Recently a tweet from US President Donald Trump about companies announcing their results on a quarterly basis generated big debate among US businessmen and policy-makers.

“On speaking with some of the world’s top business leaders, I asked what it is that would make business (jobs) even better in the US. “Stop quarterly reporting & go to a six-month system,” said one. That would allow greater flexibility & save money. I have asked the SEC to study!” Trump had tweeted on August 17. The tweet has evoked a mixed response from analysts.

While some are for continuation of the current system, there are a few who want corporates to declare results every six months. In most countries, especially the advanced economies, companies declare their financial performance on quarterly basis. Since 1998, India too follows that route.

SEBI had constituted a committee under CB Bhave, (the then managing director of National Securities Depository) to review the disclosure requirements in the financial statements, with particular reference to consolidation of accounts of group companies, reporting of segment results, impact of deferred tax and other disclosures to be made by companies on a continuous basis.

The idea was to ensure that investors can receive financial statements that offer a true and fair view of the financial position of companies and take a well-informed investment decision.

The committee had recommended, among other things, the publication of unaudited financial statements on quarterly basis and time limit of a maximum of 48 hours to inform material events (price-sensitive information) to stock exchanges.

The SEBI board on March 27, 1998, had approved the recommendations and made amendments to the listing agreement suggested by the Committee. Since then, India Inc has been disclosing its results on quarterly basis.

Time for deliberation?

The publication of quarterly numbers was considered one of the major stock market reforms, given the transparency levels of India Inc at that time.

With the passage of 20 years, should SEBI and policy-makers rethink this disclosure pattern?

Those who are for half-year results feel that companies are spending a lot of money, time and effort for just preparing quarterly results. A six-month gap would cut a lot of time used up by the management and its staff and free up more time for doing business, thus enhancing shareholder value. Managements can devote additional time to implement strategies. The undue noise due to quarterly earnings can also be avoided.

Sans study

However, some fear that it would take away transparency and will allow managements to manipulate markets by selectively leaking performance details to media. Also, there is no study pointing out that half-yearly results will actually result in saving of cost for companies.

So, for now, it appears better to continue with the current system, which at least has the effect of making companies more disciplined.

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