Chapter-5

TO MAKE A COMPARISON AMONG INDIAN, U.K AND U.S. BANKS.

The movement of information from private to public domain is known as

Disclosure Practices

According to American Accounting Association

In this chapter, an attempt has been made to measure the extent of disclosure of information in annual report
of selected banks from each country i.e. India, U.K. and U.S. banks. For this purpose this chapter has been
divided into two sections. Section one analysis the country-wise disclosure index, under this section, there
are three unweighted disclosure indexes have been prepared for each country (i.e. India, U.K. and U.S.) like
India has its own disclosure practices or index, in the financial year 2009 this index comprises of 200
disclosures and it increases from 206 for the financial year 2012-13 respectively. In case of U.K. banks
disclosure index comprising of 152 disclosures for the financial year 2009 and it increases from 170 for the
financial year 2013 respectively and in case of U.S. banks disclosure index comprising of 90 disclosures for
the financial year 2009 and it increases from 95 for the financial year 2013. The annual reports were
examine to identify if the items of information available in the disclosure index or not. For each item
disclosed, the banks were awarded a symbol ( ) if item disclosed and (-) if the item was not disclosed.

This section also includes disclosures guidelines and Accounting Standards provided by various regulatory
bodies of a specific country like in INDIA, SEBI, ICAI, RBI and MCA. In U.S., SEC is the prominent body
for framing guidelines of reporting practices and in U.K. FRC (Financial Reporting Council) is the
prominent body for framing guidelines of reporting practices.

Section II, analysis the impact of selected variables on the disclosures practices, the number of
characteristics has been taken into consideration from different banks of selected countries. Therefore, Net
Profit, Staff Productivity, Non-performing Assets and Return on Equity considered as independent variables
where as Disclosure Practices considered as dependent variables.

Section- I
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 _______________________________________________________________________________________

Country wise Disclosure Index

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Disclosure Index is a vital phenomenon for examine disclosure scores of selected countries, to achieve this
objective an index has been prepared on the basis of the contents shown in annual reports of the banks and
it has been analyzed that different country has different reporting and disclosure formats.
Each country designed its own reporting and disclosure format and this format prepared by the regulatory
and working bodies of the country.
i. In India the regulatory and working bodies in case of banks, the Banking Regulation Act 1949,
the rules of SEBI, guidelines of RBI, Companies Act 1956, new Companies Act 2013 as well as
the recommendation of ICAI (Institute of Chartered Accountant in India)
ii. In U.K ICWAI (The Institute of Chartered Accountants in England & Wales), FRC (Financial
Reporting Council), Chartered Institute of Management Accountants, The Association of
Chartered Certified Accountants, The Chartered Institute of Public Finance and Accountancy,
United Kingdom Accounting Standards Board (ASB), these regulatory bodies are working. and;
iii. In U.S. SEC (Securities Exchange Commission) norms plays most prominent role for providing
guidelines regarding disclosures.
Disclosure index has been prepared on the basis of countries wise and analyze by dividing the total of
weighted disclosure index score obtained by specific disclosures of selected banks. There are several
disclosures got highest score in disclosure index (which is 100 percent) and some of them got very
slightest scores in disclosure index. On the basis of index, disclosure that acquired highest score
considered that most important item (like Balance Sheet, Profit and Loss Account, Cash Flow statement
and Statement of changes in Equity) that shows banks financial position, performance and for a specific
flow of funds period which are then provided to external users and least disclosure score are less
important for their users. It is also investigation that varied countries have varied regulatory framework
of reporting and disclosure practices but the foundation of reporting are common for all selected
countries.

There are some disclosures that commonly found in the annual reports but appearance of these disclosures
are differ from country to country and also these item are presented by their different names in different
country like in India Balance Sheet, Profit and Loss Account, Cash Flow statement and Statement of
changes in Equity are presented by the name of financial statement. In U.S presented by the name of
financial summary and in U.K also presented by the name of financial statements.

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_______________________________________________________________________________________

Regulatory Framework of Disclosure Practices of Banks in India

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Financial Reporting is the Communication of financial of the banks to the external world.

The users of the financial statements need information about the financial position and performance of the
bank in making economic decisions. They are interested in its liquidity and solvency and the risks related to
the assets and liabilities recognized on its balance sheet and to it are off balance sheet items. In the interest
of full and complete disclosure, some very useful information is better provided, or can only be provided, by
notes to the financial statements. The use of notes and supplementary information provides the means to
explain and document certain items, which are either presented in the financial statements or otherwise
affect the financial position and performance of the reporting enterprise.

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Role of Professional & Regulatory Governing Bodies in India

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1.4.1 Reserve Bank of India (RBI)

Almost all the countries in the world have their own central banks, but it can be called by different names in
different countries, like The Reserve Bank of India is the central bank of India, Bank of England in the
U.K., whereas The Federal Reserve Bank in the U.S. etc.

