User-Customized Financial Reporting: The Potential of Database Accounting and the Internet

One of the most widely-accepted ways for publicly-held firms to communicate the results of their 

operations to stockholders, creditors, and other external stakeholders is to issue financial 

statements. The existence of multiple acceptable, yet not reconcilable, accounting procedures 

causes these financial statements to be inefficient and ineffective communication devices. Critics 

of existing financial reporting standards have argued that the operation of an efficient capital 

market requires a more effective dissemination of information to investors, creditors, and other 

stakeholders than current accounting standards provide. Financial economists that have studied 

capital markets have found that these markets may not be highly efficient, especially for smaller 

firms and for firms with lightly-traded equity securities.

This paper acknowledges that events approaches to accounting that use relational databases are 

becoming prevalent in larger firms. These approaches identify semantic accounting phenomena of one 

sort or another and make these semantic primitives available to accounting information users in 

various ways. This paper describes how current advances in inter-entity networking, such as the 

Internet, and database management software, such as data warehousing, OLAP, and data mining tools, 

could ultimately provide substitutes for periodic paper-based financial statements.

This paper discusses the prospects for extending database accounting to financial reporting 

applications. One major barrier to the extension of these accounting approaches to financial 

reporting has been the difficulty of delivering information stored in large databases to 

widely-dispersed users. The Internet may provide a means for overcoming this barrier. A second 

major barrier has been the need to restrict access to certain portions of the database while 

providing sophisticated querying capabilities. The paper describes how the currently emerging 

integration of advanced database manipulation tools with the World Wide Web (the Web) can offer 

ways to overcome this second barrier. Finally, the paper notes some concerns about auditing and 

controlling third-party access to firms' databases to prevent extraction of sensitive information.