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    • 1 THE USE OF INTERNET FOR CORPORATE REPORTING: A DISCUSSION OF THE ISSUES AND SURVEYS OF CURRENT USAGE IN BANGLADESH Md. Abid Hossain Khan Senior Lecturer in Accounting School of Business, Independent University, Bangladesh Chittagong Campus, 12 Jamal Khan Road, Chittagong, Bangladesh Email: abid@ctg.iub.edu.bd or abid9khan@yahoo.com Ahmed Taneem Muzaffar Senior Lecturer in Economics Department of Economics, East West University, Bangladesh 42, Mohakhali C/A, Dhaka 1212, Bangladesh Email: taneemm@ewubd.edu or taneemm@yahoo.com Abu Sohel Mahmood Lecturer in Marketing School of Business, Independent University, Bangladesh Chittagong Campus, 12 Jamal Khan Road, Chittagong, Bangladesh Email: asmahmood25@hotmail.com ABSTRACT The practice of corporate reporting on internet is relatively new in Bangladesh. The topic, therefore, has not been studied much in this country. The expansion of securities market in recent years has led to a higher tendency by the corporations to use internet for the purpose of reporting. Considering this, the aim of this investigation is to determine the current state of the use of internet for corporate reporting in Bangladesh. To perform the research, an extensive survey was done on the web to find out the relevant characteristics of the top listed companies ranked by Chittagong Stock Exchange. The companies were selected from eight sectors. The survey reveals that 24 (40%) of the top 60 companies in Bangladesh possessing websites found active in promoting their businesses in some way or another and cement, ceramics and food item producing companies have not initiated the practice yet. In most cases these sites provide at least a range of information with regard to company profile, product and service information and other promotion material about the company and its activities. However, some companies were found making the more use of the web than solely for advertising purposes. Keywords: Corporate reporting, internet, information dissemination, Bangladesh. INTRODUCTION Corporate reporting on internet (CRI) has expanded at a staggering pace over the past ten years particularly in countries where securities markets are functioning. World Wide Web is regarded as one of the most fast growing areas of internet throughout the world 1
    • 2 providing commercial usage to users, facilitating them with access to reported documents consisting of text, graphics, sound, and video (Lymer, 2003). This technology is used extensively not only to disseminate information and perform various forms of business communication for marketing purposes, but also to cater the needs of other areas such as corporate reporting through firms’ quarterly and annual reports, periodic and annual financial statements, press releases, speeches, performance reporting and other such information. In addition to printed annual reports, corporations are showing a growing tendency to use internet for corporate reporting allowing current and potential investors conveniently gather financial information of companies. The practice of corporate reporting on the internet is relatively new in Bangladesh. The development of securities market in Bangladesh, however, has caused expansion of this practice day by day. The paper makes an attempt to investigate the current state of the usage of corporate reporting on internet in Bangladesh and provides an assessment of the issues pertinent to CRI. REVIEW OF RELATED LITERATURE A great deal of work has been done on users, modes, and usefulness of corporate reporting on the internet. In respect of benefits of corporate reporting on internet, different studies have identified a number of reasons for usefulness of it. It enables both users and producers to access corporate data by using an established network structure at a low cost. ICAEW (1997) states that through this method an instant access to data at convenient times for users is possible, as opposed to paper versions. Internet provides for a broadcast medium for corporate reports (Parker, 1982). Green and Spaul (1997) identifies that its presentation flexibility is less constrained compared to the traditional paper versions. It also allows users to export data for constructing tailored information. With regard to the demand for information in corporate reporting on business enterprises comes from both outside and inside (Eskew and Jensen, 1996). The paper also illustrates that the users of financial reporting outside the business usually wants summarized information in standardized forms and reported at certain intervals. On the contrary, the inside users look for customized information to help them taking specific decisions and reported at frequent intervals and sometimes produced on the basis of request. Research is also carried out on major technologies currently employed on internet for the purpose of corporate reporting. In analyzing the modes used for corporate reporting on internet, studies focus mainly on four different computer software such as Microsoft Word and Microsoft Excel, Hypertext Markup Language (HTML), and Extensible Business Reporting Language (XBRL). Westarp, Ordelheide, Stubenrath, Buxmann, and Konig (1999) states that although hypertext structure of HTML derives great advantages, it has deficiency concerning the exchange of structured data. The data is not at all structured or indexed by specifying semantic elements so as to enabling the receiver’s computer processing data automatically. In relation to Portable Report Format (PDF) documents, the same study reveals that downloadable files are generally too large and automated extraction of semantic meaning from the reports is impossible. Richards and Smith (2004) states that XBRL is an XML (eXtensible Markup Languages)-based framework that provides the financial community with a standard-based method to 2
