Internet_Financial_Reporting

INTERNET FINANCIAL REPORTING (DR. MOHAMMAD GABER GHANEM) I. Definition of internet: The internet is a global system of interconnected computer networks that use the standard protocol suite to serve billions of users worldwide. It is a network of networks that consists of millions of private, public, academic, business and government networks of local to global scope, that are linked by a broad array of electronic and optical networking technologies. The development of internet increased the possibilities to manage business information, not only for internal purposes of companies , but also for external ones , and offered new ways of making commerce , publicity , as well as facilitating the communication with different parties (financial users or decision makers, customers, investors…) , so the internet served as an information super highway , it had been used for marketing applications in which firms market their status , positions to decision makers. Nowadays, with the rapid increase of internet usage, it has shown that many companies are attending to use this new technology to communicate with investors, creditors and even people who do analyze and criticize company’s financial reports. . The growth in the number of internet users over the years had a major impact on legal, financial and accounting frameworks and systems. II. Internet usages by companies increased in the past years and this can be attributed to several factors: 1- The globalization process, by which companies tend to obtain funds worldwide without limiting its operations to domestic markets. 2- The tendency to increase the control of companies by stakeholders (any group within or outside the organization that has a stake with the organization performance). 3- Environmental uncertainty that is increasing, in which decision makers have some degree of insufficient information about environmental factors and some intangible assets like Intellectual Capital. III. Traditional System vs. the New Technology Before engaging in financial reporting on the net we must pay attention and highlight on the traditional way of reporting to understand the difference between these two methods. Traditionally, financial reporting by corporations was in print format and annual reports were mailed to users of financial statements. Financial information was also released to media by way of press release. Before the availability of financial reporting on the net, users of financial statements depended on the hard copies (print) of annual report to reach them. Not everyone had the ability to reach and obtain financial info so they relied on analysts and libraries for getting information. Internet financial reporting refers to the use of the firm’s websites to disseminate or provide information about the financial performance of corporations, in this approach, firms are using the internet to market their companies to decision makers. the use of the internet by companies for the purpose of reporting manage from the unsophisticated use of internet technology , where the printed financial statements are duplicated in electronic format to a more innovative approach , where shareholders are addressed in audio formats , real time monthly sales figures and annual general meetings are planned on companies websites. IV. Precautions to consider: 1- What to report' 2- When to report' 3- How to report' 4- Who is responsible for the reporting' 1-what to report' In this approach we have to consider both coverage and depth of internet financial reporting. a- Coverage : What type of information should the firm reports online' 1- Annual reports 2- Interim reports 3- Annual and interim reports - And we must discuss to which extent these types of financial information are adequate and sufficient for the variety of users. Annual report: An annual publication that corporations provide to shareholders to describe operations and financial conditions. It is a comprehensive report on a company’s activities throughout the preceding year. Annual reports are intended to give shareholders and other interested people information about the company’s activities and financial performance. Most jurisdictions require companies to prepare and disclose annual reports, and many require the annual report to be field at the company’s registry. Companies listed on stock exchange are also required to report at more frequent intervals (depending upon the rules of the stock exchange involved). Typically annual reports will include: * Chairperson’s report * CEO’s report * Auditor’s report on corporate governance * Mission statement * Statement of directors’ responsibilities * Financial statements including: * Auditor’s report on the Financial statements * Balance Sheet * Statement of RE * Income Statement * Cash flow statement * Notes to the Financial statements * Accounting policies Interim report: A report prepared by a unit that describes changes and improvements in, and evaluations of, the unit's programs since the previous program review. The interim report submitted one year before the unit's continuing accreditation visit, is reviewed by the SPA to continue program approval. b- The depth: The relative sophistication of users must be considered in reporting financial information, and we must decide whether to report subjectively or objectively. 