REVIEWING financial statements lies at the heart of investment research. It’s what investors do most often when keeping track of the companies they follow or own.
So when it comes to choosing places to invest your IR website dollars, annual and quarterly financial statements are a high value target.
Well designed, highly usable financial statements improve the credibility of an IR website. They make it easier for investors to find the information they need to make informed judgments. And they can make companies appear to be more forthcoming than their competitors, something which can make investors and analysts view a company more favorably.
Although once confined to high-end online annual reports, the techniques we outline here are increasingly being used by companies in their regular annual and quarterly reporting to investors. And while they apply mostly to HTML reports, some of the recommendations can be used in PDF reports as well.
You can do a lot with online financial statements that you cannot do in print. However, just as in print there are a number of basic rules to observe to ensure that your financials are presented in a usable format:
Provide links from the statements to the respective notes
In paper reports, investors who want to understand the financial statements must flip between the financial statements and the footnotes.
On the Web, this activity can be made easier by providing links to the footnotes in the financial statements, preferably next to relevant line item. When users click on a footnote link, the footnote should open in a new browser window coded to appear in the top left of the user’s screen at a fixed size. This allows investors to view the financial statements while simultaneously having the respective note on their screens.
Here Reuters provides links to footnotes in its cash flow statement. Clicking on these links opens a new window coded to appear at a fixed size without browser buttons.
Linking to notes in a new fixed-size window is better than linking people away from the financial statements to the footnotes on a separate page. The latter forces people to click back and forth between the financials and notes, which can be tedious and disrupt the navigation flow.
However, it is important to properly code the new window in which the relevant note appears. It should be coded to open at a size in an a location of the screen that allows users of different operating systems and web browsers to see the financial statements window in the background. We find Reuters’ approach (above) very effective.
An alternative approach is to provide concise notes via tip boxes. In this method, a small text box appears when the user scrolls over the footnote number in the financial statements. Tip boxes are best for short qualifications but not for detailed explanations. They are probably best suited to multi-year financial histories where a qualification is important to proper understanding.
Tip boxes can provide context that investors need to understand certain figures.
Link from the financial statements to the MD&A
Management’s Discussion and Analysis in annual and quarterly reports is supposed to provide investors with management’s insights into the financial and operational position of the business as seen through management’s eyes.
Companies can provide investors with additional context in their financial statements by adding links from line items to any relevant abstracts or discussion in their MD&As. The links shouldn’t just take people to the start of the MD&A, but should go to the exact location in the MD&A where the relevant context appears.
This can be done very easily by using invisible code known as an anchor. Anchors allow you to link to a specific place or bookmark on a webpage.
IBM in its 2003 annual report gives users the ability to click from a line item to the specific discussion of the item in the MD&A as well as to the footnotes.
Provide data in different views
The interactivity of the Web allows companies to present financial information for different periods, different reporting segments, different currencies and in different accounting conventions at the click of a mouse on a single screen.
Some high-end financial statement tools allow investors to configure their own financial statements by selecting the line items they want to view by using a simple online form.
Providing the ability for investors to choose what financial information they want is a valuable feature for companies with geographically dispersed shareholders. A company in Europe that has ADRs listed in the United States can provide its financial statements in both U.S. Dollars and according to U.S. GAAP, and at the same time provide the same information in Euros according to IFRS.
The same approach can be done for providing results on a consolidated or unconsolidated basis, or to show group level results and results by reporting segment. The possibilities and permutations are endless. All that’s required is an understanding of what investors want and to provide it in ways that are easy to use.
In this earnings statement from one of its summary annual reports, Unilever gives users the choice of viewing figures in three different currencies by clicking on the currency tabs (circled).
In its 2003 Annual Report, GE reports its results on a consolidated and unconsolidated bases. Users who want to see prior years' results can click on the year links in the top menu. Users who want to see the three-year results on a consolidating bases can do so by clicking on a link in the top menu. (See below).
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Provide links to download data in Excel
Investor relations is one of the few areas on the Web where users want to interact with and manipulate the information they find. In other areas of the Web experience, information is a bridge to doing something else. It describes a product that people can buy or delivers information that people might want to print or save, but rarely edit or manipulate.
For investors, though, information and data are the pot of gold. It’s what they come to the site to obtain. It’s therefore essential for information on investor relations sites to be in formats that let users retrieve and repurpose information.
Standard HTML text is the first choice for all content on an IR website. But for complex financial tables and statements, downloadable spreadsheets can save investors considerable time re-keying or pasting information from a printout or the screen.
Spreadsheet downloads are a convenience for those who are comfortable using Excel, including investment professionals and, to a lesser extent, individual investors. In a 2001 member survey by the 5,000-member CFA Institute, portfolio managers and analysts ranked downloadable data as the fourth “most valuable” out of 12 information types.
Since only about 15% of large-cap companies provide them, companies that provide Excel downloads can stand out and strengthen their credibility with investors by appearing to be more responsive and forthcoming.
When providing Excel downloads in your annual report, provide a link to download the Excel viewer. The Excel viewer is a free software program from Microsoft Corp. for people who don’t have Excel installed on their computers.
It’s important to save Excel files in an inactive state before uploading them. Excel files are saved with the user’s last action stored for retrieval when the file is opened again. When the saved file is uploaded to the Internet, people accessing it will see what the last action of the company was before it uploaded the spreadsheet.
Also be careful that there are no links to or formulas based on information that is not included in the company’s public disclosures.
Steel giant Arcelor lets investors download individual financial statements in Excel, PDF or obtain a print-friendly HTML version.
Use legible font types and sizes
Use a minimum 12 pixels initial text size so that the figures in the financial statements are comfortable to read. It is best to use sans-serif fonts like Arial, Verdana or Tahoma because they are easier to read on a computer monitor than the more traditional serif fonts like Times Roman.
Many low-sighted users prefer to use their own text-size preferences on the Web. Make sure that your financial statements are not coded to override users’ preferences.
Users must have the ability to increase and decrease the text size in the financial statements by using the “view/text size” command in Internet Explorer 6.0. Often designers use absolute text sizes in their designs which override users’ preferences.
Medium Text Size
Largest Text Size
Users must be able to increase the text size of the financial statements.
Highlight the current year column
When laying out financial statements, the most common approach is to place the current year closest to the description of the line items on the left. However, this by no means standard practice, so you can help investors by making it clear to them which column has the most recent figures.
The best way to highlight the current year’s figures in financial statements by bolding them or using slightly larger font size. It can also help to shade the current year column or make it stand our from the rest using strongly contrasting colors. Since many people are color-blind, it is not a good idea to rely on color for emphasis alone.
Draw attention to the current year's figures by putting them against a strongly contrasting color and using bold or a larger text size.
Show percentage and absolute changes between periods
Make it easier for people to discern meaningful variances in performance between periods by using a percentage change column in the financial statements.
You can also show the absolute change between periods by showing decreases in brackets and increases outside of brackets.
In fact, you can provide both percentage change and absolute change columns by providing the financial statements in different views, as illustrated in the example of J.P. Morgan Chase on the next page.
In this annual report, users could choose to view percentage change or absolute change views of the income statement using the links at the top of the screen.
Make financial statements accessible to users with disabilities
Most financial statements online are not coded to be read by blind users who rely on special screen-reading software to navigate the Web. This denies a segment of the population access to information which other people are able to use in their investment decisions.
To make financial statements accessible to voice synthesizers and Braille software, companies have to define the relationship between each data column and row using HTML code so that the information makes sense when it is read by the software.
For technical details on the coding requirements, see the Web Accessibility Initiative’s guidelines.
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