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Peer Reviewed Article Vol.5(1) March 2003
Importance of digital annual reports
F. Haasbroek
Gold Fields Library and Information Centre
Technikon SA
fhaasbro@tsa.ac.za
A.S.A. du Toit
Department of Information Studies
Rand Afrikaans University
asadt@rau.ac.za
Contents
1. Evolutionary stages of annual reports on the Internet
2. Digital format of annual reports on the Internet
3. Benefits of annual reports on the Web for stakeholders and companies
4. Annual reports via the Web in South Africa
5. Conclusion
6. References
1 Evolutionary stages of annual reports on the Internet
The on-line annual report is usually located on the corporate Web site under the investor
relations section, company information section or financial information section (Petravick
1999:36).
Annual reports are undergoing a profound transformation on the Web. The boundaries of
Web-based annual reports are dynamic and becoming less distinct, giving the user many
viewing options and formats. The transformation is a result of companies increasingly
serving the business needs of virtual global communities.
Hedlin (1999:373) identifies three distinct evolutionary stages in the development of an
annual report on corporate Web sites. These are summarized below.
1. 1 Stage one: establishing a Web presence (early)
The first generation of Web sites contained general company information of little interest to
investors. These Web sites did not communicate with a particular audience or purpose. Most
Web sites focused on the customer and not on the investor. Some Web sites had a form
where a paper version of the annual report could be ordered.
1. 2 Sta
g
e two: use of the Internet to publish annual reports (intermediate)
This stage was characterized by an assessment of the different needs of various groups with
which the company wished to communicate. Electronic versions of paper-based annual
reports were added to corporate home pages. The Web was seen as an efficient and low-cost
distribution medium for information, but little attention was paid to unique advantages of the
Internet, which could facilitate innovation in digital annual report presentation.
1. 3 Stage three: full usage of the visually exciting and multimedia capabilities of the
Internet in electronic annual reports (advanced)
In this stage the unique, rich features and possibilities of this interactive medium are taken
advantage of, for example slide presentations, animation, music, streaming audio and video.
2 Digital format of annual reports on the Internet
Companies present annual reports on the Internet in the following on-line formats:
zPortable document format (PDF): a special file format developed by Adobe
Corporation for creating documents that are exact representations of the original
printed documents. All elements of a printed document are captured as an electronic
image. PDFs are independent formats, written by Adobe Acrobat software, that retain
the original fonts, colours, formatting and images on multiple computer platforms.
Adobe Acrobat Reader is required to view, navigate and print a PDF document. The
software is downloadable from Adobe Systems (http://www.acrobat.com) at no
charge. It is possible to view and print PDF documents with certain Internet browsers
by using a plug-in (Conosco 1999:58).
z Hypertext markup language (HTML): the programming language of the Web. This is
the common standard to present information on the Internet and create Web pages.
HTML commands are used to build Web pages that can display text and graphics
(Conosco 1999:55).
zGraphics interchange format (GIF): a file format for graphics that compresses images
without losing any information, readable by most browsers and the usual format on the
Web. It works best with images containing solid blocks of colour. Images can be
animated (Conosco 1999:55).
zJoint photographic expert group (JPEG): a graphic format used for compressing
photographic images down to a reasonable size for use on the Web (Conosco
1999:56).
zMicrosoft Excel spreadsheet: a computer application program that simulates a physical
spreadsheet by capturing, displaying and manipulating data arranged in rows and
columns. In a spreadsheet, spaces that hold items of data are called cells. Each cell is
labelled according to its placement (for example A1, A2, A3) and may have an
absolute or relative reference to the cells around it. A spreadsheet is generally designed
to hold numerical data and short text strings. Spreadsheets usually provide the ability
to portray data relationships graphically. Lotus 1-2-3 and Microsoft Excel are the most
popular.
zMicrosoft Word: the most widely used word processing application.
zZip files: WinZip is a Windows program that allows users to archive and compress
files so that they can be stored or distributed more efficiently. WinZip has a simple
drag-and-drop interface that allows the user to view individual files in a zip file
without unzipping the file. WinZip also launches installation programs from a zip file
and automatically clean up after the installation.