2- When to report' The type of financial information reported governs the frequency and time of reporting for example: * Should the interim results be reported on a quarterly or biannual basis' * Should the annual report including auditor report be provided immediately online after the completion of the annual audit exercise' * Organization must know whether the annual report be provided online immediately after the completion of the annual audit exercise. * How long should the firm’s performance data be posted on the website after the data have been released by the press 3- How to report' * The information must be reported in such a way that customers find it most convenient and understandable. * Financial information must be placed in the appropriate section of the firms’ website. * Users must be able to download online data in a format that facilitate analysis. * The arrangement of online financial information is a key element in facilitating the access of users to avoid unnecessary scroll and fourth through large volume of data. * The path from the home page of the website to the place where financial reports are found must be short and not sophisticated. * The company must choose a format that best suites its users. * Companies must make sure that their websites are interconnected via hyperlinks so as to facilitate its users surfing over the internet. 4- Who is / are responsible for reporting' The accuracy of the reported financial information depends on the people or business units involved in the internet financial reporting process. * Deciding who is / are responsible for determining which financial information to be posted online. * Deciding who is/ are responsible for posting financial information. * Deciding who is / are responsible for verifying and approving the online financial information. V. Distinction between audited and unaudited information: Various types of financial information can be found on websites, including information that has been audited (for example annual Financial Statements), information that may have been reviewed by auditors, and information with which the auditors have had no direct involvement, such as financial highlights. In a paper copy of a company’s annual report it is relatively easy (simply by referring to the relevant pages) to identify information that has been subjected to audit and is therefore covered by auditors’ report. When this same information is placed on a website, pages tend not to be numbered and visitors to the site can move from page to page without knowing the status of the information on each individual page. Different techniques are used to distinguish audited financial information and information in the annual report read by the auditor, from other financial and nonfinancial information on websites. Icons or watermarks, color borders and labels or banners are used in addition to warning pages that appears every time a visitor enters or leaves parts of the website. It is quite possible for companies to place unaudited information, believed by users to have been audited, on their websites. This transition can easily be transparent to the user when a HYPERLINK exists between audited and unaudited financial information. HYPERLINK is a connection that allows you to move easily between two computer documents or two pages on the internet. If you have used the internet before, you might remember those colored underlined links like this that you can click on to go to somewhere else on the web. VI. Advantages of Internet Financial Reporting: 1- It offers a low cost solution for both users and companies. 2- It saves time by providing instant access to data. 3- It offers a dynamic way for updating information, information can be updated (changed, corrected easily). It is easy for a company possessing its own website to include any kind of financial information and to update it when necessary, with no additional cost for the company and no cost for the users. It is obvious also, that companies can distribute their financial reports as soon as possible as they have it. Cost (no or low cost) and timeliness are two important factors contributing to the increase of accounting information value. Also to add that the cost of reporting financial information on the net by companies is very low and independent of users’ number. Simply by accessing the company website, decision maker will be informed about the status and the performance of the company. Distributing financial reports on the net at time, quickly and without delay (printing, editing, faxing, and mailing reports) will attract more users. So the lower the cost and availability of more timely and relevant information should help in increasing the efficiency of companies, as well as capital markets (as the FASB sustains). 4- Communicating with potential users of internet and improving their access to greater volume of data. The number of investors investing in stock exchanges has been increasing during the last years. Those investors are building their decisions based on accounting information and they are potential users of internet. As long as companies want to contact with them, it seems logically to include financial information in their websites to attract them. 5- The elimination of national borders, information can be accessed by everyone and the reach is international. 