    • 3 prepare and publish financial statements in a variety of formats and automatically exchange the information they contain. In line with this, Debreceny and Gray (2001) reveal that XBRL solves two significant problems through efficient preparation of financial statements in many forms and reliable extraction of specific detailed information from the different forms of financial statements. In the context of Bangladesh, some studies have been carried out in the areas of Financial Reporting on Internet (FRI). Hossain (2004) identifies a correlation between a lack of well developed securities market and poor or absence of corporate reporting on internet by the Bangladeshi companies. Saifuddin and Khan (2005) report from a stakeholders interview that variations observed in web based financial reporting pose doubts on investors’ minds that some companies are violating existing financial reporting regulations. The paper however, suggests that this should not discourage companies from web based reporting, rather take measures in order to make web based financial reporting more effective than paper based. Hye, Khan and Muzaffar (2005) reveal in their research that although many of the issues related to online financial reporting have been addressed by different standard setters worldwide, they have been overlooked in Bangladesh and some of these issues need particular attention for continued development and further guidance in this area. As a future directive to the usage of internet for corporate reporting, Ettredge, Richardson, and Scholz (2000) states that a further complexity may arise when the corporations increasingly provide alternatives or supplements to the information using dynamic interaction with the web sties rather than static presentation of information. In this connection, Gray (2004) suggests to address the challenges resulting from web based financial reporting, concerning company management, regulatory bodies, professional accountants and different users of financial information. RESEARCH METHODOLOGY In order to investigate the usage of corporate reporting on internet by Bangladeshi companies, we explored and browsed the company websites on the world wide web. We selected the top 10 or 5 “A” category companies falling in each of eight sectors listed on the Chittagong Stock Exchange (CSE) as of 29th July, 2004 to be effective up to June 2005. CSE ranks top of its listed companies and publish the list every six months at an irregular basis. The research findings are based on the search on company profile, product information, shareholder information, press releases, performance reporting, human resource and marketing. The paper also includes an attitudinal survey on stakeholders aided by questionnaire and focus group discussion (FGD) in order to assess the practice of corporate reporting on the net in Bangladesh. DETAILS OF RESEARCH FINDINGS Bangladesh is a developing country where the practice of corporate reporting on the net is rather new dating back to about five years. However this practice by the corporations has been expanding day by day, partly due to the fast development of the securities market in Bangladesh. Among the companies using the net for corporate reporting purpose, the 3
    • 4 pioneers are the companies under Beximco Group. Corporate reporting was initially confined to mostly non financial information such as product and marketing related issues while financial information has become an integral part of the contents of the companies’ websites in recent years. A search was performed on the World Wide Web using a combination of knowledge of websites and search tools to discover the homepages (main web sites) of the top 10 or 5 companies falling in each of eight sectors listed on the Chittagong Stock Exchange (CSE) out of A category only. “A” category includes most preferred listed companies out of all the segregation of which is made by CSE considering the performance in terms of dividend percentage, compliance of securities related rules and other capital market parameters. The search was focused on company profile, product information, shareholder information, press releases, performance reporting, human resource and marketing. Links were followed in an attempt to discover the existence of such information to as deep a level as was considered necessary in each site. The survey was interested in individual company information not that of groups. Table 1: Number of companies out of top 10, having websites in each sector Number of Number of companies selected top having websites out of Sector companies top companies Banking and insurance 10 5 Pharmaceuticals and chemicals 10 4 Cement and ceramics 5 0 Textiles and clothing 10 3 Leasing and finance 5 2 Food and Allied Products 5 0 ICT 5 5 Others 10 5 Source: Internet Survey The survey reveals that 24 (40%) of the top 60 companies in Bangladesh possess websites found active in promoting their businesses in some way or another and cement, ceramics and food item producing companies have not initiated the practice yet. In most cases these sites provide at least a range of information with regard to company profile, product and service information and other promotion material about the company and its activities, however, some companies were found making the more use of the web than solely for advertising purposes. The online survey revealed the following in summary: Table 2: Percentage of Internet reporting companies 4