The Reserve Bank of India is the central bank of the country and came into existence on 1st April, 1935
under the Reserve Bank of India Act, 1934. It is the apex institution of banking and financial structure of the
country. It plays a leading role in organizing, regulating, supervising and developing the banking and
financial structure of the economy.

1.4.2. Securities and Exchange Board of India (SEBI)

Securities and Exchange Board of India is the supervisory authority that stimulating and reforming Indian
financial reporting requirements for all the banks. The reporting necessities that are executed by the SEBI

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through its rules and through the Listing Agreement are in the addition to those prescribed under the
Companies Act.

1.4.3. The Companies Act: - The Companies Act arranges the detailed provisions regarding the
preservation of books of account and the planning and exhibition of annual accounts. This Act works as a
tool for issuance of accounting standards by National Financial Reporting Authority (NFRA). It specifies
the roles and responsibilities of directors and also the matters to be reported upon by them in the annual
reports of the companies. Under the provisions of the Act, audit of annual account is compulsory for all
companies registered under it. The Act extensively deals with the qualification, appointment, removal, right,
duties and liabilities of auditors and provides contents of auditors report.

As the preparation of financial statements contained in annual reports presupposes the existence of a
recording procedure of transactions of the reporting entities, the requirements as to maintenance of books of
accounts are also mentioned.

1.4.4. Institute of Chartered Accountant in India (ICAI)

In India, the Accounting Standards are formulated by Accounting Standards Board under the authority of the
Council of the Institute of Chartered Accountants of India (ICAI), with a view to harmonize the diverse
accounting policies and practices followed by various organizations including financial intermediaries.
While formulating these Standards, consideration is given to the International Accounting Standards. ICAI
expected that the business organizations (including Banks) as well as the Accountants responsible for
preparation of the financial statements must prepare the same with prudence and taking into account the
guidelines of ICAI.

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Accounting Standards Applicable in case of Banks

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The Reserve Bank of India has been continuously making efforts to ensure convergence of its supervisory
norms and practices with the international best practices with a view to aligning standards adopted by the
Indian banking system with global standards. The Accounting Standards (AS) issued by the Institute of
Chartered Accountants of India (ICAI) and recommend steps to eliminate / reduce gaps. Accordingly, a
Working Group was constituted under the Chairmanship of Shri N.D. Gupta, Former President of ICAI to
recommend steps to eliminate / reduce gaps in compliance by banks with the Accounting Standards
issued by ICAI.

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Online Financial Reporting Disclosure Index in case of Indian Banks

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To measure the type and the extent of online disclosure by the sample banks, a worksheet, referred to as
Disclosure Index of selected countries, was prepared. For more details, please refer Appendix i. The
disclosure index, which consists of 206 items, is divided into twenty categories in case of India, viz., (1)
Balance Sheet information (2) Profit and Loss Account Information (3) Boards Report Information (4)
Corporate Governance Information (5) Business Responsibility Report Information (6) Background about
the bank/general corporate information (7) Management Discussion and Analysis Information (8) Corporate
Strategy Information (9) RBI Guidelines Information (10) Financial Performance Information (11) General
Risk Management Information (12) Credit Risk Exposure Information (13) Market Risk Exposure
Information (14) Interest Rate Risk Information (15) Currency Risk Information (16) Liquidity Risk
Exposure Information (17) Accounting Policy Review Information (18) Key Non-financial Statistics
Information (19) Corporate Social Disclosure Information; and (20) Others Information. The maximum
score of disclosure index is 206 based on the same number of items by providing score 1 to each item.

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 Disclosure Index of Selected Countries

INDIA

From 2009-2013

S. No Basis of Disclosure Index Disclosure Score of Study period Percentage of Disclosure Score
BOB SBI ICICI AXIS PNB BOB SBI ICICI AXIS PNB
1. Balance sheet items (15) 15 15 15 15 15 100 100 100 100 100

2. Profit and Loss Account Items (07) 07 07 07 07 07 100 100 100 100 100

3. Boards Report (06) 06 06 06 06 06 100 100 100 100 100

4. Corporate Governance (59) 57 45 46 46 47 96.610169 76.271186 77.96610 77.966 79.661016

5 4 17 1017 95

5. Business Responsibility Report (05) 05 05 05 05 05 100 100 100 100 100

(Mandatory from 2012 Onwards)
6. Background about the bank/general 0 0 0 02 0 0 0 0 33.333 0
corporate information (06) 3333