6- Supplementing traditional disclosure practices. Financial information, and due to the regular maintenance of websites, can be kept up-to-date whereas paper reports have a very short shelf-life. 7- The desire to provide more information to third parties is one of the reasons by which companies disclose its financial information through the web, so to communicate with investors, customers, and other stakeholders. VII. Disadvantages of Financial Reporting on the Net: The main concern with financial reporting on the net is the fact that information on the website is available to anyone, at any time, in any place. Despite the causes or advantages provided; financial reporting on the web creates various challenged for companies and their auditors as well as for regulatory and standard-setting organizations: 1- The risk of increasing legal demands against the company may still take place. * Forward looking statements or the inclusion of analyst’s comments (especially the favorable ones); sometimes confuse users so they could take legal actions if they have losses as a consequence of the information disclosed by the company. * Another causes for legal risks as mentioned by FASB are : a- The inclusion of incomplete financial statements. b- The inclusion of auditing report with non complete financial statements. c- The exclusion of the auditing report in some circumstances. d- Sometimes, the existence of more information about the company might imply an excess of information that could hinder the user capacity to process and use it and this will lead to additional losses. 2- With the rapid use of internet for reporting the company’s financial statements, companies often tend to publish different kinds of reports over their websites. Usually management has much more information available to itself than of those published for outside users, such as: investors, stake holders, therefore, investors could end up interpreting information that is not audited and for that wrong decisions could be taken. 3- Downloading annual reports: Many companies tend to have summary disclosures on their websites and they do include a downloadable version in an Adobe Acrobat Document File. When it comes to download such files, it requires users to have the Adobe Acrobat reader which is a program that support such files. Moreover, users who have slow internet connections may face difficulties in downloading such files. Thus, the full disclosure principle cannot take place because of these obstacles. 4- Security: usually companies give their websites maintenance to a third party. This action must keep in mind the issue of risk, security and efficient administrating. In the absence of security measures the information are open hacked by someone internally or externally , thus the management are responsible for implementing a control procedure, for that , most of the companies decide not to public financial information statements over the internet because of such issues as hacking. VIII. Cost & Benefit relationships: Although internet financial reporting is considered an innovative approach that helps companies in reporting their f.st online instead of printing them on papers, still each firm must take into consideration the cost of innovative approach. In order to repot Financial Statements online, each firm must have a website that is considered an intermediary between its firms & its auditors. It isn’t easy for a company to establish a website because of several reasons. First, the firm must have an appropriate financial ability to finance such a project. second, after establishing the website the firm must make sure to update the features of the websites in a regular basis so as to attract the stake holders and break the routine, and this is a costly action especially if the website contains several pages that have to be updated .for example Google always updates its features according to the occasions. Third, the firm must ensure to have a capacity that can serve the large number of users. On the other hand, this approach is most important for the mgr whose ultimate aim is to satisfy the stake holder. At the beginning of each year, the board of directors meet together to discuss the issue of electing new manager, or keeping the previous one in his place. For that, managers have to keep a good relationship with their stockholders (owners). When applying this new approach the mgr will ensure to keep his position or to enhance it. IX. FORMATS: 1- PDF FILE FORMAT 2- HTML 3- XBRL 1- PDF FILE FORMAT: Companies frequently include downloadable versions of their annual reports in an Adobe Acrobat Portable document format PDF file. The PDF format files advantages: . It is popular and can be created easily from original document from original documents (the printed documents). . It provides an exact duplicate of the printed annual report when downloaded and printed. . The cost of producing PDF files by companies is very low. . It is a very safe method; it is difficult to alter these documents. . It can be viewed directly in the browser. Disadvantages of PDF format: The users have to install the adopt acrobat reader (a program that supports PDF files), on his / her computer so he can read or print a PDF file which is not always available. The size of PDF files is huge and lengthy and this will discourage users with dial up modems from downloading the complete files; they will download part of it , and thus they will possess incomplete information , and will draw incorrect conclusions. The power of hypertext navigation is not a characteristic of PDF files which is considered a disadvantage as defined by Blond ell (2000: 26). Information has to be rekeyed in order to be used and data cannot be simply transferred from these files. 