Financial Disclosure on Corporate Website

Internet financial reporting (IFR) is a recent but fast-growing phenomena. Many companies worldwide publish their corporate financial information on the internet. Financial information provided on the web includes comprehensive sets of financial statements, including footnotes; partial sets of financial statements; and/or financial highlight that may include summary financial statements or extracts from such statements.

By placing financial information on the firm’s website, users can search, filter, retrieve, download, and even reconfigure such information at low cost in a timely fashion. But Internet Financial Reporting (IFR) is not restricted to static texts and graphs. It allows for hyperlinks, search engine, multimedia, and interactivity (Lymer, 1999). Even more use of interactivity would be a dialogue reporting by which users could specify information demands based on information they received previously.

Firms can learn from tracking users’ information requests or specific user demands, which users can pose either anonymously or by filling in some kind of access identification. Access statistics are market-driven direct measures of the importance of information, and if interpreted carefully, can guide firms and also standard-setters to react to the demand revealed by the users’ behavior. Software applications offered by a preparer on the internet could allow firms to learn assumptions investors in analyzing financial data.

The internet may also improve the availability of financial information within firms themselves. For example, many of the processes that occur in distant places can be automated and fed into a firm-wide information system. Reporting and consolidation is improved and speeded up (“fast close”). One opportunity is to increase reporting frequency from annual or quarterly to monthly, daily, or even (almost) instant financial statement. The internet is a perquisite for high-frequency reporting, as the information should be provide immediately after the announcement release and will lose value fast if delivered to users too late relative to the length of the periods it covers. A consequences of more frequent reporting could be that the users’ focus on quarterly earnings may vanish, and with it the incentives of firms to manage them. However, it would require a major change in most accounting systems because events, such as updates of market prices, estimates, judgments, would need to be entered on real-time basis as well. Of course, economic questions such as the optimal length of a reporting period emerge, but are not yet well understood (Wagenhofer, 2003).

The advantages of IFR give rise to a number of issues, which include blurring the line between audited and unaudited information, equity and efficiency of access, introduction of errors, security and integrity of the information, and other professional issue.

Internet reporting blurs the distiction between current financial information used by management and the historical (and audited) information made available to the public (Hodge, 2001). This reporting may supersede the historicaly audited information currently made available to shareholders and the company’s broader constituencies by providing financial information used by management.

In some Web sites, a downloadable data feature allows the user to copy data into the appropriate word processing application or a spreadsheet application. At least one company also provides analytical tools’ to assist its users in summarizing and analyzing the company’s historical financial data and in modeling projected earnings. Based on the comments of some companies interviewed, providing those tools helps to promote greater usage of a company’s Web site by saving re-keying time and effort for those interested in analyzing the data.