7. Management Discussion and Analysis 12 12 12 12 12 100 100 100 100 100

(12)
8. Corporate Strategy (03) 0 0 0 0 0 0 0 0 0 0

9. RBI Guidelines (29) 29 29 29 29 29 100 100 100 100 100

10. Financial Performance (13) 4 0 0 0 2 30.769230 0 0 0 15.384615

8 38

11. General Risk Management (07) 2 0 0 5 0 28.571428 0 0 71.428 0

6 5714

12. Credit Risk Exposure (07) 0 2 0 1 1 0 28.571428 0 14.285 14.285714

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 6 7143 29

13. Market Risk Exposure (04) 1 1 1 1 4 25 25 25 25 100

14. Interest Rate Risk (02) 0 1 0 0 1 0 50 0 0 50

15. Currency Risk (03) 0 0 0 0 0 0 0 0 0 0

16. Liquidity Risk Exposure (03) 0 1 0 0 1 0 0 0 0 0

17. Accounting Policy Review (02) 0 0 0 0 0 0 0 0 0 0

18. Key Non-financial Statistics (08) 0 0 4 0 0 0 0 50 0 0

19. Corporate Social Disclosure (04) 0 0 4 1 3 0 0 100 25 75

20. Others (07) 2 0 0 0 2 28.571428 0 0 0 28.571428

6 57

Source: Annual Reports of Selected Indian Banks

Note: - See Annexure (i)

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Interpretation: - From the above table number ( ), It has been observed that Balance Sheet, Profit and Loss
Account, Board Reports and Business Responsibility Report got maximum scores i.e. 100 percent from all
selected Indian banks, followed by Corporate Governance scores second highest disclosure in its disclosure
index say, Bank of Baroda disclosed 96.6 percent disclosure followed by State bank of India, AXIS Bank,
ICICI Bank, Punjab National Bank. Corporate Social Responsibility got third highest disclosure scores in its
disclosure index say ICICI bank disclosure 100 percent disclosure followed by State bank of India, AXIS
Bank, Bank of Baroda and Punjab National Bank.

There are some disclosures got least scores in disclosure index like Currency Risk, Liquidity Risk
Exposure, Accounting Policy Review, Key Non-financial Statistics, Corporate Strategy and Background
about the bank/general corporate information and it is considered that these disclosure are not mandatory in
nature.

All selected Indian banks like, State bank of India, AXIS Bank, ICICI Bank, Punjab National Bank
and Bank of Baroda shown their annual reports in parts and even there is download facility to download a
complete reports or a specific part of it.

These annual reports are available on the websites of the respective banks into various forms like
HTML, PDF and latest format is XBRL (eXtensible Business Reporting Language) this format are still
voluntary in nature for Indian banks, so that no banks present or disclose its financial statement in this
format.

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 United Kingdom
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Regulatory Framework of Disclosure Practices in U.K. Banks

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Generally Accepted Accounting Practice in the UK, or UK GAAP, is the overall body of regulation
establishing how company accounts must be prepared in the United Kingdom. This includes not only
accounting standards, but also UK company law.

Accounting standards derive from a number of sources. The chief standard-setter is the Accounting
Standards Board (ASB), which issues standards called Financial Reporting Standards (FRS). The ASB is
part of the Financial Reporting Council, an independent regulator funded by a levy on listed companies, and
it replaced the Accounting Standards Committee (ASC), which was disbanded in 1990 following a number
of criticisms of its work. To the extent that the ASC's pronouncements, known as Statements of Standard
Accounting Practice (SSAPs), have not been replaced by FRS, they remain in force

1. Financial Reporting Council- The Financial Reporting Council (FRC) is the UK's and the Republic
of Ireland's independent regulator responsible for promoting high quality corporate governance and
reporting to foster investment.

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The FRC board is supported by three committees:

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The Codes & Standards Committee This board advise the FRC board on matters relating to
codes, standard-setting and policy questions, through its Accounting, Actuarial and Audit & Assurance
Councils (formerly Audit Practices Board)

The Executive Committee - This board advise the FRC Board in matters relating to conduct
activities to promote high-quality corporate reporting, including monitoring, oversight, investigative and
disciplinary functions, through its Monitoring Committee and Case Management Committee

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 The Conduct Committee - This board advise the Board by advising on strategic issues and
providing day-to-day oversight of the work of the FRC.

The FRC incorporates five operating bodies:

i. Accounting Standards Board- The role of the Accounting Standards Board (ASB) is to issue accounting
standards in the United Kingdom. It is recognized for that purpose under the Companies Act 1985. It took
over the task of setting accounting standards from the Accounting Standards Committee (ASC) in 1990.
However, ASB was overtaken by Financial Reporting Council (FRC) on 2 July 2012. Thus, FRC is now the
authority that may issue accounting standards in UK.

ii. Financial Reporting Review Panel- The Financial Reporting Review Panel (FRRP) was established in
1990 as a subsidiary of the United Kingdom's Financial Reporting Council. The FRRP seeks to ensure that
the provision of financial information by public and large private companies complies with relevant
accounting requirements such as the Companies Act 1985.