2- HTML: Hyper Text Markup Language The HTML technique uses concepts which support on-screen navigation through links between pages (pages are linked together so we can easily navigate from one to another). Companies are benefiting from HTML technique in their annual reports by linking specific elements in the financial statements with their applicable notes (cash and its derivatives). Despites the large volume of information provided by HTML technique, users are sometimes confused about the boundaries and scope of the company’s annual reports , and the associated auditor’s report , for that the desired or the target information may not be always attained by the users . HTML documents are not suitable for printing because pages are in state of on tidiness (are not ordered in a good manner), users must go from page to page to print; and since only text files can be saved; the saving of graphics cannot take place. Another disadvantage of html documents is that: they are relatively easy to change and therefore it can be sabotaged. 3- XBRL: EXTENSIBLE BUSINESS REPORTING LANGUAGE An important problem arises by using HTML and PDF by companies that is the difficulty of importing numbers ant information of financial statements directly into any spread sheet program for analysis, examination or calculation . Thus corporations needed to file their financial reports to various agencies and organizations in various formats that are not compatible with HTML or PDF files. The XBRL format which is freely licensed creates a solution for this problem by making financial statements easily prepared and permits the automatic exchange and reliable extraction of financial information across all software formats and technologies. XBRL ultimately benefits all users of the financial information supply chain: public and private companies, capital markets and lenders, as well as key third parties such as software developers and data aggregators. Moreover, it doesn’t require a change of existing accounting standards like in case of PDF or HTML; improves actions to financial information; reduces the need to enter the financial information more than once; reduces the risk of data entry errors; eliminates the need to manually key in information for various formats and enhances efficiencies of the internet by making web browser searches more accurate and relevant. Once added to the software, it will automatically and transparently translate all the business information chosen such as numbers and words so each segment of data is identified when viewed by a web browser or sent to a spreadsheet application for calculation or examination. Example: if a particular asset value has to be sent on the internet, programming was required to recognize the figure as asset value. XBRL delivers the figure along with the tags, which are identified in as asset value, along with mentioning its currency and also the period in which it pertains. The capabilities of XBRL are not limited to financial information alone. It can tag any kind of information which may be industry specific or company specific. A brief list of agencies that are accepting XBRL Format: -In the Netherlands, all government agencies from the justice department to bank regulator to tax collector. -Toronto stocks exchange publishes its financial statements in XBRL since 2003.Australia prudential regulations authority has been collecting regulatory data in XBRL for years. -Japan launched an XBRL based corporate tax filing system. -China security regulatory commission has mandated XBRL filling for the country’s largest stock exchange. -Denmark has been accepting XBRL fillings for company registration. -Spain central bank is leading several XBRL based data collection efforts, including information on annual real property valuation. -European Union banking regulators are building a taxonomy that all EU banks will use. -Us federal financial institutions, us securities and exchange commission and NASDAQ also have XBRL projects rolled out. First Case: Financial Information Reporting In Spain Although the internet usage in Spain is growing rapidly, still the percentage of users is too low, since Spanish users do not represent a significant portion of users worldwide. It represents 0.5% to 1% of the worldwide users (between 1996 and 1997). Different investigations have been conducted about the access of internet through the Spanish population. One of these studies is represented in the following table. Number( % of population who) | Feb/March 1996 | Feb/March 1997 | Feb/March 1998 | Growth in numbers between Feb/March 1997 and Feb/March 1998 | Are computer users | 6208(18.4%) | 7215(21.2%) | 7992(23.4%) | +10.8% | Are