User:Well-rested/Voluntary disclosure

'''This is an early draft of the article. It has been shifted to Voluntary disclosure.'''

Voluntary disclosure in accounting is the provision of information by a company's management beyond requirements such as generally accepted accounting principles and Securities and Exchange Commission rules, where the information is believed to be relevant to the decision-making of users of the company's annual reports.

Voluntary disclosure is carried out extensively by many companies, and has also been identified as an important area in financial reporting research. Voluntary disclosures can include strategic information such as company characteristics and strategy, nonfinancial information such socially responsible practices, and financial information such as stock price information.

Impact of voluntary disclosure
Voluntary disclosure benefits investors, companies and the economy. For example, it helps investors make better capital allocation decisions and lowers firms' cost of capital, the latter of which also benefits the general economy. Chau and Gray (2002) also found support for the theory that voluntary disclosure helps reduce conflicts of interest in widely-held firms.

Firms, however, balance the benefits of voluntary disclosure against the costs, which may include the cost of procuring the information to be disclosed, and decreased competitive advantage.

Types and examples of voluntary disclosures
The FASB classified voluntary disclosures into six categories below, while Meek, Roberts and Gray (1995) classified them into three major groups: strategic, nonfinancial and financial information.
 * Business data
 * e.g. breakdown of market share growth and information on new products


 * Analysis of business data
 * e.g. trend analysis and comparisons with competitors


 * Forward-looking information
 * e.g. sales forecast breakdown and plans for expansion


 * Information about management and shareholders
 * e.g. information on stockholders and creditors and shareholding breakdown


 * Company background
 * e.g. product description and long-term objectives


 * Information about intangible assets
 * e.g. research and development and customer relations.

Determinants
The determinants of the extent and type of voluntary disclosures of firms have been explored in the financial reporting literature. Meek, Roberts and Gray (1995) found that the extent and type of voluntary disclosure differs by geographic region, industry, and company size, and other research has found that the extent of voluntary disclosure is affected by the firm's corporate governance structure and ownership structure.