Seven out of ten companies are including e-business measures such as web-page hits and subscriber numbers in their annual reports, a study has revealed.
The research, by Arthur Andersen, looked at 50 UK listed companies, including web companies like auctioneer QXL and mixed economy businesses like retailer Iceland, directly involved in e-business, including new and old economy businesses.
Isobel Sharp, Arthur Andersen partner, said: ‘The new economy is affecting not only the way companies report but also what they report. E-business activity has had a greater impact on the narrative section of annual reports than on the financial statements section. This is not a surprise given the tough accounting rules which apply to the latter.’
For new economy companies starting out, it is crucial to have something to use as a performance indicator since they tend to lack solid figures on which to report during their first years.
More critical for new economy businesses are moves by the Accounting Standards Board to force companies to show the cost of offering employees shares and share options in their profit and loss accounts. Opponents argue that the proposals will have a significant impact on the profitability of many quoted companies.
‘With companies both “established” and “new” investing in new products and services, non-financial measures can be good indicators of performance.
But these measures vary according to what definition has been applied, so comparing similar businesses is a complex process,’ added Sharp.
There is no recognised framework governing the reporting of non-financial measures in annual reports. But, Andersen’s research shows non-financial measures such as technology, partnerships, subscriber numbers and brands are some of the most relevant.
Over 80% of new and established companies use the company name as a brand to promote their e-commerce strategy, said the report. And over 60% of companies disclose some form of alliance in the narrative section of their annual reports.
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