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MOF Accepts CCDG's Recommendations on Operating and Financial Review (OFR)

12 Feb 2004

The Council on Corporate Disclosure and Governance (CCDG) has recommended an OFR Guide to raise the quality of reporting by listed companies. The CCDG recommended that the OFR Guide be included as a practice note (which is non-mandatory) in the listing manual of the Singapore Exchange. Adherence by listed companies would be voluntary. The Ministry of Finance accepts the CCDG's recommendations and the OFR Guide.


2. The idea of having an OFR Guide for listed companies was first mooted by two private sector-led committees: the Disclosure and Accounting Standards Committee (DASC) and the Company Legislation and Regulatory Framework Committee (CLRFC). The DASC and the CLRFC also recommended that the contents of the OFR should be prescribed by the CCDG and the Singapore Exchange (SGX).

Summary of OFR Guide

3. The OFR Guide emphasises the importance of the OFR in providing users with a good understanding of the company, and in assisting users' assessment of its performance and future direction. It contains eight principles that are fundamental to the preparation of a good OFR, which:

a. focuses on matters that are relevant to investors;
b. provides an overview of the company's objectives and broad strategies;
c. draws its analysis from the key financial and non-financial performance indicators used by management;
d. discusses the performance of the company as well as relevant business segments;
e. discusses the business dynamics and risks facing the company;
f. discusses the company's investments and measures taken to maintain profitability;
g. discusses the company's capital structure, treasury policy and liquidity position; and
h. discusses the overall return attributable to shareholders.

4. Complementary guidelines clarify how these principles should be applied, and offer clarity to listed companies in preparing their OFR.

5. In making these recommendations, the CCDG considered practices by leading jurisdictions such as the UK and Australia, which have already introduced OFR guides. The CCDG also conducted a public consultation and sought views from representatives from various stakeholder groups, including the investment and business communities. There is wide support for the recommendations.

6. SGX will be asked to include the OFR Guide as a practice note (which is non-mandatory) in the listing manual of the Singapore Exchange. Listed companies are urged to consider the principles and guidelines in the OFR Guide in preparing their annual reports for financial years starting from 1 January 2004.

Annex:The CCDG's letter to the Government