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by the markets, resulting very often in significant
changes of security prices. It becomes clear that
institutional and individual investors would like to
make use of more frequently released financial
information. Such information would be most
beneficial for individual shareholders since mutual
funds and investment houses often obtain information
directly from corporations between the reporting
periods. Actually, the annual financial reports are
delayed more than a quarter from the end of the annual
accounting period. It takes several weeks to proof and
print these reports, then distribute them by mail. Most
of annual financial reports reach the investors in the
month of March of the next year.
In the summer of 1996 the American Security and
Exchange Commission (SEC) adopter a rule
permitting the use of the electronic media delivery in
compliance with the information delivery
requirements of the federal securities law. The term
“electronic delivery” refers to transmission of
information via facsimile, CD-ROM, electronic mail,
electronic bulletin boards, Internet, or computer
networks. SEC also issued interpretive guidance on
the use of electronic media by broker-dealers, transfer
agents, and investment advisors for the delivery of
information to their customers.
In the year 2000 SEC issued regulation requiring
listed companies to make their financial releases
available to shareholders at the same time as they
become available to investors.
In the following paragraphs we will try to argue
that it is possible to greatly increase the frequency of
financial reporting without a significant increase in the
preparation effort. Also, a method for the electronic
delivery of financial information will be discussed.
2 POSSIBILITY OF PAPERLESS
ACCOUNTING
In the early stages of the computerized era it was easy
to be convinced that we are approaching the so called
"paperless society," where the use of the paper for the
commerce would be greatly reduced. Ironically,
computers, with their vast ability of printing reports
and documents, increased the paper usage. It is
assumed that paper usage will grow at least until the
end of this decade (Rifkin, 1995, p. 450).
What are the reasons for such an increase in paper
usage despite the fast growing computerization?
Essentially, paper is preferred by readers. Reading
from a computer screen is not convenient. Paper is
accessible and easy to read. Only during the last few
years has significant progress had been made in
transferring documents electronically within a
company on the organization's network, usually local
area networks (LAN) and between companies and
individuals on wide area networks, mainly via
INTERNET. Still, these links for retrieval and
transmission of documents are awkward to use and
require technical skills. Since security issues are still
plaguing computerized networks, the users are
reluctant to make themselves dependent on
computerized documents. At the same time the
printing of computerized data in a high resolution and
even color hard copy is getting easier and cheaper.
The largest maker of printers "Hewlett Packard is
shipping monthly almost 1 million laser and ink-jet
printers" (Rifkin, 1995 p. 47).
Despite this paper glut the base for electronic
transactions is being expanded. Banks and software
companies are introducing the second time around,
easier systems for electronic banking. The
proliferation of PC's and increased ease of use of
INTERNET has drawn over 100 million estimated
users, as of year 2000.
The internal electronic mail system is used by
virtually all large companies and institutions. The
document imaging technology, which converts paper
documents into digital form, makes significant inroads
into insurance, banking, and other paper intensive
industries. And for years some operations, such as
electronic money transfers, have been for the most part
"paperless." Another application that could operate in
a similar manner, without paper is financial reporting.
Several large corporations, such as General Motors
or Microsoft, post their financial statements on their
Web sites. Although this information may be helpful
to investors, the usage of such sites may be
cumbersome to investors since each site is organized
in a different fashion making the search time
consuming. Furthermore, such sites may post only
financial statements and skip the supplemental
information, such as the SEC fillings. A shareholder
having twenty stocks will have to access twenty sites,
sometimes several times if the reports were not
released yet.
The clearinghouse would have a send emails
informing registered shareholders that their companies
reports were posted or just email the financial reports
and the supplemental information. This way every
shareholder, small or large, will have an equal
opportunity to review financial reports as soon as they
are released.
3 PROPOSED METHOD FOR
DISTRIBUTION OF FINANCIAL
REPORTS
Accounting is a prevalent computerized application in
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