regular computer users | 4179(12.4%) | 4947(14.6%) | 5559(16.3%) | +12.4% | Have internet access | 487(1.4%) | 1073(3.2%) | 1850(5.4%) | +72.4% | Have used internet during the last month | 242(0.7%) | 765(2.3%) | 1362(4%) | +78.0% | Source: AIMAC 1998(Spanish Association for Research into Communication Media) After analyzing the previous table, we have concluded that: * The of computer users between 1996 and 1998 is at an increasing status (18.4% in1996 to 23.4% in 1998). * The percentage of regular users (that use internet on a daily basis) increased from 12.4% in 1996 to 16.3% in 1998. * This table shows that in 1996, the percentage of users who access internet is 1.4% which is a low percentage. Although there occurred an increase between 1996 and 1998, still the percentage of users who accessed internet is too low compared to other countries. However, there is evidence that contradicts the results, that is a study conducted by GOWTHORPE and FLYNN (1998) about the internet as a communication between Business and interested parties. It shows that 16 out of 50 large quoted companies in Spain had websites. Those established websites by mid of 1997, focused on promoting the companies’ products, although some features begin to emerge on these websites: Electronic Banking facilities, Publication of annual financial reports, Electronic Banking Facilities…. Internet as a medium of communicating Financial Information Communicating with stakeholders and exchanging information with them posed a great issue on companies, which defines the concept of corporate dialogue: to keep stakeholders informed about the financial position and status of the firm by allowing immediate access to a broad range of internally generated corporate information. The next part of the paper discusses how quoted companies in Spain is improving the way by which it communicates with stakeholders by focusing on up to date reporting on the net. The survey was conducted on companies listed on the Madrid stock exchange, a total of 379 companies of different sectors, to determine the frequency of companies with websites. Sector | Totalnumber ofcompanies | Companies insector withwebsites | Percentage ofcompanies insector withwebsites | Banks | 23 | 12 | 52 | Cement and construction materials | 11 | 2 | 18 | Services | 7 | 5 | 71 | SIMCAVa | 58 | 0 | 0 | Conglomerates | 17 | 2 | 12 | Basic metals | 6 | 1 | 17 | Trading | 7 | 4 | 57 | Real estate | 22 | 4 | 18 | Agriculture, livestock, poultry and fish | 3 | 0 | 0 | Construction | 10 | 1 | 10 | SIMb | 104 | 0 | 0 | Food, drink and tobacco | 19 | 7 | 37 | Other manufacturing | 10 | 1 | 10 | Machinery | 15 | 4 | 27 | Parking and motorways | 6 | 1 | 17 | Insurance companies | 5 | 4 | 80 | Holding companies | 10 | 1 | 10 | Electricity and gas | 12 | 10 | 83 | Automobiles | 3 | 2 | 67 | Chemicals | 8 | 2 | 25 | Paper and wood | 11 | 2 | 18 | Oil | 2 | 1 | 50 | Metal product processing | 2 | 1 | 50 | Transport | 3 | 1 | 33 | Water | 1 | 1 | 100 | Mining and extractions | 3 | 0 | 0 | Communications | 1 | 1 | 100 | Total | 379 | 70 | 18.5 | Notes: a SIMCAV: a company quoted on a stock exchange which invests in the shares of other listed Companies, and which has a variable capital, fluctuating as investors enter or leave the company. b SIM: a company quoted on a stock exchange which invests in the shares of other listed companies but whose capital is fixed (unless a formal resolution is passed). Out of the 379 companies, only 70 that is a percentage of 18.5 %( which is very low) are having websites. Larger companies are far more likely to have a website ex: services (5 of 7 companies), Insurance companies (4 of 5 companies), Electricity and Gas (10 of 12 companies). Among the 70 companies with websites, 9 companies had their websites under construction. 27 companies communicated no financial accounting information. The type of communication presented by the remaining 34 companies is indicated in the following table. ------------------------------------------------- Some communication of information 15 Communication of substantial amounts of information 19 Total 34 Communication of: Up-to-date quarterly information 12 Annual accounts via PDF files 11 Annual accounts (not via PDF files) 4 Both up-to-date quarterly information and annual accounts 8 Current share price 1 The table consists of two parts, the first part presents a subjective judgment, the second part relates to particular types of information. We can see that few companies use up-to-date quarterly information to communicate with stakeholders (12 of 34 companies).8 companies communicate using both up-to-date quarterly information and annual accounts, 5 of them are from Electricity and Gas companies. The current share price which is related to shareholders is absent from Spanish sites. Websites of companies in the Banking sector are especially product oriented, containing details about the range of accounts and other financial service on offer. Conclusion: Although the level of disclosure of financial information through the internet by Spanish companies is still low, it is increasing gradually over time. Larger companies in Spain are using the internet to communicate with stakeholders more than medium or small sized companies. The Electricity and Gas industry