    • 5 Percentage of internet reporting companies Bank & Pharma Textile Lease & ICT Others Insurance & Chem & Cloth Fin Company Profile 50 100 100 100 100 80 Product Information 40 100 100 100 100 60 Investors Relations 0 50 0 0 20 0 Press Release 20 50 0 100 40 40 Performance 20 50 0 0 0 20 Reporting Human Resource 20 50 0 50 0 20 Marketing 30 75 0 100 100 60 Source: Internet Survey A discussion on exposures resulting from broad sector analysis has been done beneath. Bank and Insurance The most common data presented on the web by the banks were company profile and information relating to the services they provide. Many of the banks reporting through website highlighted information regarding the their branches situated in different places and used marketing tools. Despite of their listing on both the stock exchanges of the country, no bank constructed a site for investors’ relation in order to facilitate present and potential investors. Pharmaceuticals and Chemicals Only four of top ten listed companies that fall in pharmaceuticals and chemicals sector were found reporting on various corporate issues using World Wide Web. Among these Beximco Pharmaceuticals Ltd. and ACI Ltd. have been found making the effective use of the web to deliver reporting both financial and no-financial information in integrated way. Considering web features in presentation and contents of information, other companies’ websites can be classified as below average. Textiles and Clothing In terms of web based corporate reporting Beximco group of companies is the pioneer in this sector. There are seven textile and clothing companies in Beximco group all of which have a single page for each in the website of the group company. Only two companies of Beximco group and Square Textile Ltd. categorized as A class by CSE under textile and clothing sector. In the case of all these three companies sufficient information has been found regarding company profile and product information whereas information for investors decision; for example financial and non-financial performance reporting, press release, human resource were found completely missing. Moreover, single web page for one company resulted to the data less than the minimum requirement, that is, deeper than one level down. 5
    • 6 Leasing and Finance Out of only five listed A class companies two companies named IDLC and Midas Financing Limited maintain corporate websites. Company profile, rigorous advertisement of the products and services and release of recent events have been found common in both the companies. Besides IDLC reports on financial performance through five years trend data, corporate governance issues and career opportunities in the company. Information Communication Technology (ICT) ICT sector includes those companies, which provides Internet service providing companies. These companies also doing business on software solutions, e-business, web design, site design etc. All the companies make some services available to the members or users, for instance web mail account operation, usage record check, some essential software download, important web links and refilling prepaid account. Company profile was found common in all these websites. Another common characteristic is all the companies used different marketing tools to such extant with a view to promoting their businesses that, it might make an impression that these companies developed and maintain websites for selling products and services only. However some were observed making press releases with respect to the recent events on regular basis and maintaining separate investors relations page enclosing trend data in it, one company took the opportunity to make financial performance data available via web. Others This category of listed companies comprises leather, property development, paper products, fuel and power. In corporate websites most of the Internet reporting companies of this sector assimilate information concerning corporate profile and products whilst a very few has been found emphasizing on performance reporting. Sites of particular interest • Beximco Pharmaceuticals Ltd. – It is a well-presented site maintaining corporate image through meeting all the basic requirements. The site contains full presentation of latest financial statements, latest five years statistics of key data and downloadable latest annual report for the benefit of stakeholders. • ACI (Advance Chemical Industries Ltd.) – A well designed site with thoughtful use of the web to present information highlighting key performance and for financial analysis. • IDLC (Industrial Development Leasing Company Ltd.) – Effective use of the web in support of selling activities of products and services has been noticed in this site. Financial performance reporting with recent five years trend data and corporate governance reporting presented with great care. Most unique feature is the frequent half yearly performance reporting of the enterprise. • BOL (Bangladesh Online Ltd.) – This site embraces rigorous advertisement of the products and online purchasing facility for customers. Separate pages insertion for investor relations containing downloadable annual reports made data easily 6
