Internet Financial Reporting Analysis


The 21st century is characterized with increased technology and in particular in the information technology. There has been noted a great advancement in information technology that has enabled promoted the performances of many organizations greatly by facilitating online shopping and Internet Financial Reporting. Online selling is the process where firms advertises and sells their products and services through the internet. On the other hand Internet Financial Reporting is the process by which companies uses the Internet to enhance financial services of their products and services. In IFR companies launch their financial information through of their enterprises. Through this method these companies enhances their companies thus receiving new investors and shareholders.

The IFR contains firms’ information that ranges from yearly, quarterly reports, reserve price data, press releases, analyst reports, and management discussions of operations. These information is relayed to the targeted groups in form of hyperlinks, audio files, video, processable file formats, and active graphics. Thus giving the investors a choice to select their best selection concerning the Internet financial reports to view and the design in which to view them. Most firms used hyperlinks to present their financial reports to their current and new investors. Through this reports the existing investors can learn the financial status of their partner companies while the new investors scrutinizes these financial reports to help them to decide whether to join these firms or not. The hyperlinks are usually associated with unfavorable cognitive effects on new users that are not conversant with the IFR system. This is because requires the new users to undertake numerous tasks at the same time when using the hyperlinks to surf the financial status of the companies that are IFR compliant. These activities ranges from navigate throughout the system. Through this process the user must read, understand, analyze, and recall information formerly viewed at once.(Boechler2001). This process of doing all these activities Simultaneous places a high cognitive load to the user.

The high cognitive load on the user is noted to bring depressing affects to the user that includes navigation perplexity, slow learning and high chances of errors that results to poor decision makings. (Tarmizi and Sweller 1988). Thus it has been established inexperienced investors that view the companies’ financial information through hyperlinks experience high cognitive load in comparison to the new inexperienced investors that view the same financial reports from paper-based financial reports. This renders the inexperienced new investors that using hyperlinks to gather few information that influences to make poor decision over a long duration of time than their counterparts using that gets a lot of information from the paper based reports that enables them to make very accurate decision within a very short time span. (Crandall and Phillips 2002) Accounting research have proved that presentation format of financial disclosures affects the decision-making process conversely the findings of the effects of IFR on investor judgments is limited because IFR is a new field in the business arena. Currently the research that investigates website findings is mostly descriptive as this field of financial reporting is still very young with inadequate guidelines. The execution of IFR has also created emerging challenges for management and internal auditors who are in charge for creating and evaluating the required controls, correspondingly. (Sweller1988)

Problem Statement

The report tries to establish the impacts of the Internet on the firms’ financial reporting and in particular its impact on UK’s companies that are IFR complaint.

Aims and Objectives

The aim of this research is to identify how the Internet Financial reporting affects the Overall performances of organizations that have implemented the IFR.


  1. To find out the advantages of Internet financial Reporting on firms’ performances
  2. To identify demerits associated with Internet Financial Reporting
  3. To recommend Efficient Internet Financial Reporting Methods.


  1. The advantage of Internet Financial reporting is that it provides reliable and updated IFR.
  2. The demerit of Internet Financial reporting is that it creates cognitive overload to investors.

Literature Review

To compile this research a literature review compiled was written to support this discussion. The literature review was composed of facts obtained after a though research from the references indicate in the reference page.

Internet Financial Reporting is the process by which companies uses the Internet by using their websites to inform new and existing investors about the financial performance of their enterprises. Through this process firms market their firms to get new investors and shareholders. The use Internet for Financial Reporting is associated with a number of advantages. These merits include the ability of the IFR to allow considerable administration reductions and improved company financial controls. This enables the business enterprise to increase its proceeds precincts greatly. According to a study in printed in the CFO Magazine, it was noted that for every $1 saved in management overhead correspond to a $10 augmentation in the market worth of a corporation.

In a typical UK corporation, the cost of backroom managerial financial reporting transaction goes as much as to $54 per transaction. Therefore the use of IFR can reduce can reduce this high internal overhead expense to as low as $8. This is because the adoptions of Internet financial Reporting system will really increase the efforts of performing mysterious financial transaction. This will assists in removing the old reporting strategies that involve pushing paper through the system and impeding valuable staff with non-productive tasks. With the adoption of IFR the mysterious financial operations will be reported automatically to the administration by the IFR systems. The other benefoit associated with this type of financial reporting is its ability to bring a significant development savings. This is because for funds strapped conglomerates, there is no demand for huge money loss to purchase the suspicious transactions reporting management system and no necessity of investing in expensive continuing advancements. This is because IFR will be accountable for all this. (Debreceny, Gray and Rahman2002)

