If market discipline is to be effective, however, it must be supported by substantial and meaningful public disclosure - as well as sound accounting standards and an efficient and credible legal framework. Knowing a company's appetite for risk and its approach to, and methodologies for, managing risk is essential to understanding the risks of being a shareholder, a creditor, or a counterparty. While significant progress has been made in recent years in improving disclosure practices, it unfortunately remains the case that many of these practices have simply not kept pace either with the rapid changes in many firms' business activities and risk exposures or with how these exposures are measured and managed. For this situation to be fully remedied, notions of what is proprietary information and what should be in the public domain must change. There can be no doubt about the need for dramatic progress in improving disclosure practices. Clearly, a full appreciation of risk cannot be achieved without sufficient information. This past year has made all too clear that there is no greater enemy to financial stability than a loss of confidence - and nothing undermines confidence more than a lack of reliable information. Discipline imposed by markets might not be pleasant, but fuller, higher-quality information - in a word, transparency - bolsters the confidence of depositors and other creditors and thereby makes doing business easier and more secure for everyone.
Each of these intangible assets has value, but this value can be lost in a heartbeat. While it is true that a tangible asset such as a factory can burn to the ground overnight, intangibles, unlike a factory, usually cannot be insured. A challenge to current accounting - and disclosure - rules, therefore, is how to reflect accurately not only the value of intangible assets, but also their vulnerabilities to sharp downward revaluations. BIS Review 57/2002  5  In terms of complex financial transactions, this past year's events have made clear that accounting and disclosure rules have failed to keep pace with financial innovation. Complex financial arrangements, such as those funded offshore or through special-purpose entities, are not effectively addressed in today's accounting and disclosure rules. We also saw telecom equipment manufacturers run up billions of dollars’ worth of customer guarantees, which under current accounting and disclosure guidelines did not have to be recognized in financial accounts or disclosed to investors until their customers defaulted or were near default. In these cases, it seems clear, one of the basic tenets of accounting and disclosure rules - that there should be no “hidden” liabilities - seems to have been violated. I would like to see much more done to address these deficiencies without unduly burdening the readers of accounting statements. 4. Disclosure  Disclosure is most useful as a complement to accounting statements.