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zMacromedia Flash software: the standard for delivering high-impact, lightweight Web
content. Designs, animations and application user interfaces are deployed immediately
across all browsers and platforms, attracting and engaging users with a rewarding Web
experience.
zRealNetworks RealPlayer software: the most common plug-in that enables streaming
audio and video.
zMacromedia Shockwave software: this software is a family of multimedia layers. Web
users can download the Shockwave players from the Macromedia site and use them to
display and hear Shockwave files.
3 Benefits of annual reports on the Web for stakeholders and companies
There has been a dramatic increase in the percentage of annual reports on-line due to the
following benefits:
3. 1 Benefits for stakeholders
3.1.1 Up-to-date information
The key advantage of on-line communication is instant access and availability of up-to-date
information. Usually investors will look at the company Web site for the information before
contacting a company directly. Previously, annual reports were perceived as historical
documents for the archives (Rhein 2000:73).
3.1.2 Timeliness
The Web enables users to retrieve and receive information the moment it is published and
increases the timeliness of information provided. The information is easy to access for all
user groups.
3.1.3 Free information in greater volumes
There is tremendous growth in the number of third party Web sites and on-line investment
brokers assemble financial and other business information related to companies. Third
p
arties are gathering information and adding value to it. These sites enable investors to save
time and effort searching the Internet by collecting the data and providing access through a
single site. These Web sites give visitors the capability to search a variety of sources for
information on a particular company or industry. Enhanced search, download and data
formatting capabilities are also provided. The downside for investors is that most of the
information is available only through subscription or direct purchase. Some information may
be provided at no charge. Web sites often require users to register and data can only be
accessed with a password. The benefit of annual reports on company Web sites is that the
information is free. Freely available and easily accessible company information sources are
usually widely used.
3.1.4 Information to support decision making
Information provided on a corporate Web site should provide investors with all relevant
information required to make informed risk assessment and investment decisions. In certain
instances, information about a company can be found only on the Web (LaRose 1997:32).
3.1.5 Depth and context
Individual investors can access information according to the depth, level of detail and
technicality of the information that they need. This can be an interactive communication with
stakeholders who are able to be highly selective about the information accessed, drilling
down to more in-depth information that is not possible in paper-based reports.
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3.1.6 Access on demand
Investors can instantly access and retrieve information on-line in their own time and in any
time zone anywhere in the world. The Internet is a 24-hour 365-day a year medium. The
annual report is an easy, fast and worldwide access point to company data. The importance a
company places on the accessibility of annual reports and financial information can be
measured by how deep (levels down from the home page) the material is placed on the Web
site. The deeper it is in the site, the harder it is to find and therefore the lower the priority the
data are likely to receive in the design of the site (Lymer and Tallberg 1997).
Users can be immediately gratified by going directly to the annual report site instead of
waiting for the report to arrive in the mail.
3.1.7 Cost
The cost for users to access annual reports on-line is low. Shareholders can receive
information on-line instead of attending annual meetings. This saves on travelling costs.
3.1.8 Investor empowerment
Large institutional investors routinely have the opportunity for private meetings with
management to gather information. Previously the smaller private investors were distanced
from contact with management and had to rely almost exclusively on professional advisors
for information. Now shareholders are empowered because the barriers to accessing
information are significantly lowered (Amernic 1998).
3.1.9 Unfiltered information
Investors prefer information straight from the 'horse's mouth', devoid of inaccuracies. They
may perceive intermediaries, such as brokers, as less trustworthy in this regard. Investors can
retrieve the facts from third party financial Web sites, but they can only get the 'real story'
from the company annual report (print or on-line).
3.1.10 Historical information
Some companies offer a Web archive of annual reports with a back file of two to five years.
This is useful for the user who wishes to analyse the progress of the company. The corporate
Web site should serve as repositories for the most current report and reports of several
p
revious years (Toronto Stock Exchange 1999:2). This eliminates the need for libraries and
other corporate information centres to store annual report collections. It saves space and the
labour of ordering and filing it.
3.1.11 Hyperlinks to other information
Hyperlinks improve the readability of annual reports and user access to information. Some
Web sites provide the user with links to additional information. Hyperlinks give users the
illusion of more control over the information accessed. The Internet user can choose which
link to follow through the corporate annual report portion of the Web site.
