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Disclosures in financial reports require substantial improvement

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Disclosures in financial reports of listed companies require substantial improvement, according to the Netherlands Authority for the Financial Markets (AFM), after having carried out its 2009 review of financial reports. Disclosures are very important to enable investors to properly assess a company’s financial position and performance. The AFM believes that disclosures regarding a number of items in financial reports require improvement and that disclosures need to be more specific.

Disclosures need to improve in three areas in particular:

  1. To provide an understanding of the liquidity risks, companies are required to disclose a liquidity risk analysis. However, this disclosure often did not cover all future payment obligations, interest payments being the main item excluded.
  2. Disclosures regarding impairments of assets should not merely refer to general economic circumstances. They have to be more specific.
  3. One or more of the three required statements on a company’s internal risk management and control system were not provided in a number of cases. For example, only half of the companies reviewed included a statement about the absence of any indications of these systems not operating properly in the current financial year.

The AFM reviewed the financial reports of 63 listed companies in 2009. In 24 cases, this review focused on whether companies had adequately complied with the notifications issued by the AFM relating to the financial report of the previous year. Eighteen out of these 24 companies (2008: fifteen out of twenty-seven) adequately complied with the notifications. The six companies failing to adequately comply with the AFM’s notifications were selected for a full desktop review. The percentage of companies adequately complying with the AFM's notifications increased from 55 percent in 2008 to 75 percent in 2009. This is, without doubt, a positive development, but there is still room for improvement.


With respect to 38 of the 63 completed desktop reviews, the AFM requested additional information about the application of financial reporting standards. This is the same number as in 2008. The AFM issued one or more notifications to 36 companies, one of which (2008: two) was accompanied by a recommendation. Only two companies were able to remove the AFM's doubts about the correct application of financial reporting standards. Carrying out a similar number of reviews in 2009 as in 2008, the number of companies to which the AFM issued one or more notifications grew by six, representing a 20 percent increase compared with 2008.


The notifications mainly related to incorrect application of financial reporting requirements in IFRS 7 (Financial Instruments: Disclosures), IAS 12 (Income Taxes), IAS 1 (Presentation of Financial Statements) and IAS 36 (Impairment of Assets). The AFM’s findings often related to disclosures that had not been provided, or that were incomplete or inaccurate. In addition, the AFM pointed out to various companies that they had inadequately complied with the requirements concerning the accounting of investments in consolidated group companies and the recognition of statutory reserves in the company financial statements.

In 2009, the AFM included in its register the half-yearly and annual financial reports of 240 companies. In addition, it included the interim statements of approximately 130 companies. Too many companies still file their documents too late. As an enforcement measure, the AFM instructed nine (2008: six) companies to file their annual financial reports.

Following the implementation of the Transparency Directive, the AFM started its supervision of half-yearly financial reports of listed companies in 2009. In 2010, it will conduct a thematic review of half-yearly financial reports, including a comparison of 2008 and 2009 half-yearly financial reports, to assess the impact of the implementation of the Transparency Directive on half-yearly financial reports.

The AFM promotes fairness and transparency within financial markets. We are the independent supervisory authority for the savings, lending, investment and insurance markets. The AFM promotes the conscientious provision of financial services to consumers and supervises the honest and efficient operation of the capital markets. Our aim is to improve consumers’ and the business sector’s confidence in the financial markets, both in the Netherlands and abroad. In performing this task the AFM contributes to the prosperity and economic reputation of the Netherlands.

The AFM is committed to promoting fair and transparent financial markets.

As an independent market conduct authority, we contribute to a sustainable financial system and prosperity in the Netherlands.

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