    • 7 accessible and useable. In addition some important links and Internet related facilities made available. • IBBL (Islami Bank Bangladesh Ltd.) – A complete website with widest range of information since it has, in it, links to separate pages which contain performance reporting, human resource, press releases, success stories, information regarding branches and downloadable annual reports of latest two years. Information relating to products and services has not been neglected on the site. Effective Use of the Web There are some areas in which the Internet and in particular the web may offer possibilities to enhance the provision of corporate reporters to users. This section reviews the use of the web by surveyed companies. In particular, this section discusses: • The use of graphics • Use of hyper-linked data • Ability for downloading of data • Press release provision • Trend data and analysis • Other jurisdiction data • Dynamic data provision • Non-financial measures of performance Graphics The ability to enhance the presentation of performance information with graphics is a feature made possible with the use of the web. The most common use of graphics found in reporting web sites was to repeat the diagrams that have appeared in the conventionally published version of the financial performance information, for example the sites of Advance Chemicals Industries Ltd. and Beximco Pharmaceuticals Ltd. Good examples of the use of graphics however, can be seen in the sites of Beximco Pharmaceuticals Ltd. and IDLC where they are used effectively to support the explanation of trend data and in the Beximco Pharma web site they are used to support the comparative analysis. Hyper-links The most common use of the hyper-linking feature of the web was to allow for inter- linking of pages of information to support user controlled access to the set of documents provided. The most straight forward example of this has been found in sites linking notes to the account information in Beximco Pharma only. Almost all other sites used frames or image maps as an additional or separate navigation tool to conventional links for various purposes other than accounts. Poor understanding of this feature, however, has also been visible – for example Square Pharmaceuticals, Beximco Textiles, National Bank where full years results appeared in document with no linkages. Downloading of Data 7
    • 8 The ability for the users to download data for their own analysis was not supported in even a case. No financial statement and supporting information was easily accessible or easily downloadable in any convenient format, for example XBRL, Lotus or Excel spreadsheet. More common was the provision of accounts in Adobe Acrobat format for downloading and local viewing. This facility is being offered by IDLC, Beximco Pharma, Square Pharma and Bangladesh Online. IDLC makes their un-audited 1st Half Year results for 2005 available in Acrobat format – the only firm to do this. Press Releases Many companies have been found making the press releases in various manners. Some companies e.g. Bangladesh Online, IDLC, Midas Financing, IFIC Bank maintain separate page in their web site for recent press releases. On the other hand it has been noticed that other enterprises have not felt the importance and made the press releases of recent important events in scattered manner. Trend Data It has been argued that the advantages of presentation by the web is the ability to provide more data to the user in explanation of company performance than is otherwise possible to do. A significant number of companies supplying financial data over the web made use of this possibility to support the performance message they want to promote. In some cases five years or longer reviews were given in various forms (data and graphics) e.g. IDLC, Square Pharma and Beximco Pharma. Other Jurisdiction Data The ability of the web to reach beyond the border of a country may suggest that the companies would think about the international audience for their corporate reports. This was, however, not the scenario in all the Bangladeshi companies who opted just to produce the accounting information fulfilling the local requirements. No company has been found who linked in GAAP data in local format. Dynamic Data Provision The web offers the ability for rapid/instant updating facilities to enhance the provision of performance data. This feature is yet to be adopted by many Bangladeshi companies on their web sites. The notable exceptions to this are Bangladesh On Line and IDLC. In the case of the former company the site is updated regularly with a link to Dhaka Stock Exchange Site where 15 minutes delayed stock prices for the company can be obtained and in latter company half yearly data are added on regular basis. Non-financial Performance Measures In addition to the financial information, non-financial data matters much in various analysis of performance. In spite of the importance of non-financial performance data, no 8
    • 9 corporate reporting web site took the opportunity to present performance measures other than financial ones. Findings from Stakeholders Interview The survey on the stakeholders finds that all the respondents who are users of corporate information, visualize internet as one of the flourishing means of corporate reporting. Amongst the stakeholders having internet access considering both permanent and casual types, around sixty percent browses the company websites regularly and forty percent seldom visits the sites. Table 3 shows the opinions expressed by the respondents. It reveals that aggregate score of the opinions of the sample respondents regarding usage of corporate reporting on internet in Bangladesh is 1.97 and it ranges from 1.76 to 2.19. This signifies the importance of the variables considered. Table 3: T-test result from survey on stakeholders Variables Considered Average Remarks Scores (T-test Result) Graphics is important for enabling the companies to 2.19 Insignificant produce the published version of information effectively on web sites Hyper-linking is essential for interlinking of information 2.15 Insignificant to support the users Downloadable data is needed in such format that is ready 2.10 Insignificant for own analysis of users Press releases on company web sites make the users 1.93 Insignificant updated Financial trend data helps to substantiate corporate 1.90 Insignificant performance in different aspects Regular updating of data contained in the site should be a 1.76 