Objectives of the Disclosure System and Financial Reporting
1. In predicting the future of the entity, information pertaining to the current
situation of the entity is essential. However, there is generally a large discrepancy
between investors and management regarding the opportunity to obtain such
information. Under these circumstances, if information is only insufficiently
disclosed, investors would not be able to take the responsibility in estimating the
value of stocks, bonds, or other securities issued by the entity and, thus, these
securities would not be issued or traded easily. The raison d’etre of the disclosure
system is to promote the disclosure of private information held by management in
order to relieve such asymmetry of information and to resolve the malfunction of the
market caused by such asymmetry.