3.1.12 Personalization and customization
Information can be customized and personalized to take account of the needs of individual
stakeholder groups (possible through the use of intelligent agent software). Information can
be filtered, prioritized and annotated to meet the criteria of the users. Customized e-mail
allows investors to receive alerts and information of interest, for example newsletters and
p
ress releases.
3.1.13 Global reach
The Web has the ability to reach an international global audience. On the Internet the
company can present corporate financial data in accordance with the accounting standards,
languages and currencies of multiple countries. The Web offers the ability to rapidly or
instantly update facilities to enhance the provision of performance data.
3.1 14 Single point of reference
An annual report is a comprehensive source of information of activities of a company. Very
often it provides information that a user cannot locate from any other published source. Once
bookmarked on a user's Internet browser, the information is easy to locate.
3.1.15 Downloading and manipulation of data
Companies can present corporate information in spreadsheet format. Data can be
downloaded or exported for user manipulation and analysis.
3.1.16 Search facility
Effective internal search tools within Web sites can help users to find relevant information.
Users can search the contents of HTML and PDF annual reports, using keywords for specific
data. Previously, the user had to read extensive amounts of text to extract a specific piece of
information. Companies should provide a sophisticated internal site search facility that
makes it easy for investors to find information.
3.1.17 Preventing information overload
Internet technology means that more information and more sources of information about a
company are available. The overabundance of information results in information overload.
Internet users are not equipped to handle information glut or judge the quality and validity of
what they access on third party Web sites. The corporate Web site and annual reports should
be the most complete source of information and first choice of the corporate information
seeker. The Web site should provide timely and precisely targeted business information.
3.2 Benefits for companies
3.2.1 Effective communication
The Web is an effective way to communicate with potential investors and shareholders.
Companies can communicate with previously unidentified information users. It is a medium
for dialogue with stakeholders that can be designed to encourage them to provide feedback to
the company. The Internet provides a broadcast (mass communications) medium for
corporate reports.
3.2.2 Site monitoring
Companies can monitor and track the total activity of the investor relations section of Web
sites to identify ways to improve site efficiency and increase usage. The data collected
indicate how many people have accessed the annual report as well as the usefulness of the
different types of information included on the Web. The data needs of stakeholders can be
identified in this way (Financial Accounting Standards Board 2000; O’Kelly 2000).
3.2.3 Global audience
Companies are increasingly seeking markets beyond their borders. Digital annual reports
p
rovide unrestricted global access and increase the disclosure audience of a firm. It is an
opportunity to enhance and expand the traditional information channels. The Web opens up
readership to a much wider international audience (Russell 2000). Besides shareholders and
other stakeholders, the 'public domain' in general can also take advantage of access to Web-
based corporate information. Digital annual reports maximize the exposure of the annual
report and increase the potential readers.
3.2.4 Dynamic updating potential
Regular maintenance of Web sites means that the information provided can be continuously
updated to reflect new information, whereas paper reports have a very short shelf life.
Outdated material can be removed promptly or moved to the archive section of the Web site.
3.2.5 Interactivity
A company can ensure maximum attention from on-line investors and be in a position to
expand the business by making an interactive, visually appealing, on-line edition of the
annual report available on its Web site. By doing this, the user-friendliness of the
information is improved (Clackworthy 2000:38).
Multimedia enhances hypertext by adding animation, graphics, video and audio (Koreto
1997). The Internet can integrally accommodate interactive, non-linear, multimedia and
animation elements. The on-line annual report becomes an experience that is simply not
p
ossible with the limitations presented by print media. The interactive nature of the Web will
be an incentive for visitors to return to the Web site and will increase its 'stickiness'. The
company can build strong ties with all stakeholders (Lehrer 2000:87).
3.2.6 Hyperlinking
Hyperlinks offer firms the opportunity to integrate several sections of the annual report and
link financial disclosures to other pertinent information elsewhere on the Web site.
Companies can hyperlink to on-line stock prices and various additional information sources.
3.2.7 Limitless space available
Computer memory is cheap and a Web site offers almost unlimited space. More information
can be added to a site to explain company performance. There are fewer constraints on
p
resentation flexibility than with traditional paper versions.