Insignificant part of business of the companies In addition to financial information non-financial 1.82 Insignificant performance data ought to be a part of corporate web sites Total 1.97 Insignificant Source: Field Survey CONCLUSION AND RECOMMENDATIONS The web offers a number of possible features for corporate reporting. Since it has not been long enough, the corporate reporting practices on Internet by Bangladeshi companies have not been evolved to the level of standard yet. It requires adequate preparation, proper regulations, control and effective structure for its better functioning. In the context of corporate reporting practices on the Internet in Bangladesh and results derived from the survey, the paper proposes the following recommendations. • The standard setters, for example Institute of Chartered Accountants of Bangladesh (ICAB) and regulatory body for listed companies, Securities and 9
    • 10 Exchange Commission (SEC) are to extend the content of standards to regulate the content of digital financial reporting. • Necessary Internet specific rules with respect to interlinking of information, performance data, press releases on recent events and price sensitive information and updating web site data after a certain interval are required to be developed. • The auditor’s report should be hyper linked to that part of the web site which consists of the information reviewed. • Further research should be carried out in order to prevent manipulation of digital data and guarantee the authenticity and reliability of the corporate information distributed via Internet to the users’ satisfaction. • The domain name of individual companies must be highly restricted so that it cannot be used by others. • Instead of other formats of corporate reporting on Internet, consistent use of XBRL should be encouraged so that extraction of specific information by data identification and analysis of the same will be easier. • Compliance of GAAP (Generally Accepted Accounting Principles) and IASs (International Accounting Standards) must be ensured in the web based financial reporting practices gradually for achieving the borderless and wide acceptance. REFERENCE Lymer, A., (2003), “The Auditor and Corporate Reporting on the Internet: Challenges and Institutional Responses”, International Journal of Auditing, Volume 7, p.p. 103-120. Westarp, W., Ordelheide, D., Stubenrath, M., Buxmann, P., and Konig, W., (1999), “Internet-Based Corporate Reporting-Filling the Standardization Gap”, Proceedings of the 32nd Hawaii International Conference on System Sciences. ICAEW (1997), “ Added-value Professionals – Chartered Accountants in 2005”, Consultation Document. Parker, L., (1982), “ Corporate Annual Reporting: A Mass Communication Perspective”, Accounting and Business Research, Autumn, p.p. 279-286. Green, G. and Spaul, B., (1997), “ Digital Accountability”, Accountancy, May, p.p. 64-65. Gray, L., (2004), “Financial Reporting on the Internet – Instant, Economical, Global Communication”, http://www.ifac.org/Library/SpeechArticle.tmpl Eskew, Robert K. and Jensen, Daniel L., (1996), Financial Accounting; 5th Edition, McGraw-Hill, New York, pp:4 Debreceny, R. and Gray, (1999), ‘ Financial Reporting on the Internet and the External Audit’, European Accounting Review, 8,2, pp: 335-350. 10
    • 11 IASC, (1999), Business Reporting on the Internet. London: International Accounting Standards Committee ICSA, (2000), Electronic Communications with Shareholders: A Guide to Recommended Best Practice. London: Institute of Chartered Secretaries and Administrators FASB, (2000), Business Reporting Research Project: Electronic Distribution of Business Information. Norwalk: Financial Accounting Standard Board ICPAS, (2001), A proposal for Electronic Filing and Reporting of Business Performance Information. Singapore: Institute of Certified Public Accountants of Singapore COB, (2000), La COB lance une consultation publique sur un project de recommendation Internet. Paris: Commission des Operations de Bourse Richards, J., and Smith, B., (2004), “An Introduction to XBRL”, Working Paper, pp: 2. Debreceny and Gray, (2001), “the Production and Use of Semantically Rich Accounting Reports on the Internet: XML and XBRL”, International Journal of Accounting Information Systems, vol 2, no 1, pp 47-74. Ettredge, M., Richardson, V. J., and Scholz, S., (2000), “The Presentation of Financial Information at Corporate Web Sites”, International Journal of Accounting Information Systems, Vol. 2, No. 1, pp 1-21. Ashbaugh, H., Johnstone, K. M., and Warfield, T.D., 1999, “Corporate Reporting on the Internet”, Accounting Horizons, Vol 13, No. 3, pp 241-257. Cushing, B. (1989), “On The Feasibility and The consequences of A Database Approach to Corporate Financial Reporting”, Journal of Information Systems, 3,1 , pp: 335-350. Keiso, D. E., Weygandt, Jerry J., and Warfield, Terry D., (2001), Intermediate Accounting, John Wiley & Sons Inc. , New York, Tenth Edition, pp:38. Poon, Pak-Lok., and Li, David, (2003), “Internet Financial Reporting”, Information Systems Control Journal, Volume 1, pp: 16-29. Hossain, S. M., (2004), Rapporteurs Report, Unpublished paper presented at the Conference on Development of Bond Market in Bangladesh, Bangladesh Bank, Dhaka, Bangladesh. Saifuddin, M., and Khan, A., (2005), Financial Reporting on the Internet: An Instant and Economical Global Communication, Bangladesh Accountant, April-June, Dhaka, Bangladesh. 11
    • 12 Hye, A., Khan, A., and Muzaffar, A. T., (2005), Corporate Financial Reporting on Internet: Global Developments and An Appraisal of Practices in Bangladesh, Unpublished Paper. Web sites: Chittagong Stock Exchange - www.csebd.com Dhaka Stock Exchange - dsebd.org Securities and Exchange Commission, Bangladesh - www.secbd.org 12