and the Banking sectors have been the first to use and explore the internet for communication. Thus the new technology is changing the habits of corporate managers in their relations with investors, by providing an innovative way of disclosing both financial and nonfinancial information. Hard- copies are replaced by well designed websites in which there is a link between information so attract more investors and to enhance corporate dialogue. Second Case: AIMR vs. TECH. FIRMS We will begin our case by highlighting of examining 2 types of companies: First we examined companies followed by the AIMR which is the abbreviation of association for investment, management and research and which consists of 259companies representing 15 industries such as Airlines, Electrical equipment, health care, Natural gas… The AIMR sample is characterized by companies that are consistently large. The second type studied is an addition of companies from Biotechnology and computer technology that are not covered by AIMR. So the total is this sample is 490 companies. By doing this, we are providing a wider variation of companies size and development stage. .The first table shows the distribution of firms across industries and provides us with percentages of industries with websites. .Industries are listed in descending order of the percentage with websites. INDUSTRY | TOTAL FIRMS | FIRMS WITH WEBSITES | PERCENT WITH SITES | *AIMR Firms | | | | Airlines | 11 | 11 | 100 | Electrical Equipment | 12 | 12 | 100 | Health Care/Pharmaceutical | 17 | 17 | 100 | Natural Gas | 12 | 12 | 100 | Media | 18 | 17 | 94 | Automotive | 14 | 13 | 93 | Petroleum | 20 | 18 | 90 | Retail Trade | 26 | 22 | 85 | Food ,Beverage ,Tobacco | 31 | 26 | 84 | Paper and forest products | 27 | 22 | 79 | Insurance | 28 | 22 | 79 | Home Building | 11 | 8 | 73 | Mining | 12 | 8 | 67 | Environmental control | 12 | 6 | 50 | AIMR subtotal | 259 | 220 | 85 | *Technology firms | | | | Computer technology | 112 | 102 | 92 | Biotechnology | 119 | 80 | 67 | Technology subtotal | 231 | 182 | 79 | TOTAL | 490 | 402 | 82 | * Among the 490companies, the websites are found for 402 which is a good percentage of 82% which reflects that a significant number of companies are having websites. * Among all industries of AIMR, only four have a 100% representation on their websites: Airlines, Electrical Equipment, Health care, natural gas industries. * Environmental control Industry: the lowest % of the sites. * Also the AIMR firms have higher % of websites than high technology firms SO these percentages are consistent with NIRI surveys. * NIRI: National Investor Relations Institute NIRI Founded in 1969. NIRI is the professional association of corporate officers and investors relation consultants responsible for communicating among corporate management, shareholders, securities analysts… It is the largest professional investor relations association in the world. After discussing the percentages of firms possessing websites, the next step is to focus on the financial information presented at these websites by inspecting both accounting and non accounting based financial items.(These websites were visited by authors and research assistants between February and may 1998). Non accounting data were included so to permit a comparison with accounting data. Short definition or focus on both accounting and non accounting information: * Annual report: an annual publication that corporation provide to shareholders to describe operations and financial conditions. Consists of 2parts:-front part: combination of photos, graphics accompanying narrative over the past year.-back part: contains detailed financial and operational information. Annual report contains: Financial highlights, financial statement, auditors’ reports, corporate information, notes to financial statements. * Annual excerpt: portions of annual reports (only counted if no full A/R) * SEC Fillings: SEC reports :10-K,10-Q,Proxy ,etc 10-K: A DOCUMENT filed with the SEC which contains a detailed explanation of a business reported annually, Contains same financial statements, The annual report does in a more detailed form, Allows us to find additional information such as: Amount of stock options awarded to executives at the company. 10-q: similar to 10-K, but it is filed quarterly (4times per year). * Quarterly report: abbreviated financial statements and discussions. * Recent: accounting information(monthly sales) * Edgar links: link to the SEC Edgar sites : Edgar: electronic data gathering, analysis and retrieval system, Performs automated collection, validation, indexing, acceptance and forwarding of submissions by companies and other who are required by law to file forms with the US SEC. Its first purpose is to increase the efficiency and fairness of the securities market for the benefit of investors, corporations and the economy by accelerating the receipt, acceptance, dissemination and analysis of time sensitive corporate information field with the agency. 