Neutrality of narrative discussion in annual reports of UK listed companies

This paper reports the results of an investigation into the neutrality of the narrative discussion of financial performance and position, as evidenced in 179 annual reports of UK listed companies. Neutrality of narrative discussion was determined by comparing the average proportions of good and bad news contained in the narrative and statutory accounts sections of the annual reports. The results of a comparison of the proportion of good news in the two sections of the annual reports suggest that the narrative sections contained a significantly higher proportion of good news than the statutory accounts sections. Comparison of proportions of bad news, however, indicates that the narrative sections contained a significantly lower proportion of bad news compared to the statutory accounts sections. Finally, the results also suggest that the proportion of good news as compared to bad news in the narrative sections is significantly higher than the proportion of good news compared to bad news in the statutory accounts section. The results are consistent with the suggestion that company management highlights good news in narrative discussions. The implications of the findings for company management, users, auditors and regulators are discussed

The effect of audit committee characteristics on intellectual capital disclosure

This paper, using data from 100 UK listed firms, investigates the relationship between audit committee characteristics and intellectual capital (IC) disclosure. We find that IC disclosure is positively associated with audit committee characteristics of size and frequency of meetings, and negatively associated with audit committee directors’ shareholding. We find no significant relationship between IC disclosure and audit committee independence and financial expertise. We also observe variations in the association between audit committee characteristics and IC disclosure at its component level, which suggest that the underlying factors that drive various forms of IC disclosure, i.e. human capital, structural capital and relational capital, are different. These results have important implications for policy-makers who have a responsibility to ensure that shareholders are protected by prescribing appropriate corporate governance structures and accounting regulations/guidelines

The concept of ‘disposal’ for the purposes of capital gains tax in South Africa

Liability for capital gains tax is determined in terms of the Eighth Schedule to the Income Tax Act 58 of 1962. According to the Eighth Schedule, the disposal of an asset is the event that triggers the liability for capital gains tax. It is therefore imperative to know what constitutes a disposal, because it is fundamental to the entire capital gains tax regime. The purpose of this paper is to analyse the definition of a disposal in order to ascertain whether a disposal, as defined, is intended to mean a transfer of ownership in an asset or whether a disposal could take place upon the occurrence of events or causae other than the transfer of ownership. A study of relevant literature was undertaken to analyse the definition of "disposal" in order to fully comprehend the intention and meaning of the term as it is contemplated in the Eighth Schedule. The current definition of a "disposal" could lead to uncertainty and anomalies. It is therefore recommended that the legislature should amend the definition of a disposal in the Eighth Schedule. The definition should refer to the disposal of an asset (other than a personal-use asset) as being the transfer of ownership of an asset from one person to another or the loss of the ownership of an asset. Because the common law has clear principles regarding how ownership of different classes of assets is transferred, no confusion would arise regarding whether or when a disposal has occurred