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Online Reporting: Rules, Roles and Responsibilities of Accounting on the Internet

Online Reporting: Rules, Roles and Responsibilities of Accounting on the Internet. Chairman: Andrew Lymer University of Birmingham & Lymer & Associates a.lymer@lymerassociates.co.uk. Introduction. Online reporting ‘old’ in web terms Generations of Corporate Websites

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Online Reporting: Rules, Roles and Responsibilities of Accounting on the Internet

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  1. Online Reporting:Rules, Roles and Responsibilities of Accounting on the Internet Chairman: Andrew Lymer University of Birmingham & Lymer & Associates a.lymer@lymerassociates.co.uk

  2. Introduction • Online reporting ‘old’ in web terms • Generations of Corporate Websites • Best practice still developing daily

  3. Online reporting ‘old’ in web terms • 1996 • 81% of US Fortune 150 • 1997 • 68% Fortune 50 & 50% Top 50 UK companies distributing reports online • 1998 • 72% of UK companies using for investor relations (Source: Lymer ‘The Internet and the Future of Corporate Reporting in Europe, European Accounting Review, Sept 2000)

  4. Online Reporting Activity • Situation as at Summer 99: • UK Top 30 - USA Top 30 - 1 had no website - all had website - 11 had no financials - only 3 had no financials - 11 full HTML accounts - 9 full HTML accounts and downloadsand downloads Source: IASC Discussion Paper ‘Business Reporting on the Internet’ Nov 1999

  5. Corporate Website Generations • 1st Generation • experimental e.g. copies of paper reports • ‘Jones’s’ websites • 2nd Generation • other news and background data • mechanism to deliver message to smaller investors • 3rd Generation • active role in operation of company e.g. voting at AGMs (‘Online Investor Relations’ Nordberg 1998)

  6. Recent Global Activity • Activity has attracted regulator/ profession interest • CICA - Oct 99 • IASC - Nov 99 • AICPA - Dec 99 • FASB, DTI and ASB - Feb 2000

  7. Canadian Institute of Chartered Accountants • ‘Impact of Technology of Financial and Business Reporting’ (Trites) October 1999 • ‘the WWW is challenging the very nature of financial reporting, its boundaries, its frameworks and even its fundamental role in society’

  8. Canadian Institute of Chartered Accountants • Boundaries of information • Presentation of unstructured information • User-designed reporting models • Ensuring comparability • Convergence of Management and Financial Accounting functions • Information overload

  9. International Accounting Standards Committee • ‘Business Reporting on the Internet’ • A. Lymer, R. Debreceny, G. Gray, A. Rahman • commissioned August 1998 • recommendations: • ‘Code of Practice’ • Business Reporting Language via Consortia approach

  10. IASC ‘Business Reporting Language’ • Current use of technologies limited • Potential value of Internet much greater • Encompass wider reporting remit • Automation is key - use of XML? • Standard reporting language needed • Can not develop standards in isolation

  11. AICPA Activity: XBRL • eXtended Business Reporting Language (XBRL) • Consortium approach to development • includes major accounting firms and software houses (North American based) • ‘Standards based method for preparing financial data that supports exchange and analysis of information’ • see www.xbrl.org

  12. FASB • Business Reporting Research Project • ‘Electronic Distribution of Business Reporting Information’ - Report 1 • selected findings: • democratizing of business reporting • the reporting model - multiple sources of information • lack of completeness in online reporting • timeliness of reporting

  13. Department of Trade and Industry • Review of UK Company Law • ‘Electronic Communications for Companies’ - consultation document • draft Order under EC Bill following 1999 consultation • company communications with members and Companies House • covers Internet and other electronic methods (e.g. fax)

  14. Department of Trade and Industry • incorporation/re-registrations • statutory declarations replaced by statements that can be electronic • common members communications can be done electronically • annual reports, summary statements, notice of meetings etc • proxy appointments but NOT electronic voting (yet)

  15. Accounting Standards Board • Recognises the increasing role of the Internet • ‘..companies should be encouraged to place their preliminary announcements (and other information given to analysts) on their Websites’ • ‘..case for developing standards for business reporting on the Internet’ ‘Year-end Financial Reports: Improving Communications’

  16. Arthur Andersen ‘Spice it up’ • Most recent report in UK - ‘Spice up the story’ • Survey of narrative reporting in annual reports • i.e. info in reports except financials • one of objectives = Internet use • comparison with 1996 survey

  17. Arthur Andersen ‘Spice it up’ • 100 companies examined (random) • split between top 350, next 700, next 1051 (by market capitalisation) • Findings Have website Financials Top 350 94% 88% 351-1050 82% 58% 1051+ 52% 21%

  18. a.lymer@lymerassociates.co.uk

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