iii. Accountancy & Actuarial Discipline Board- The Accountancy & Actuarial Discipline Board (AADB) is
the independent, investigative and disciplinary body for accountants and actuaries in the United Kingdom.
The AADB was formerly known as the Accountancy Investigation & Discipline Board (AIDB). It changed
its name to the AADB on August 16, 2007. The AADB Scheme establishes the framework and sets in place
the legal formalities of participation between the AADB and the Participating Accountancy Bodies i.e.
the Institute of Chartered Accountants in England and Wales (ICAEW), the Association of Chartered
Certified Accountants (ACCA), the Chartered Institute of Management Accountants (CIMA) and
the Chartered Institute of Public Finance and Accountancy (CIPFA), The Institute of Chartered Accountants
of Ireland, and the Institute of Chartered Accountants of Scotland.

iv. Professional Oversight Board- The Professional Oversight Board (POB) is a UK regulatory body
specializing in the accounting, auditing and actuarial professions. It is a part of the Financial Reporting
Council (FRC), the independent regulator of corporate governance and reporting in the UK.

v. Auditing Practices Board- The Auditing Practices Board Limited (APB) was originally established in
1991 as a committee of the Consultative Committee of Accountancy Bodies, to take responsibility within

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both Ireland and the United Kingdom for setting standards of auditing with the objective of enhancing
public confidence in the audit process and the quality and relevance of audit services in the public interest.

2. Companies Act 2006- This Act passed by the Parliament of the United Kingdom which forms the
primary source of UK company law. It had the distinction of being the longest in British Parliamentary
history: with 1,300 sections and covering nearly 700 pages, and containing 16 schedules (the list of contents
is 59 pages long) but it has since been surpassed, in that respect, by the Corporation Tax Act 2009

The Act contains various provisions which affect all companies irrespective of their status:

Company formation - the procedure for incorporating companies will be modernized to facilitate
incorporation over the Internet. It will become possible for a single person to form a public company.

Constitutional documents - a company's articles of association will become its main constitutional
document, and the company's memorandum will be treated as part of its articles. New model articles for
private companies to be made under the Act are intended to reflect better the way that small companies
operate, and will replace the existing Table A. Existing companies will be permitted to adopt the new model
articles in whole or in part.

Corporate capacity - under the new Act a company's capacity will be unlimited unless its articles
specifically provide otherwise, thus greatly reducing the applicability of the ultra vires doctrine to corporate
law and removing the need for an excessively long objects clause in the Memorandum of Association.

Execution of documents - Formalities for execution as a deed are to be further revised, so that a
single director can execute a document as a deed on behalf of the company by a simple signature in the
presence of a witness.

Share capital - the requirement for an authorized share capital will be abolished. Companies will be
able to redenominate their share capital from one currency to another without an order of the court.

Distributions in kind - The Act addresses the current uncertainty in the law in relation to the transfer
of non-cash assets by a company to a shareholder, and whether this should be treated as a distribution.

Shareholder meetings - The Act enables shareholder meetings to be held more quickly. Special
resolutions now require only 14 days' notice unless proposed at an AGM.

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 Shareholder communications - The Act made it easier for companies to communicate
electronically (e.g. by email or by website) with their shareholders by express agreement (which agreement
can be obtained under the articles, or by the shareholder failing to indicate that they do not wish to
communicate via the website, as well as by more conventional methods).

Auditor's liability - Auditors are now permitted to limit their liability for claims in negligence,
breach of trust or breach of duty so long as:

The shareholders have approved the limitation in advance.

the court considers the limitation of liability to be 'fair and reasonable'

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Online Financial Reporting Disclosure Index in case of U.K. Banks

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To measure the type and the extent of online disclosure by the sample banks, a worksheet, referred to as
Disclosure Index of selected countries, was prepared. For more details, please refer Appendix ii, The
disclosure index, which consists of 130 items, is divided into nine categories in case of U.K., viz., (1)
Strategic Report information (2) Governance Report Information (3) Remuneration Report Information (4)
Business review Risk and Balance Sheet Management Information (5) Other Risks Information (6)
Financial Statements Information (7) Risk Review Information (8) Shareholder Information (9) Additional
Information. The maximum score of disclosure index is 130 based on the same number of items by
providing score 1 to each item.

