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Case Study - Infosys

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Essay title: Case Study - Infosys

# 1 Discuss the reasons why Infosys might want to disclose additional information voluntarily.

As learned in class, accounting principles and disclosure regulations differ between countries and there is often a lack of transparency, especially in merging economies. There are several reasons why Infosys might want to disclose additional information on a voluntarily base. Such information can help investors, analysts and the general public to gain a better understanding of the company’s current performance by increasing both, the quality and comparability of reports. Moreover, this information enables them to better assess Infosys’s future prospects. This becomes very important because Infosys does not just operate in the Indian market, but sells most of its goods and services abroad, especially to North America. Since Infosys is the first Indian company listed at the NASDAQ, they recognized the need of additional disclosure and better communication of information in comparison to other companies. Infosys’s disclosure of voluntarily information can promote confidence that the information provided are both, comprehensive and reliable. In addition it enables them to communicate more policy and future-oriented issues about the corporation.

Globalization of capital markets increases the pressure for greater transparency and disclosure of additional information, because of the importance and the growing need to attract and retain foreign capital. A study by Adhikari and Tondkar shows that the size of equity markets is significant in determining the level of disclosure. Since the Indian capital market is very small, Infosys needs to get capital from international capital markets, such as the U.S. In order to continue their expansion process it needs to provide additional information. However, voluntary disclosure can result in better conditions for raising capital; it would very likely have a positive impact on the stock price and the investors’ desire to invest in the company.

# 2 Explain and discuss the relevance of the information items disclosed in the intangible assets scoresheet. How would you interpret the changes from 2003 to 2004?

The intangible asset score card is produced on a voluntarily base. It provides additional information, about the company’s intangible assets, which are not accounted in the traditional financial statement. Since the company’s most valuable asset are not tangible, but intangible, the scoresheet can serve as a tool for investors in order to evaluate the market worthiness of the company. The figures in the scoresheet seem to be appropriate and reliable, even though they are subjective, since it is difficult to measure intangible assets. Nevertheless the additional information is relevant for investors and analysts.

Looking at the intangible asset score card we can see some changes between the years 2003 and 2004. In 2004, Infosys could increase its most valuable intangible asset, the client base, in comparison to 2003. However, the revenue grew with a smaller percentage

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