1. 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

2. © Lymer & Associates Introduction Online reporting ‘old’ in web termsOnline reporting ‘old’ in web terms Generations of Corporate WebsitesGenerations of Corporate Websites Best practice still developing dailyBest practice still developing daily

3. © Lymer & Associates Online reporting ‘old’ in web terms 19961996 –81% of US Fortune 150 19971997 –68% Fortune 50 & 50% Top 50 UK companies distributing reports online 19981998 –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. © Lymer & Associates 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 downloads and downloads Source: IASC Discussion Paper ‘Business Reporting on the Internet’ Nov 1999

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

6. © Lymer & Associates Recent Global Activity Activity has attracted regulator/ profession interestActivity has attracted regulator/ profession interest –CICA - Oct 99 –IASC - Nov 99 –AICPA - Dec 99 –FASB, DTI and ASB - Feb 2000

7. © Lymer & Associates 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. © Lymer & Associates 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. © Lymer & Associates International Accounting Standards Committee –‘Business Reporting on the Internet’ A. Lymer, R. Debreceny, G. Gray, A. RahmanA. Lymer, R. Debreceny, G. Gray, A. Rahman –commissioned August 1998 –recommendations: ‘Code of Practice’‘Code of Practice’ Business Reporting Language via Consortia approachBusiness Reporting Language via Consortia approach

10. © Lymer & Associates 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. © Lymer & Associates AICPA Activity: XBRL –eXtended Business Reporting Language (XBRL) –Consortium approach to development includes major accounting firms and software houses (North American based)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. © Lymer & Associates FASB –Business Reporting Research Project –‘Electronic Distribution of Business Reporting Information’ - Report 1 –selected findings: democratizing of business reportingdemocratizing of business reporting the reporting model - multiple sources of informationthe reporting model - multiple sources of information lack of completeness in online reportinglack of completeness in online reporting timeliness of reportingtimeliness of reporting

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

14. © Lymer & Associates 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 etcannual reports, summary statements, notice of meetings etc –proxy appointments but NOT electronic voting (yet)

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

17. © Lymer & Associates Arthur Andersen ‘Spice it up’ –100 companies examined (random) split between top 350, next 700, next 1051 (by market capitalisation)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