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 United Kingdom

From 2009-2013

S. Basis of Disclosure Disclosure Score of Study period Percentage of Disclosure Score

No Index
R BARCLAY LIIOYD HSB S.CHAR RBS BARCLA LIIOYDS HSBC S.CHARTERE
BS S C TERED Y D

1. Strategic Report (28) 18 09 09 04 14 64.28 32.1428 32.1428 14.2857 50

571 6 57 1

2. Governance report 17 03 00 04 05 94.44 16.6666 0 22.2222 27.777778

(18) 444 7 2

3. Remuneration report 00 10 00 05 02 0 100 0 50 20

(10)
4. Business review Risk 09 18 18 14 17 34.61 69.2307 69.2307 53.8461 65.384615
and balance sheet 538 7 69 5

management (26)
5. Other risks (09) 08 08 08 08 08 88.88 88.8888 88.8888 88.8888 88.888889
889 9 89 9

6. Financial statements 04 13 09 09 11 26.66 86.6666 60 60 73.333333

(15) 667 7

7. Risk Review (09) 04 06 06 09 06 44.44 66.6666 66.6666 100 66.666667

444 7 67

8. Shareholder 00 04 00 00 05 0 66.6666 0 0 83.333333

information (06) 7

9. Additional

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 information (09)

Source: Annual Reports of Selected U.K. Banks

Note: - See Annexure (ii)

Interpretation: - From the above table number ( ), It has been observed that disclosure of financial statements scores highest
disclosure in its disclosure index say Barclay bank disclosed 87 percent disclosure followed by RBS, LIoyds, HSBC and Standard
Chartered bank. Governance Report scores second highest disclosure in its annual reports say, RBS disclosed 94.4 percent followed by
LIoyds, Barclay Bank, HSBC and Standard Chartered bank.

There are some disclosures got least scores in disclosure index like Remuneration report, Strategic report and additional
information and it is considered that these disclosure are not essential for taking investment decision.

All selected U.K. Banks like RBS, Lloyds, HSBC and Standard Chartered bank and Barclay Bank shown their annual reports
in parts and even there is download facility to download a complete reports or a specific part of it.

These annual reports are available on the websites of the respective banks into various forms like HTML, PDF and latest
format is XBRL (eXtensible Business Reporting Language) this format is mandate in U.K from 2010 onwards.

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 United States
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Regulatory Framework of Disclosure Practices of Banks in U.S

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1.5.1 SEC Disclosure Laws and Regulations

Companies that are privately owned are not required by law to disclose detailed financial and operating
information in most instances. They enjoy wide latitude in deciding what types of information to make
available to the public. Companies that are publicly owned are subject to detailed disclosure laws about their
financial condition, operating results, management compensation, and other areas of their business. While
these disclosure obligations are primarily linked with large publicly traded companies, many smaller
companies choose to raise capital by making shares in the company available to investors. In such instances,
the small business is subject to many of the same disclosure laws that apply to large corporations.
Disclosure laws and regulations are monitored and enforced by the U.S. Securities and Exchange
Commission (SEC).

All of the SEC's disclosure requirements have statutory authority, and these rules and regulations are subject
to changes and amendments over time. Some changes are made as the result of new accounting rules
adopted by the principal rule-making bodies of the accounting profession. In 2000 the SEC imposed new
regulations to eliminate the practice of "selective disclosure," in which business leaders provided earnings
estimates and other vital information to analysts and large institutional shareholders before informing
smaller investors and the rest of the general public.

2.5.1 SEC Disclosure Obligations

1. SEC regulations require publicly owned companies to disclose certain types of business and financial
data on a regular basis to the SEC and to the company's stockholders. The SEC also requires disclosure of
relevant business and financial information to potential investors when new securities, such as stocks and
bonds, are issued to the public, although exceptions are made for small issues and private placements. The
current system of mandatory corporate disclosure is known as the integrated disclosure system.

2. Publicly owned companies prepare two annual reports, one for the SEC and one for their shareholders.
Form 10-K is the annual report made to the SEC, and its content and form are strictly governed by federal

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statutes. It contains detailed financial and operating information, as well as a management response to
specific questions about the company's operations.

3. Companies have had more leeway in what they include in their annual reports to stockholders. Over the
years, however, the SEC has gained more influence over the content of such annual reports, primarily
through amending its rules on proxy statements. Since most companies mail annual reports along with their
proxy statements, they must make their annual stockholder reports comply with SEC requirements.

4. The certified financial statement must include a two-year audited balance sheet and a three-year audited
statement of income and cash flows. In addition, annual reports must contain five years of selected financial
data, including net sales or operating revenues, income or loss from continuing operations, total assets, long-
term obligations and redeemable preferred stock, and cash dividends declared per common share.

5. Annual reports to stockholders must also contain management's discussion and analysis of the firm's
financial condition and results of operations. Information contained therein includes discussions of the
firm's liquidity, capital resources and results of operations, any favorable or unfavorable trends in the
industry, and any significant events or uncertainties. Other information to be included in annual reports to
stockholders includes a brief description of the business covering such matters as main products and
services, sources of materials, and status of new products.

3.5.1 The Sarbanes-Oxley Act

Prior to 2002, the regulations on financial reporting were much more lax than they are currently. Companies
were more apt to be under the radar if they desired to engage in fraudulent financial practices. Since the
enactment of the Sarbanes Oxley Act in 2002, all publicly-traded companies have been required to comply
with regulatory policies. Many of these policies had been in existence before SOX, but they were not
enforced.