4 Annual reports via the Web in South Africa
N
ationally and internationally, there seems to be a definite increase in the use of the Internet
as a platform for the presentation of electronic corporate report information. South Africa has
made considerable progress in the virtual environment since 1999, with a dramatic increase
in companies with a Web presence and digital annual reports.
In June 1999, the top 100 South African companies, ranked according to sales on the
B
usiness Times Web site (http://www.btimes.co.za), were examined. Only 38% of the
companies surveyed had no Web site. Table 1 shows that out of the 100 companies, 62% had
a Web site. However, Table 2 indicates that only 11% of the surveyed companies had full
annual reports available on-line (Stainbank 2000).
Table 1 Top South African companies on the Web in June 1999 (Stainbank 2000:23)
Table 2 Financial disclosures on the Web in June 1999 (Stainbank 2000:23)
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Number of companies
Financial information on Web site 33
No financial information given 10
No Web site 38
Failed to access 18
Under construction 1
Total 100
N
o South African research could be found after the 1999 Stainbank study and the authors of
this article conducted a survey in May 2001 to establish what the current situation in South
Africa is. Research indicated a dramatic growth in South African companies with Web sites
since 1999. The top (industrial) companies (ranked by total assets) of the Financial Mail
(Financial Mail 2000) was used to select the companies. Eight of the top 100 companies
listed in the millennium edition of the Financial Mail were no longer listed on the JSE. To
overcome this problem, the companies ranked 1–108 were selected. The 13 companies with
no Web sites were phoned by the researchers to confirm that no Web site existed. The study
failed to access three company Web sites, because the servers or networks were down and
the Web sites were not available.
Table 3 illustrates that 87% of the top South African companies had Web sites in May 2001
compared to 62% in June 1999. The latest international study done in 2000 by the Financial
Accounting Standards Board (FASB) indicated that 99% of companies had Web sites. The
number of South African companies with Web sites (87%) was considerably less than the top
international companies with Web sites (99%). This indicates that South African companies
were behind overseas companies in adopting the Internet as a delivery and communication
mechanism.
Table 3 Top South African companies on the Web in May 2001
According to Stainbank (2000), only 11% of the top South African companies had full
annual reports on the Web. Table 4 illustrates the findings of the present authors' survey
conducted in May 2001. According to these statistics 53% of the top 100 South African had
full annual reports on the Web.
Table 4 Top 100 South African companies with full annual reports on the Web in May
2001
Tables 5 and 6 indicate that South African companies are moving from HTML format (16%)
to PDF format (37%). PDF seems to be the most popular format at this time. Although only
16% of South African companies are using HTML format for presenting annual reports, the
FASB stud
y
(FASB 2000) indicates that 59% of the top 100 Fortune companies do so.
Number of companies
Full annual report 11
Financial statements 22
Total 33
Number of companies %
Web site 87 87
No Web site 13 13
Total 100 100
Number of companies %
Full annual report 53 53
No annual report 31 31
No Web site 13 13
Failed to access 3 3
Total 100 100
Table 5 Annual reports in PDF onl
y
Table 6 Annual reports in HTML only
Annual reports in PDF are usually broken down into subdivisions to facilitate ease of
downloading. The study conducted by the FASB in 2000 on Fortune 100 companies
indicated that 61% had annual reports exclusively in PDF format.
Companies also have historical, retrospective information on sites. Some companies offer
full digital annual reports as far back as 1997. This is very useful for investors and analysts
who want to follow the progress of the company.
Table 7 illustrates that only 2% of companies in South Africa provide visitors the option of
viewing the annual report in HTML or PDF format, compared to the 27% Fortune 100
companies as reported by the FASB study.
Table 7 Annual reports in PDF and HTML
Table 8 shows that only two companies (2%) provided financial information in
downloadable spreadsheet format, compared to the 16% Fortune 100 companies, as reported
by the FASB study.
