The Capital Market Authority requires companies to disclose shareholder profits

The Saudi Capital Market Authority (CMA) has issued new binding directives aimed at enhancing transparency in the financial market. The CMA has mandated that listed companies amend their financial results disclosure forms. Under the new regulations, which will take effect with the next financial results announcement via the Saudi Stock Exchange (Tadawul), companies must disclose, explicitly and separately, both net profit (or loss) and total comprehensive income attributable to shareholders, after deducting minority interests (if any).

Enhancing transparency and protecting investors

The authority explained in its statement that this step comes as part of its ongoing efforts to develop financial disclosure mechanisms, ensuring a more accurate reading of financial data by investors and financial analysts. The decision primarily aims to protect shareholders' rights by clarifying the actual profits available to shareholders of the parent company and separating them from profits attributable to non-controlling interests (minority interests) in subsidiaries, thus preventing any confusion that might arise when interpreting aggregate figures.

The context of financial development in the Kingdom

This decision comes as part of a series of regulatory reforms led by the Capital Market Authority (CMA) to align with global best practices in financial markets. The CMA is working diligently to harmonize Saudi market standards with International Financial Reporting Standards (IFRS) to enhance market efficiency and attractiveness. Accurate financial data is a cornerstone of building trust between listed companies and the investment community, particularly given the rapid growth of the Saudi economy.

Economic importance and expected impact

This amendment is of paramount importance to financial analysts and investment fund managers, as company valuations and price-to-earnings (P/E) ratio calculations rely more accurately on net profit attributable to shareholders, not gross profit before minority interests. This measure is expected to contribute to:

• Improving the accuracy of valuations: Helping investors make decisions based on numbers that accurately reflect the financial reality of their stakes.
• Attracting foreign investment: Raising the level of governance and transparency enhances the position of the Saudi market (Tadawul) as a reliable investment destination for international financial institutions.
• Risk reduction: Limiting variance in the interpretation of financial statements and reducing the chances of unintentional misinterpretation of results.

This approach is consistent with the objectives of the Financial Sector Development Program, one of the Kingdom’s Vision 2030 programs, which aims to develop an advanced financial market that contributes to financing the economy and provides safe and viable investment channels.