4.5.1 Disclosure Rules of The Accounting Profession

1. Generally accepted accounting principles (GAAP) and specific rules of the accounting profession
require that certain types of information be disclosed in a business's audited financial statement

2. These rules and principles do not have the same force of law as SEC rules and regulations. Once
adopted, however, they are widely accepted and followed by the accounting profession. Indeed, in some

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instances, disclosures required by the rules and regulations of the accounting profession may exceed those
required by the SEC.s.

3. It is a generally accepted accounting principle that financial statements must disclose all significant
information that would be of interest to a concerned investor, creditor, or buyer.

4. Among the types of information that must be disclosed are financial records, accounting policies
employed and litigation in progress, lease information, and details of pension plan funding. Generally, full
disclosure is required when alternative accounting policies are available, as with inventory valuation,
depreciation, and long-term contract accounting. In addition, accounting practices applicable to a particular
industry and other unusual applications of accounting principles are usually disclosed.

5. Certified financial statements contain a statement of opinion from an auditor, in which the auditor
states that it is his or her opinion that the financial statements were prepared in accordance with GAAP and
that no material information was left undisclosed. If the auditor has any doubts, then a qualified or adverse
opinion statement is written.

_______________________________________________________________________________________

Online Financial Reporting Disclosure Index in case of U.S. Banks

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To measure the type and the extent of online disclosure by the sample banks, a worksheet, referred to as
Disclosure Index of selected countries, was prepared. For more details, please refer Appendix ii, the
disclosure index, which consists of 94 items, is divided into five categories in case of U.K., viz., (1)
Financial Summary Information (2) Managements Discussion and Analysis Information (3) Controls and
Procedures Information (4) Notes to Consolidated Financial Statements Information; and (5) Financial
Statement Information. The maximum score of disclosure index is 94 based on the same number of items by
providing score 1 to each item.

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 United States

From 2009-2013

S. No Basis of Disclosure Index Disclosure Score of Study period Percentage of Disclosure Score

BNY Goldman' wells A.Expre Suntrus BNY Goldma wells A.Expre Su

s ss t n's ss

1. Financial Summary (38) 28 06 14 06 11 73.68421 15.7895 36.8421 15.7895 28.94

05

2. Managements Discussion and 01 15 02 01 03 5.263157 78.9474 10.5263 5.26316 15.78

89
Analysis (19)
3. Controls and Procedures 04 04 04 02 02 100 100 100 50
(04)
4. Financial Statement (07) 05 07 05 05 05 71.42857 100 71.4286 71.4286 71.42
14

5. Notes to Consolidated Financial 26 26 26 26 26 100 100 100 100 1

Statements
(26)
Source: Created by Researcher from annual reports of selected U.S. Banks
Note: - See Annexure (ii)

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Interpretation: - From the above table number ( ), It has been observed that Notes to Consolidated Financial
Statements got maximum scores i.e. 100 percent from all selected U.S. banks, followed by Financial Statement
scores second highest disclosure in its disclosure index say, Goldman's sachs group disclosed 100 percent
disclosure followed by Wells Fargo & Company, American Express, Bank of New York and Mellon and SunTrust
disclosed 71.2 percent disclosure and rest of the disclosure got least scores in disclosure index.

All selected U.S. Banks like Wells Fargo & Company, American Express, Bank of New York and Mellon,
SunTrust and Goldman's Sachs group disclosed shown their annual reports in parts and even there is download
facility to download a complete reports or a specific part of it.

These annual reports are available on the websites of the respective banks into various forms like HTML,
PDF and latest format is XBRL (eXtensible Business Reporting Language) this format is mandate in U.S from
2010 onwards.

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 Hypothesis Testing
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To examine statistically the possible relationship between disclosure indexes of selected countries, the following
null hypothesis has been formulated and tested:

Ho2: There is no significant difference between the online disclosures of financial information of selected banks

Table 3.3.4.5: Kruskal Wallis Test for online Disclosure Index of selected Countries

Labels N Mean Rank

1. 0-10 (For Indian Banks) 20 13.575
Online Disclosure Index 2. 10-20 (For U.K. Banks) 8 22.50

3. 20-30 (For U.S. Banks) 5 21.90

33

Test Statistics
Online Disclosure Index Chi-Square Test df Asymp. Sig.
6.420 2 0.040

Analysis:- The SPSS result of Kruskal Wallis H Test is given in Table 3.3.4.5. As the 33 samples have been
divided into three categories, the sampling distribution of H approximates closely related with Chi-Square

distribution ( ). To test the null hypothesis, we have the value of = 6.420 for (k-1) or 3-1=2 degree of

freedom at 5% level of significance. Since the calculated value of H is only 0.040 and does not exceed the
value of 6.420, so we accept the null hypothesis and conclude that there is no significant difference between the
online disclosures of financial information of selected banks.

