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Global Trends of Online Financial Reporting

Companies in developed nations, especially in the United States , have shown an increased effort in their online annual reporting in light of the recent accounting scandals and subsequent regulations such as the Sarbanes-Oxley Act (Jones, 2003) .

An IASC survey showed that 86% of the organizations across Europe, Asia, Pacific, North and South America had websites and almost 66% of them publish or did some form of financial reporting over the internet (Lymer et al 1999) .


Reporting Formats

A majority of the companies in developed nations have shown preference for using the HTML format for reporting their financial statements online. Other companies are using Adobe's PDF format to present their financial reports on the internet. (Jones 2003) .



Although the file formats identified as being commonly used by firms provide a useful platform for reporting financial data, users in developed countries are still finding it difficult to download information and mould it into different forms useful for decision making. (Australian CPA 2002) . This is especially due in part to some companies converting their financial tables and charts into image-based annual reports, where individual numbers or words within the image cannot be selected or copied, making it difficult for end users to effectively utilize the data (Jones 2003) .

Companies are also making efforts to facilitate easy access to the financial information by investors and web users. Some 67% of the companies have been observed to have a direct link from their website's homepage to an investor relations section. Another 22% have a direct link to the actual financial reports from their home pages (Business Reporting Research Project 2000) .



There are currently no accounting standards governing online financial reporting. However, some of the major accounting bodies have issued general guidelines for companies who have seen a need to publish their financial statements online. In 1999, the IASC issued a Code of Conduct for financial reporting on the internet, which was contained in a discussion paper entitled “Business Reporting on the Internet”. This Code of Conduct appears to cover both the form and content aspects of online financial reporting.

Subsequently, the staff of IFAC released a study entitled “Financial Reporting on the Internet”. It sought to outline the responsibilities of directors and managers for online financial reporting with regards to establishing a business policy for online financial reporting for their respective firms. It also mentioned other issues which should be considered by directors and management concerning financial reporting online such as content, timeliness and security.


Emerging Trends

There is currently a new format for online financial reporting under development called XBRL (eXtensible Business Reporting Language). It is a freely licensed, royalty free specification which “allows automatic exchange and reliable extraction of financial information across all software formats and technologies, including the internet” (Khan 2000) . It offers a number of advantages over prior formats used to publish financial information online. Firstly, it reduces the need to enter financial information more than once, for the purpose of reporting online. This is because XBRL can be integrated into accounting software used to initially prepare the financial statements and subsequently publish directly to the firm's website. This therefore reduces the risk of data entry error as it eliminates the need for companies to manually key information into other formats for reporting online. As a result of this, the cost of preparing and distribution financial statements will be lowered. (Khan, October 2000, Australian CPA)



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