The IFR is user friendly it does not require a lot guidance or extra programs installation on the user’s PC. The IFR programs are capable of being used all over the world as long as the place is accessible to the Internet. The firms use the IFR with the assistances of their current Web browsers. Such that there are no extra cost are required to set up the web browsers since the firms’ uses their existing web browsers. The IFR is exceptionally secure and reliable for every corporation to adapt since the reporting transactions are accomplished merely after accountable administrators approve them. Commercial suspicious transaction reporting sequence procedures and endorsement guidelines sometimes are present over the Internet to assurance there are no misapprehension of corporate policy. Approving of policies and safe keeping of the proceedings is also feasible on the system itself or on the bequest system adapted by the financial association. The whole automation of the IFR programs ensures improved effectiveness of backroom management processes. Paperless methods of endorsement and reporting can lead to significant company management savings. Apart from reporting suspicious transactions to the management the IFR system allows transient of the information to Customs and Revenue Agency on the import or export of exchange of monetary tools to assists in detecting and reducing money frauds. (Kelton and Yang 2005)

On the other hand IFR method of financial reporting suffers from a number of challenges. Some of these problems include management’s challenges in establishing the control structure and to internal auditors responsible for reviewing the IFR controls. These problems include challenges of identifying the following four aspects: (Amer1991)

  • What to report
  • When to report
  • How to report
  • Who is accountable for reporting based on the formerly described surveys.

What to report

In this aspect the coverage and the intensity of IFR have to be well thought-out. Significant subjects in this feature include: finding out what forms of financial information is supposed to be provided by the firms’ reports online. From this learning five financials information have been acknowledged as universal forms of online financial reporting methods. They include annual reports, interim reports, real-time, and share value movements and chronological dividend for every share. The IFR is yet to determine whether these financials information are sufficient and satisfactory for the variety of predictable clients and if not, what also ought to be reported. For the Depth attribute the matter is whether it is the objective or subjective monetary information to be reported. A recommendation of putting into account the status of users has been forwarded. The IFR should ascertain whether the users should be given with features to “bore down” into reported data to get rid of layers of aggregation. These elements would carry several presentations in agreement with the use of the information. From an auditing angle, where information can be disaggregated to their basic components, the auditing of GAAP accuracy becomes extraneous. This is because the information can be controlled as an alternative through diverse GAAP filters to make financial records in any GAAP that might be essential. (Garland and2004)

When to report

The rate and instant of reporting will relay on the form of financial information reported. Some vital concerns that crop up in IFR is whether the interim results will be reported on a quarterly or twice per year basis and whether the yearly reports that includes the auditor report will be provided in the online reports at once after the conclusion of the yearly inventory exercise. Hence there is a need to determine after how long the financial presentation data should be placed to the firm’s website subsequent to the data being released formally through the press. (Garland and2004)

How to report

Information should be delivered in such a manner that clients find it most suitable to receive and apply. To attain this ending, administration and internal auditors should reflect on the subsequent questions: -Are consumers capable to download online financial information in a design that facilitates consequent analysis for instance, are the users able to get these financial reports in the form of an electronic spreadsheet such as an excel copy?. Is the financial information placed in the proper part on the firm’s web site? – How far in website home page do users have to navigate to get the appropriate financial information? – Is the online financial information arranged in a proper screen layout to avoid the call for the users to needlessly scroll back and forth through large volumes of data? – Are the web pages that have the online financial data interrelated through hyperlinks? And should the extended business reporting language (XBRL0 be employed for IFR? The XBRL uses of the extended markup language (XML) to ease the allotment of financial reporting information. The (XML allows information to be “marked” in such a manner as to summarize statistics or sequences of words not only for presentation, but also as objects containing information. Therefore they are presented as numbers and words that contain significance and context.

For who is responsible to report

The individuals or the commerce components in the company that are involved in IFR will have an effect on the exactness of the reported financial information. Distinctive issues are that arises here includes who is/are accountable for choosing which financial information ought to be placed online? – Who is/are in charge for this financial information online? – Who is/are liable for confirming and approving the online financial information? Other challenges that arises includes cognitive overload to investors. The increase cognitive load will cause new investors that are inexperienced in using the hyperlinks to get less information that will lead them in making poor decisions after a long duration of time. (Ashbaugh, Johnstone and Warfield 1999)


The research will involve carrying out a primary research to collect the effects of IFR to UK companies. A primary research is a research that has being conducted primarily to collect data for a specific project. This will be achieved by preparing some questioners that will either be posted or distributed to targeted UK firms. The companies selected will comprise of some that are IFR compliant and others that have not yet implemented IFR. The data collected from this research will be used to supplement the secondary research conducted for this research to come up with an appropriate research about the impacts of IFR in UK’s Companies. A secondary research is a research that has being conducted based on facts or data collected for another project.

The data that will be collected in primary research will include: The improvements that have occurred in the UK companies in the companies that have implemented IFR. The research should also collect the data for the challenges the IFR have brought in their financial reporting systems and what they are doing to address them. The research should include collecting the data about financial reports of these firms before they implemented IFR. These companies selected should comprise of companies that implemented IFR for more than five years and others that have used IFR for less than a year. The research will then collect the financial reports for companies that have not implemented IFR. From the analysis of these data using tables, graphs and other features I will be able to determine the significance if IFR in financial reporting in UK companies and make appropriate recommendations about effective and efficient IFR reporting process. Also from these data I will be able to predict the performances of the firms that have not become IFR compliant for their first five years if they implement IFR system. This will be made possible from the help of data of performance collected from the IFR companies in UK. (Anderson and Reckers1992)


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