ANNEXURE

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1. AS-5 Net Profit or Loss for the period, prior period items and changes in accounting policies. The
objective of this Standard is to prescribe the classification and disclosure of certain items in the statement of profit
and loss so that all enterprises prepare and present such a statement on a uniform basis. Accordingly, this Standard
requires the classification and disclosure of extraordinary and prior period items, and the disclosure of certain
items within profit or loss from ordinary activities. It also specifies the accounting treatment for changes in
accounting estimates and the disclosures to be made in the financial statements regarding changes in accounting
policies. This Standard deals with, among other matters, the disclosure of certain items of net profit or loss for the
period. These disclosures are made in addition to any other disclosures required by other Accounting Standards.

2. AS-15 Employees Benefit- This Standard deals with accounting for retirement benefits in the financial
statements of employers. This Standard applies to retirement benefits in the form of provident fund,
superannuation/pension and gratuity provided by an employer to employees, whether in pursuance of
requirements of any law or otherwise. It also applies to retirement benefits in the form of leave encashment
benefit, health and welfare schemes and other retirement benefits, if the predominant characteristics of these
benefits are the same as those of provident fund, superannuation/pension or gratuity benefit, i.e. if such a
retirement benefit is in the nature of either a defined contribution scheme or a defined benefit scheme as described
in this Standard. This Standard does not apply to those retirement benefits for which the employers obligation
cannot be reasonably estimated, e.g., ad hoc ex- gratia payments made to employees on retirement. As per the
Standard, the cost of retirement benefits to an employer results from receiving services from the employees who
are entitled to receive such benefits.
3. AS-17 Segment Reporting- The Standard establishes principles for reporting financial information, about the
different types of products and services an enterprise produces and the different geographical areas in which it
operates. As per the Standard, for reporting the financial information, business and geographical segments are
required to be identified. It contains requirements for identifying reportable segments and lays down disclosures
required for reportable segments for primary segment reporting format of an enterprise as well as the disclosures
required for secondary reporting format of the enterprise. It also addresses several other segment disclosure
matters.

Reasons for qualification Banks were not able to adopt the Accounting Standard due to lack of clarity for
identifying the business segments and geographical segments as also the absence of uniform disclosure formats as
relevant to banks.

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4. AS-18 Related Party disclosures- This Standard is applied in reporting related party relationships and
transactions between a reporting enterprise and its related parties. This Standard requires that name of the related
party and nature of the related party relationship where control exists should be disclosed irrespective of whether
or not there have been transactions between the related parties. The Standard requires that where control does not
exist, certain disclosures have to be made by the reporting enterprise if there have been transactions between
related parties, during the existence of a related party relationship. As per the Statement, items of a similar nature
may be disclosed in aggregate by type of related party.

Reasons for qualification Many banks had not complied with this Accounting Standard due to the following
reasons and had, therefore, invited qualifications of their financial statements:
Compliance with the above Accounting Standard would infringe upon their obligation to maintain
confidentiality of their customers accounts.
Banks were not sure who their related parties, including key management personnel were.
Absence of a disclosure format relevant to banks.

5. AS-21 Consolidated Financial Statements (CFS)- As regards disclosures in the Notes to Accounts to
the Consolidated Financial Statements, banks may be guided by general clarifications issued by Institute of
Chartered Accountants of India from time to time. A parent company, presenting the CFS, should consolidate the
financial statements of all subsidiaries - domestic as well as foreign, except those specifically permitted to be
excluded under the AS-21. The reasons for not consolidating a subsidiary should be disclosed in the CFS. The
responsibility of determining whether a particular entity should be included or not for consolidation would be that
of the Management of the parent entity. In case, its Statutory Auditors are of the opinion that an entity, which
ought to have been consolidated, has been omitted, they should incorporate their comments in this regard in the
"Auditors Report"

6. AS-22 Accounting for Taxes on Income- This Standard is applied in accounting for taxes on income.
This includes the determination of the amount of the expense or saving related to taxes on income in respect of an
accounting period and the disclosure of such an amount in the financial statements. The Standard requires that
tax expense for the period, comprising current tax and deferred tax, should be included in the determination of the
net profit or loss for the period. As per the Standard, deferred tax should be recognised for all the timing
differences, subject to the consideration of prudence in respect of deferred tax assets as specified in the Standard.

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7. AS-23 Accounting for Investments in Associates in Consolidated Financial Statements- This
Accounting Standard sets out principles and procedures for recognising, in the consolidated financial statements,
the effects of the investments in associates on the financial position and operating results of a group. The Standard
defines associate as an enterprise in which the investor has significant influence and which is neither a subsidiary
nor a joint venture of the investor. The Standard requires that an investment in an associate should be accounted
for in consolidated financial statements under the equity method subject to certain exceptions.

