The Internet has become an increasingly important means of communication. By August 2001, the world population on-line reached 8.46%. The top three countries in terms of on-line population were Sweden (64%), the US (60%), and the UK (55%). Forecasts made by eTforcats (2001) in July 2001 suggest that globally the on-line population is expected to grow from just under 7% in 2000 to 20% by 2006. The Internet is also an increasingly attractive market place with business-to-business e-commerce predicted to increase from US $919 billion in 2001 to US $8.53 trillion by 2005.

The Internet is also increasingly important for financial reporting. The majority of the largest listed companies in developed countries now have an Internet website on which they publish financial information. This Internet usage varies between countries. Lymer, Debreceny, Gray, and Rahman (1999), for example, find that Asian, African, and South American companies lag behind North American and European companies in their provision of on-line corporate and financial information. Differences also exist in European companies. For example, 5% of the top 30 Italian companies did not have a website and 13% of those companies with a website did not disclose any financial information in 1999. By contrast, the figures for the top Swedish 30 companies were 0 and 3%, respectively.

Potentially, the Internet has the power to revolutionise external reporting. Company websites can include the traditional annual reports together with additional financial and non-financial information in multiple formats. The use of multimedia presentational formats also allows corporate information to be presented in innovative ways. Indeed, large volumes of data are posted on the Web with hypertext and hypermedia being used extensively. Such developments have a great potential impact on users, auditors and regulators in terms of widening user access and creating issues relating to security, auditabilty and regulatability.

The extent to which this potential will be realised is currently unknown. With rare exceptions such as Microsoft, most current websites still make relatively unsophisticated use of Internet technology. Much speculation exists, but most is based on individual personal observation rather than on empirical study or group opinions. Moreover, the prior literature largely exists in a theoretical vacuum. Furthermore, most prior speculation is not time-specific. As a result of these deficiencies the prior literature is of limited value for policy-making. This paper aims to overcome some of these lacunae. It aims to develop a consensus among participating experts (representing key interested parties) on the likely developments in financial reporting on the Internet by 2010 and then to explore the main issues and consequences for these parties.

A modified Delphi technique was used to obtain consensus. Delphi is a widely used forecasting technique involving repeated interactions between researchers and a group of experts. In this study, the experts themselves raised the issues of importance and also determined the agenda for discussion by completing an open-ended questionnaire survey. Subsequently, a theme-based Likert scale questionnaire survey, face-to-face interviews and a round-table meeting were conducted. Twenty experts in accounting and/or the Internet participated, representing academics, auditors, regulators, reporting companies and users. As all but one of the experts were from the UK, they are not necessarily internationally representative. This research, therefore, has most relevance to the UK and to other countries in Europe and elsewhere which have a similar level of Internet development.

Conceptually, this paper adopts a three-dimensional framework, which emerged from the initial open-ended questionnaire: the role of the Internet (problem solver or problem creator), the determinant of change (technological determinism, non-technological determinism or contingency perspective) and the pace of change (conservatism, gradualism and radicalism). The expert responses to the initial questionnaire provided a variety of views, which could be categorised along each of the three dimensions. The subsequent Delphi process, however, resulted in consensus views on an overwhelming majority of issues (although occasionally divergence remained). This allowed us to construct a consensual financial reporting scenario.

This paper makes several contributions. First, and most importantly, unlike prior individual personal observations, it provides consensus views of a group of experts on financial reporting on the Internet by 2010. In particular, this paper complements prior studies by providing an empirically-derived overall scenario, which supports the approach of customisation around a standard report. In addition, it provides consensus views that support or reject some of the speculations in the prior literature. Although carried out in the UK, this research should be pertinent to other European countries with advanced economies and a level of Internet usage similar to that of the UK. Second, it uses the three-dimensional conceptual framework to analyse and synthesise predictions and to build a scenario. Third, the issues, dilemmas and policy implications that are identified should be relevant to various interested parties and provide scope for further academic research.

The rest of the paper consists of seven sections. The next section reviews the prior speculative studies of financial reporting on the Internet. The research methodology used in this study (a modified Delphi technique) is then outlined. Section 4 sets out the main elements of the conceptual framework. Section 5 then presents the main consensus, which emerged from the research. In Section 6 this consensus is then analysed against the background of the conceptual framework. In Section 7, we set out the overarching financial reporting scenario, which emerged from the research and reflect on several key issues, which arise. The final section summarises, investigates the implications for the major interested parties and suggests avenues for further research.

All commentators agree that the Internet is here to stay. Indeed, most commentators see the demise of the hard copy annual report as inevitable. Generally, the Internet is welcomed as a potential solution to some well-recognised problems of general purpose reporting (such as untimely information and lack of customised information). The Internet may facilitate the increased provision of information, real-time reporting, customised and disaggregated financial reporting. Green and Spaul (1997), for example, see the Internet as enabling the communication and dissemination of a whole range of additional non-financial information.

Many commentators see the Internet as overcoming a traditional bugbear of financial reporting: untimely information. Certainly the potential is there. Many companies, such as US-based Cisco, already have near real-time reporting for their management accounts. The US Financial Accounting Standards Board (FASB) (2000), however, sounds a note of caution: real-time reporting under current technology may deliver more data, but not necessarily more information. Moreover, whether companies are comfortable with real-time data has received less consideration.