2. Other financial information: * Advantages: discussion of advantages of holding stock * Analyst: list of link to analysts following the companies. * Calendar: planned financial events: earnings release dates. * Current price: stock price update (at least) daily * DRIP: dividend reinvestment plan information * Historic price: part share price(s) * News: financial news: share repurchase, earnings release * Stock link: link to third party stock data * Overview: highlights , graphs, charts, frequently asked questions * Speeches: transcripts or audio of IR or other officer speeches * Transfer agent: information about transfer agent: address, phone, link TABLE: FREQUENCY OF DISCLOSURE ITEMS *Percentage of sites at which item is found RANK | ITEM | AIMR firms | TECHNOLOGY firms | ALL firms | Accounting data | | | | | 1 | Quarterly reports | 58 | 51 | 54 | 2 | Edgar link | 49 | 51 | 50 | 3 | Annual reports | 55 | 32 | 45 | 4 | Other SEC filings | 19 | 17 | 18 | 5 | AIR excerpts | 19 | 15 | 17 | 6 | Recent accounting data | 5 | 1 | 3 | | ANNUAL reports and Excerpts combined | 75 | 47 | 62 | OTHER FINANCIAL DATA | | | | | 1 | Financial news | 82 | 77 | 80 | 2 | Stock link | 49 | 68 | 57 | 3 | Overview | 50 | 38 | 45 | 4 | Transfer agent | 55 | 26 | 42 | 5 | DRIP | 36 | 3 | 21 | 6 | Historic price | 27 | 14 | 21 | 7 | Analyst information | 10 | 21 | 15 | 8 | Current price | 21 | 7 | 15 | 9 | Advantage | 20 | 5 | 14 | 10 | Calendar | 16 | 7 | 12 | 11 | Speech | 13 | 4 | 9 | * Most common accounting items: quarterly reports with an average of 54% * Followed by Edgar links (50%) * Complete annual reports (45%) of the sites * Excerpts from annual reports 17% * SEC Filings are at 18% of the sites * Recent accounting data are the least presented data items with 3% * Accounting information are distributed fairly and evenly between both AIMR and technology firms. The difference is visible in case of annual reports (55% to AIMR VS 32% to technology) and in case of recent accounting data (5% vs. 1%) * Financial news (non accounting) most common of all items (80%) * Links to stock data (57%) * Speeches in the least (9%) * Technology firms are more likely to include stock links and analyst information than AIMR; All other items are found at AIMR at a higher percentage than technology firms except for financial news which is similar WEBSITES CONTENT ISSUES Among the 402 sites, a subset of 67 sites were taken, study on annual reports components was conducted. The study was on accounting information however a problem arised which is the exclusion omission of portions from annual reports. *PERCENTAGE OF SITES AT WHICH ITEM IS FOUND | HIGH TECNOLOGY | AIMR | ALL | INCOME STATEMENT | 70,4 | 72,5 | 71,6 | BALANCE SHEET | 70,4 | 60 | 64,2 | MANAGEMENT DISCUSSION | 48,1 | 55 | 52,2 | CASH FLOW STATEMENT | 14,8 | 47,5 | 34,3 | SHAREHOLDER’S EQUITY | 14,8 | 35 | 26,9 | FOOTNOTES | 22,2 | 20 | 20,9 | AUDITOR’S REPORT | 3,7 | 0 | 1,5 | * Income statement and balance sheet are presented at high percentage 71,6% to I.S and 64,2% to B.S * Cash flow statement and OE are presented at fewer than half of the sites * Footnotes are presented at lower percentages of an average of 20,9% * Auditors report are rarely presented with 1.5% CONCLUSION This poses a problem of omitting information, income statement and balance sheet are presented but management discussion of future risks and expected challenges and actions to be taken may be omitted. Footnotes are omitted and audited reports. Conclusion: This paper attempts to discuss the potential for the World-Wide Web as a delivery, communication mechanism in corporate reporting. There has been significant debate over the last 50 years as to how best to deal with the issue of corporate reporting to related parties. The current systems in place in many countries operates on a value-based strategy with varying levels of national and international regulations to structure the way in which this reporting is undertaken. Moreover, this paper shows the pros and cons of the internet financial reporting for firms and investors, as well as it did highlighted on an important issue regarding the corporate and manger relationship. It also, presents two cases that address the issue internet financial reporting. Regarding our own opinion, the internet financial reporting do facilitate the communication between the company and its stake holders by providing an innovative approach that is said to be better than the traditional one which is paper based annual reports. Outline: I. Definition of Internet and its Penetration into Business II. Factors attributing to internet usage by companies III. Traditional system vs. The new technology IV. Precautions to consider: 1- What to report' 2- When to report' 3- How to report' 4- Who is responsible for reporting' V. Distinction between audited and unaudited information VI. Advantages of IFR VII. Disadvantages of IFR VIII. Cost and Benefits of IFR IX. Formats 1- PDF 2- HTML 3- XBRL X- Two cases for Analysis References: http://www.isaca.org/Journal/Past-Issues/2003/Volume-1/Documents/jpdf031-InternetFinancialReporting.pdf http://fabweb.cityu.edu.hk/ac4161/courses/AC4161/Class%20Notes/Finally,%20Business%20Talks%20the%20Same%20Language.pdf http://www.msit.tafe.qld.gov.au/services_and_facilities/library/workshop/glossary.html http://www.meditari.org.za/docs/2004VOL1/1_20.pdf M. Ettredge et al. / International Journal of Accounting Information Systems 2 (2001) 149–168 The European Accounting Review 1999, 8:2, 365–371 Journal of a accounting August 2000 The Chartered Accountant January 2006