As per the Standard, the equity method is a method of accounting whereby the investment is initially recorded
at cost, identifying any goodwill/capital reserve arising at the time of acquisition. The carrying amount of the
investment is adjusted thereafter for the post-acquisition change in the investors share of net assets of the
investee. The consolidated statement of profit and loss reflects the investors share of the results of operations of
the investee. The Standard lays down the requirements in respect of the application of the equity method.

8. AS- 24 Discontinuing Operations- Merger/ closure of branches of banks by transferring the assets/
liabilities to the other branches of the same bank may not be deemed as a discontinuing operation and hence this
Accounting Standard will not be applicable to merger / closure of branches of banks by transferring the assets/
liabilities to the other branches of the same bank.

Disclosures would be required under the Standard only when:

a) Discontinuing of the operation has resulted in shedding of liability and realization of the assets by the bank or
decision to discontinue an operation which will have the above effect has been finalized by the bank, and

b) The discontinued operation is substantial in its entirety.

9. AS-25 Interim Financial Reporting- This Standard prescribes the minimum content of an interim
financial report and the principles for recognition and measurement in complete or condensed financial statements
for an interim period. As per the Standard, a statute governing an enterprise or a regulator may require an
enterprise to prepare and present certain information at an interim date which may be different in form and/or
content as required by this Standard..

As per the Standard, an interim financial report should include, at a minimum, condensed balance sheet;
condensed statement of profit and loss; condensed cash flow statement; and selected explanatory notes. In respect
of recognition and measurement, the Standard requires that an enterprise should apply the same accounting
policies in its interim financial statements as are applied in its annual financial statements, except for accounting

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policy changes made after the date of the most recent annual financial statements that are to be reflected in the
next annual financial statements. However, the frequency of an enterprise's reporting (annual, half-yearly, or
quarterly) should not affect the measurement of its annual results. To achieve that objective, measurements for
interim reporting purposes should be made on a year-to-date basis.

10. AS-26 Intangible asset- This Statement prescribes the accounting treatment for intangible assets that are
not dealt with specifically in another Accounting Standard. This Statement requires an enterprise to recognize an
intangible asset if, and only if, certain criteria are met. The Statement also specifies how to measure the carrying
amount of intangible assets and requires certain disclosures about intangible assets. This Statement is applied by
all enterprises in accounting for intangible assets, except certain assets specified in the Statement including
financial assets. The Statement requires that an intangible asset should be measured initially at cost. The
Statement requires that internally generated goodwill should not be recognized as an asset. The Statement also
deals with subsequent expenditure on an intangible asset. The Statement requires that after initial recognition, an
intangible asset should be carried at its cost less any accumulated amortization and any accumulated impairment
losses. This Statement also deals with amortization of intangible assets, including amortization period,
amortization method etc.

11. AS-27 Financial Reporting of Interests in Joint Ventures- This Standard is applied in accounting for
interests in joint ventures and the reporting of joint venture assets, liabilities, income and expenses in the financial
statements of ventures and investors, regardless of the structures or forms under which the joint venture activities
take place. This Standard identifies three broad types of joint ventures, namely, jointly controlled operations,
jointly controlled assets and jointly controlled entities. This Standard requires, inter alia, that in its consolidated
financial statements, a venturer should report its interest in a jointly controlled entity using proportionate
consolidation subject to certain exceptions. The Standard defines proportionate consolidation as a method of
accounting and reporting whereby a venturer's share of each of the assets, liabilities, income and expenses of a
jointly controlled entity is reported as separate line items in the ventures financial statements.

12. AS- 28 Impairment of assets- This Statement prescribes the procedures that an enterprise applies to
ensure that its assets are carried at no more than their recoverable amount. An asset is carried at more than its
recoverable amount if its carrying amount exceeds the amount to be recovered through use or sale of the asset. If
this is the case, the asset is described as impaired and this Statement requires the enterprise to recognize an
impairment loss. This Statement also specifies when an enterprise should reverse an impairment loss and it
prescribes certain disclosures for impaired assets. This Statement requires that an enterprise should assess at each

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balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the
enterprise should estimate the recoverable amount of the asset. The Statement also describes some minimum
indications for this purpose. The Statement deals in detail with the determination of the recoverable amount of an
asset. The Statement requires that if the recoverable amount of an asset is less than its carrying amount, the
carrying amount of the asset should be reduced to its recoverable amount. That reduction is an impairment loss.
The Statement requires that an impairment loss should be recognized as an expense in the statement of profit and
loss immediately, unless the asset is carried at revalued amount in accordance with Accounting Standard (AS) 10,
Accounting for Fixed Assets, in which case any impairment loss of a revalued asset should be treated as a
revaluation decrease under that Accounting Standard.

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