Financial Reporting on the
Internet
Andrew Lymer
Lymer & Associates and
The University of Birmingham
a.lymer@accountingeducation.com
Outline
Background
Current Technologies & Trends
International activity
Best practice quick guide
Demise of annual reporting?
Conclusion
Background
Internet History - the bits that still matter
Developed in USA
No central governing body
Statistics? - big enough to matter!
Estimated 850 million indexable web pages
High penetration amongst companies
Recent global survey of large co.s - 62%
100% in Germany, Sweden, Canada and USA
Lowest - Chile at 52%
Current Technologies
The Technologies
CD-ROM - largely bypassed
Electronic Paper - e.g. Adobe Acrobat
HTML + plug-ins, multimedia, 3D
Dynamic media - database driven, Java
Push technologies
XML - the future?
Intelligent Agents ….
International Activity
Online Reporting Current ‘Hot Topic’
AICPA Jenkins Report (94), Elliott Report (96), Vision
Project, Continuous Auditing Report (99), XFRML
FASB - ‘Top 4’ strategy item
Business Reporting Research Project (99)
Faux com Inc. (98)
ICAEW & ICAS
21st Century Company Reporting (98)
Business Reporting - An Inevitable
Change? (99)
International Activity
CICA - ‘Impact of Technology on
Financial and Business Reporting’
November 1999
‘..the WWW is beginning to
challenge the very nature of
financial reporting, its
boundaries, its frameworks,
even its fundamental role in
society’
International Activity
IASC - ‘Business Reporting on the Internet’
(Nov 1999)
Purpose
to examine the nature of change occurring in
business reporting and the dissemination of
accounting and business information.
to identify the effects the change may have on
the future of accounting standard setting.
to recommend a set of measures to deal with the
varied forms of electronic business reporting.
International Activity
Examination of top 30 companies in Dow
Jones Global Index (22 countries)
16%
22%
96%
95%
52%
45%
had no website
had website but no financials
provide Income Statement
provide Balance Sheet
provide full Notes to Accounts
provide ‘Audit Report’
International Activity
IASC Report - UK v USA
USA
UK
Website
100%
90%
Financials
87%
66%
Summary
95%
93%
Primary Statements
100% 100%
Notes
84%
100%
Audit Report
89%
93%
International Activity
IASC Report Recommendations
Short Term proposal
‘Code of Conduct’
Longer Term issues
The ‘Business Reporting Language’
International Activity
IASC Report - Short Term Proposal
Example areas covered by code :
clear foundation of responsibilities
departure point from financials
indicated
comparison of paper and online
versions possible
clear labelling of GAAP used &
reconciliation between GAAPs
International Activity
Short Term Proposal continued..
data should be placed online immediately
available
information should be stable/accessible
over time
audit reports to be made available for
audited data
all supplementary data should be available
online
International Activity
Longer Term Issues
HTML is presentation language
limited usefulness
Need data description ‘language’
favoured example = XML
Allows for ‘combined reporting’ without
overload
e.g. company financials, news, share details etc
Requires co-operation to make work
International Activity
Where next?
AICPA etc proposal for XFRML?
What does it mean?
Extensible Financial Reporting
Mark up Language
What does it ACTUALLY mean?
International Activity
XFRML
‘Framework which allows companies,
accountants, investors, bankers, industry analysts,
regulators and others involved in the financial
reporting supply chain, a standard way to prepare
publish, exchange and analyze
financial reports and the information
they contain and allow financial
information prepared to be reliably
and automatically extracted or
exchanged between computer
applications’
International Activity
XFRML: text based information
At December 31:
1998
1997
Finished Goods
£1,088
£1,090
Work in process and
4,112
4,049
£5,200
£5,139
raw materials
International Activity
XFRML: XML based information
<Type>stock</type>
<Label>STOCK</label>
<table columns=“3” ID=“stock”>
<columnheaders>
<columnheader>At December 31:</columnheader>
<columnheader>1998</columnheader>
<columnheader>1997</columnheader>
</columnheaders>
<LineItem>
<Label>Finished Goods</label>
<amount period=”1998”>1088</amount>
<amount period=“1997”>1090</amount>
</LineItem>
……..
International Activity
Is the future XFRML?
Problems are BIG
role of auditor/attestation?
who sets the standards?
who monitors and enforces?
data integrity?
Current Best Practice
Microsoft -
http://www.microsoft.com/msft
Report as pdf & Financial Review
Webcasts of events such as earnings
announcements
Live stock activity link
History in excel spreadsheets & graphs
Excel PivotTables for financials analysis
Online speeches and meetings in video &
audio
Statutory filings & Press Releases
Non-financial data
Demise of the annual report?
Key issue to be addressed
what do people really want?
e.g. cost v timeliness
who is best placed to deliver it?
Demise of the annual report?
By 2005 - the ‘crystal ball’
globally focused companies the norm
interactive investor relations
online reporting normal means of
corporate communication
single GAAP as only workable solution
monthly reporting
continuous audit for all listed companies
far greater access to historical and forward
looking data for all
intelligent software for data analysis
Conclusion
Internet developing rapidly as
investor relations tool
Lots of opportunity to use
innovatively
Future solutions to overload
problems in hand
Globalisation will make online
reporting required
a.lymer@accountingeducation.com