1a) Are the disclosures in the Swiss annual report really unnecessary?
1b) what social, economic, and institutional factors in Switzerland Might be causing the inclusion of these disclosures?
1c) Describe on of the differences in financial reporting between a Swiss company and the reporting in another country?
Rob Carpenter senior manager at a prestigious accounting firm, recently transferred to the international division of acquisition and mergers. Mr. Carpenter was recently asked to make a recommendation regarding Nestle. Mr. Carpenter unfamiliar with the accounting in Switzerland has realized substantial differences between Swiss and U.S. accounting standards. Surprisingly, there are many “unnecessary” details in …show more content…
This may be best explained by the international exposure Nestle has and their necessity to display a socially conscious image.
In addition, Switzerland operates under the German Civil law system. The civil law system is sometimes “characterized as mandating acceptable behavior” (Saudagaran, 2009). In code law countries accounting is regulated mainly through an accounting code that tends to be highly “detailed, prescriptive, and procedural” (Saudagaran, 2009). Code-law accounting is deemed to be less market oriented and relies heavily on private information. Nestle, however, seems to break the mold of such description as their report has characteristics that are both public and market oriented. In any event, their long narrative is a cause of concern and may also be explained by the exposure to detailed and prescriptive elements of their civil law system.
The Financial reporting overall from these Switzerland companies has only led to small increase from the relative length of the annual report in comparison to 2008 and 2009 figures, which are roughly at 45%. (Bryois and Weiser, 2010). In 2009 changes to the IFRS could have required additional disclosures, which would have likely caused an increase into the length of the annual reports. If Nestle were