely dependent on the flow of information and it cannot be done in the cost of
efficiency and equality. In this process, the confidence of the investors should not be affected. As
a part of this, the process of selective disclosure creates obstacle to bring loyalty in the share
analysis, put restriction on the investors so that they do not be able to obtain equal information,
affecting the market transparency and to spoil the confidence of the investors and shareholders
(Marquis, Toffel and Zhou 2016). In the process of selective disclosure, it can be seen that the
business organizations use to choose the disclosure of selective share information so that they
can get favourable results; but these results do not have any connection with the goals and
objectives of the companies. Apart from this, in the presence of selective disclosure, institutional
investors get the option for the extraction of preferred share information of the ASX listed
companies with the assistance of private briefing (Fisher 2015). However, the importance of
selective briefing cannot be ignored as it is important to fill the gap of the share price analysis

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and the investors get great benefit from this. In this aspect, level the playing is an important part
as it is helpful for getting the access of required information. Most of the organizations like in the
adoption of the process of share information. For all these reasons, ASIC has recently initiated
the surveillance on the price sensitive information.
Surveillance
The current process of ASIC in order to carry out the process of spot check of selected
organizations has not been implemented properly. The presence of major complexities for the
process of effective monitoring and the process of criminal proceeding can be held responsible
for this. Moreover, the total cost of ASIC is needed to be taken into consideration and thus, it is
required to have strict laws. At the same time, there is a strong need of effective governance that
is required to be implemented alongside the required regulations (Yanco 2013). For all these
reasons, the surveillance program of ASIC plays an important role for continuous disclosure
regime.
Conclusion
As per the above discussion, it can be seen that continuous disclosure regime plays an
important role for the ASX listed organizations in the disclosure of price sensitive share
information. As per the above discussion, the effectiveness of continuous disclosure regime can
be increased by the participation of authorities like ASIC and others. In addition, it can also be
observed that it is the responsibility of the ASX listed companies to comply with the principles
of continuous disclosure regime. Thus, based on the above discussion, it can be concluded that
continuous disclosure regime has its necessity as well as effectiveness for disclosing adequate
information for the companies.

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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
17 Jan. 2018].
Chang, M., Hooi, L. and Wee, M., 2014. How does investor relations disclosure affect analysts'
forecasts?. Accounting & Finance, 54(2), pp.365-391.
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.
Fisher, C., 2015. The disclosure dilemma: Returning to journalism after political media
advising. Communication Research and Practice, 1(1), pp.58-70.
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 17
Jan. 2018].

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Kathy Rao, K., Tilt, C.A. and Lester, L.H., 2012. Corporate governance and environmental
reporting: an Australian study. Corporate Governance: The international journal of business in
society, 12(2), pp.143-163.
Kent, P. and Zunker, T., 2013. Attaining legitimacy by employee information in annual
reports. Accounting, Auditing & Accountability Journal, 26(7), pp.1072-1106.
Lumsden, A., 2012. Making Continuous Disclosure Work–Outcomes v. Enforcement. Browser
Download This Paper.
Marquis, C., Toffel, M.W. and Zhou, Y., 2016. Scrutiny, norms, and selective disclosure: A
global study of greenwashing. Organization Science, 27(2), pp.483-504.
Matolcsy, Z., Tyler, J. and Wells, P., 2012. Is continuous disclosure associated with board
independence?. Australian Journal of Management, 37(1), pp.99-124.
Seamer, M., 2014. Does Effective Corporate Governance Facilitate Continuous Market
Disclosure?. Australian Accounting Review, 24(2), pp.111-126.
Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and practices.
Oxford University Press, USA.
Watarai, H., 2013. Continuous separation principles using external microaction forces. Annual
Review of Analytical Chemistry, 6, pp.353-378.
Worthington, A.C., 2013. Financial literacy and financial literacy programmes in
Australia. Journal of Financial Services Marketing, 18(3), pp.227-240.

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Yanco, G., 2013. New ASIC surveillance system to benefit markets. Keeping Good
Companies, 65(6), p.345.