Table 8 Exporting of financial information to a spreadsheet
2000 Annual report 1999 Annual report 1998 Annual report
Yes 37 (37%) 19 (19%) 6 (6%)
No 47 (47%) 65 (65%) 78 (78%)
No Web site 13 (13%) 13 (13%) 13 (13%)
Failed to access 3 (3%) 3 (3%) 3 (3%)
Total 100 100 100
2000 Annual report 1999 Annual report 1998 Annual report
Yes 16 (16%) 19 (19%) 4 (4%)
No 68 (68%) 65 (65%) 80 (80%)
No Web site 13 (13%) 13 (13%) 13 (13%)
Failed to access 3 (3%) 3 (3%) 3 (3%)
Total 100 100 100
2000 Annual report 1999 Annual report
Yes 2 (2%) 4 (4%)
No 82 (82%) 80 (80%)
No Web site 13 (13%) 13 (13%)
Failed to access 3 (3%) 3 (3%)
Total 100 100
Number of companies %
Yes 2 2
No 98 98
PDF is the most popular format for publishing annual reports on the Web (see Table 5). The
PDF format is ideal for printing and the spreadsheet format for the manipulation of data.
However, few South African companies currently use the corporate Web site as an electronic
data archive to store historical corporate information. Ideally full annual reports for five
years should be in PDF format and full financials should be available in spreadsheet format
for downloading.
5 Conclusion
Transparency, openness, availability and accessibility of information are beneficial to
learning, knowledge and the evolution of both individuals and the business environment.
Internet technology is making markets more transparent and companies more open and
accountable, resulting in increased shareholder loyalty and commitment.
South African companies are behind the top performing overseas companies in using the
Internet as a delivery and communication mechanism to voluntarily disclose information and
disseminate digital annual reports. However, during the last three years, the use of the
Internet by companies in South Africa has shown rapid growth. Most of the companies in
South Africa are currently at stage two of the development stages of annual reports on the
Internet as identified by Hedlin (1999:73). At this intermediate stage, the companies have a
Web presence and an electronic version of the annual report, but are not making use of the
interactive features. South African companies should take advantage of the unique interactive
nature and multimedia features of Internet technology as a medium to maximize global
access to corporate data and information transparency. Companies in South Africa will have
to make an extra effort to present information in a format relevant to the needs of various sets
of stakeholders by customizing access to information and packaging information and data
according to the needs and preferences of stakeholders. Corporate home pages are a
competitive asset and the prime gateway to any company. The rich sophisticated multimedia
environment of text, graphics, images, sound and audio information will be the primary
medium for communicating globally with stakeholders in the future.
6 References
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be the same old thing. [Online]. Available WWW:
http://mgmt.utoronto.ca/~americ/sameold/htm
(Accessed 26 March 2001).
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http://www.conosco.com
(Accessed 26 March 2001).
Financial Accounting Standards Board. 2000. Business reporting research project (BRRP).
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[Online]. Available WWW: http://fasb.org
(Accessed 26 March 2001).
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inancial Mail Special Surve
y
. 2000. Top companies: millennium edition. Supplement to
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Hedlin, P. 1999. The Internet as a vehicle for investor relations: the Swedish case. European
accounting review 8(2):373–381.
Koreto, R.J. 1997. When the bottom line is on-line. Journal of accountancy 183(3):63–5.
LaRose, J.A. 1997. Company information on the World Wide Web: using corporate Web
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ages to supplement traditional business resources. Reference librarian 58:27.
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Lymer, A. and Tallberg, A. 1997. Corporate reporting and the Internet – survey and
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Available WWW: http://accounting.rutgers.edu/SUMMA/corp/papers/lymereaa.htm
(Accessed 14 April 2001).
O’Kelly, C. 2000. Reporting gets personal. [Online]. Available WWW:
http://www.icai.ie/accountancy-ireland/articles/reportinggetspersonal.htm
(Accessed 27 February 2001).
Petravick, S. Online financial reporting. CPA journal 69(2):32–36.
Rhein, J.H.W. 2000. Annual reports: numbers in cyberspace. Equities (Mar/Apr) 48(2):73.
Russel, J. 2000. University trades in pricey annual report, delivers info via the Web instead.
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ew Orleans city business (21 February): 15.
Stainbank, L.J. 2000. The status of financial reporting on the Internet. Accountancy SA
(April):23,25.
Toronto Stock Exchange. 1999. Electronic communications disclosure guidelines. [Online].
Available WWW: http://tsers.com
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