Financial Reporting on the Internet: Evidence from the Fortune 100

The Internet has become one of investors' most frequently used sources of information, and many companies are now reporting all or part of their financial information on their websites. This study evaluates the websites of the 2003, 2006, and 2009 Fortune 100 U.S. corporations to report on the status of financial reporting on the Internet over time. We reviewed these websites during April to June 2003, 2006, and 2009 to determine how many of the companies are reporting various relevant attributes. We divided the attributes of interest into two groups: 1. Attributes that relate to the general information portion of the website and 2. Annual report attributes that relate to investor relations and financial reporting. The study concludes with recommendations for successful reporting on the internet. According to Pontus Hedlin, there are three stages of development in using the internet as a vehicle for investor relations information: 1. Establishing a Web presence, 2. Using the internet to communicate investor information, and 3. Taking advantage of the unique features and possibilities of the medium. Hedlin surveyed the websites of 60 companies listed on the Stockholm Stock Exchange in September 1998 and concluded that these companies are "presently in the second stage, with only a few companies starting to explore the richer potential the internet offers for the investor relations. " (1) Literature Review In February 1998, the Financial Accounting Standards Board (FASB) undertook a research project to consider the types of information that should be provided to investors. one aspect of the project was to study the "present systems for delivery of information electronically and considering the implications for business reporting. " According to Wayne Upton, FASB senior project manager, "There's no doubt that the Internet has changed the delivery of financial information. if you need a company's annual report on a Sunday night, you can probably get it from the company's webpage. Failing that, there is always the SEC's EDGAR database. " (2) Most companies place their annual reports on the internet, but, unfortunately, most of those simply reproduce their hard-copy annual reports. Without doubt, internet reporting is a very powerful and useful tool for reporting financial information. The use of hyperlinks improves the readability and usefulness of the presentation. A reader could be looking at the balance sheet and want to know more about inventory. All the reader has to do is to click on inventory, and he or she can access notes accompanying the financial statements that pertain to inventory. The question then is, "What should be included on the website? " In its report, "Improving Business Reporting--A Customer Focus," the Special Committee on Financial Reporting of the American Institute of Certified Public Accountants (AICPA) identified 10 elements of a comprehensive reporting package. (3) These elements are: 1. Financial statements and related disclosures; 2. High-level operating data and performance measurements management uses to manage its businesses; 3. Reasons for changes in the financial, operating, and performance-related data and the identity and past effect of key trends; 4. A description of opportunities and risks, including those resulting from key trends; 5. Management's plans, including critical success factors; 6. Comparison of actual business performance to previously disclosed opportunities, risks, and management's plans; 7. Information about directors, management, compensation, major shareholders, transactions, and relationships among related parties; 8. Broad objectives and strategies of the company; 9. Scope and description of the business and properties; and 10. Impact of industry structure on the company. …