Translation: Financial Disclosure = Financial Disclosure

Financial Disclosure (Financial Disclosure) — refers to a company clearly and regularly disclosing financial or material information that may affect the decisions of investors and shareholders, such as business results, profits and losses, debts, acquisitions, costs, changes in ownership, or any event that may have a financial impact on the company.

Financial disclosure aims to achieve transparency and help investors assess the company's financial position and make decisions based on clear information available to everyone.

Simple definition:
Financial disclosure is like the company telling investors: "These are our figures, these are the transactions we have carried out, and these are the risks or changes that may affect us."

Instead of having to guess, investors receive clear information about matters that are important to them, enabling them to decide whether to invest in the company, hold their shares, or sell them.

How is financial disclosure made?
Companies typically disclose information through several means, such as:

  • Annual and quarterly financial statements.
  • Announcements of profits and losses.
  • Disclosure of acquisitions and mergers.
  • Announcements of new loans and financing.
  • Disclosure of material changes in the company's assets or liabilities.
  • Clarification of the expected financial impact of any transaction or significant event.

Disclosure is not limited to figures; it may also include information that helps investors understand the reason for the financial change and its expected future impact.

Note:
There is a difference between Financial Disclosure (Financial Disclosure) and Financial Statements (Financial Statements).

Financial statements present the company's figures, such as revenues, expenses, assets, liabilities, and profits, whereas financial disclosure is a broader concept; it may include financial statements as well as announcements, explanations, and information relating to transactions, risks, and material events.

Example:
Suppose Qassim Cement Company announces the acquisition of 100% of a ready-mix concrete company.

In this case, the company must disclose important information relating to the transaction, such as:

  • The acquisition percentage.
  • The transaction value and method of financing.
  • The parties to the transaction.
  • The costs associated with the acquisition.
  • The expected financial impact on the company.

When the company issued a subsequent announcement clarifying the names of the selling shareholders and then stated that this update would not result in any additional financial impact or change in the transaction costs, this constituted part of the disclosure intended to provide investors with complete and clear information.

What does this mean for you?

  • Greater clarity: Disclosure helps you understand the company's actual position instead of relying on expectations or rumors.
  • Better investment decisions: You can compare the company's profits, debts, transactions, and risks before buying or selling its shares.
  • Assessing the impact of events: If the company announces an acquisition or a new loan, you can determine whether it will affect its financial position positively or negatively.
  • Investor protection: Disclosure reduces information asymmetry, ensuring that the company's management does not retain material information unknown to other investors.

Frequently asked question: Is every announcement made by the company considered financial disclosure?

Answer: Not necessarily. Financial disclosure is more closely related to information concerning the financial position, performance, transactions, and events that may affect investors. There are also other disclosures that may be operational, administrative, or legal, but they become financially significant when they may affect the company's profits, assets, liabilities, or market value.