LANGUAGE

Although this study did not go into detail regarding differences in versions of the reports between the local language and the English language, it is still observed that companies would display different amounts and types of information in relation to the main reporting language in comparison to the English language. The same comprehension problem will be faced by a user who is not familiar with the main reporting language, relying on incomplete or inaccurate. Unaudited information provided in the English language.

7.4.1.2 ACCOUNTING STANDARDS

As mentioned earlier only 19 percent of the companies used IFRS and 31 percent used the U.S.GAAP or reconciled to U.S.GAAP. The rest of the companies used the local GAAP. Although most of these countries have based the local GAAP on the International Accounting Standards (IFRS) it is hard to say the level of harmonization that has been achieved therefore it is hard for the user to assume that observing accounting values based on the local/ national GAAP automatically implies uniformity with IFRS. The U.S.GAAP is far more extensive than any GAAP around the world. Thus there are no means of comparison for 50 percent of the companies in relation to uniformity of accounting standards. This would have a negative impact on understandability from the user’s point of view.

7.4.2 RELEVANCE

According to the IASB Framework, information is relevant if it influences the decision making process of users by assisting them in evaluating past, present and future events (International Accounting Standards Board 2001). Under relevance the following qualitative characteristics are classified: Materiality and Timeliness. 7.4.2.1 MATERIALITY

Material information is defined as ‘Information if omitted or miss stated could influence the economic decisions of users’ (International Accounting Standards Board 2001, p 11).

From the Internet Financial reporting point of view, it has been observed that companies in multiple instances, have omitted information that has been determined as material by the accounting standards and frameworks.

7.4.2.2 TIMELINES

Timeliness is also another aspect of relevance. ‘To be useful information must be provided to users within the time period in which it is most likely to impact on their decisions (International Accounting Standards Board 2001).

It has been found that multiple companies have relieved themselves of the

responsibility of providing financial reporting information on a timely basis via their websites.

There are contradictions relating to what regulatory bodies say companies should do in relation to providing information on their websites. For example The

Commision des -Operations de Bourse (1999) a French public independent regulatory agency recommends that:

The information provided by a company on its web site should be accurate, precise and sincere. Any links to additional sites should be easily identifiable. Disclaimers on the website of the company should be clearly identified with all contents of the website to which they hold.

If there are any errors on the website they should be quickly identified, a warning should be issued and the mistake should be rectified.

On the other hand Financial Accounting Standards Board (2000, p. 72) suggests that:

Companies should provide cautionary disclaimers accompanying everything presented on the web page including forward-looking statements and speeches, not provide links to analysts' websites, include full sets of statutory reports and notes, and avoid duty to update disclosures by putting disclaimers against updated information.

As a result, it can be deduced that presentation of accounting information on a company’s website becomes a legal issue and qualitative characteristics such as materiality and timeliness become compromised due to the presence of disclaimers, voiding the company of responsibility in relation to the contents of its website.

Table 7.30 provides the time frame of companies’ financial reports accessed in the period of June to October 2005. The major point of observation is that 46 of the companies had 2003 financial reports and 2 had pre-2003 reports. This is 54 percent

of the companies with annual/interim reporting that had 2003 or pre-2003 reports in the time period of June –October 2005.

Table 7.30 The latest period of the financial report

Frequency Percent Unknown 86 48.6 Pre-2003 2 1.1 2003 46 26.0 2004 38 21.5 Form 20- F 4 2.3 FORM 10-K 1 .6 Total 177 100.0

On a positive note, the ready availability of online reports 24 hours 7 days a week may generate better timeliness and usefulness of financial information. Speed and ease of technology adoption in various regions of the world has a major impact on accessibility to information. This is assuming that there are no technical breakdowns such as server breakdowns or high costs relating to access to the Internet.

7.4.3 RELIABILITY

According to the IASB framework, Reliability is defined as ‘information that is free from material error and bias and can be depended on by users to represent events and transactions faithfully (International Accounting Standards Board 2001).

This study has found that reliability of information cannot be guaranteed in relation to online financial reporting. This is due to 2 main factors: the absence of online audit reports for majority of companies. The second factor is the presence of disclaimers on companies’ websites releasing the company from any liability in relation to the accuracy or completeness or timeliness in relation to information

may be absent or incomplete and there may be no assertions made by third parties in relation to the accuracy and reliability of the information presented. Disclaimers made by companies would also raise questions regarding the reliability of the information. An example of a disclaimer generating this notion is provided below:

While Industrivärden uses reasonable efforts to obtain information from sources which it believes to be reliable, Industrivärden makes no representation or warranty (neither express or implied) that the information contained on its website is accurate, reliable or complete.

(Source: Indutrivarden 2005). Due to the presence of the disclaimers none of these characteristics can be guaranteed, including the qualitative characteristic of completeness. IASB states that ‘omissions make financial statements just as wrong as unreliable or irrelevant

information’ (Alferdon, Leo, Picker, Pacter & Radford 2005). Disclaimers like these weaken the assertions made by authors such as Litan and Wilson (2000) that the Internet ought to provide a more accurate picture of the organization’s current and future prospects.

7.4.4 COMPLETENESS

The observations made in relation to disclosure have emphasized the point that companies’ financial reporting is lacking in completeness in one form or another. There are variables missing from one or more of the financial reporting type groups, ranging from a few to many. This would have a negative affect on completeness and would therefore make comparability of reports harder as well.

7.4.5 COMPARABLITY

The two aspects of comparability are being able to evaluate the information over time for one company and being able to compare different companies from an industry. As mentioned in detail, companies are presenting a wide array of

information and due to gaps that exist in information available, comparability may become harder to achieve. None the less the majority of the companies did provide comparison information between time periods in relation to financial data in the annual reports, generating comparability.

7.5 CONCLUSION

A detailed outlay of the observations and findings of this research was provided in this chapter. The 26 variables were described in detail in relation to the sample companies selected and the type of information presented by companies in relation to these variables. It was observed that there is a wide array of information presented in relation to the variables, depending on not only region bot also the type of company investigated. There were examples of unique types of disclosure that was specific to a region such as the CSR disclosure in relation to human resources found in the annual reports of South African companies.

Certain important elements of financial reporting (compulsory based on regulatory requirements) were found to be lacking. For example the lack of audit reports for majority of the companies.

The countries were divided into High income, Upper middle, lower middle, low income and the ‘other’ regions categories. Disclosure scores (derived from the CIFAR checklist) were assigned to the companies based on the items found from the checklists in the financial reports/ secondary data provided. These were then

compared to the CIFAR scores and abnormalities were identified.

The chapter finished by linking in the literature and the observations made in this study with the qualitative characteristics framework identified in Chapter1. The next chapter provides a summary of the literature review, the findings made in this research and the regulatory requirements. The impact of this study on research and practice is also provided. Chapter VIII is the final chapter and it sums up various aspects and impacts of this study.