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The Emerging Need for E-Commerce Accepted Practice (ECAP) 61
The traditional accounting methods do not deal with the unique complexities
that e-commerce introduces into the business. Accounting standards do not
specifically deal with the financial reporting standards for Internet firms, often giving
these firms abundant freedom in their financial reporting. For example, the
development cost of Web sites should be amortized evenly over their useful
economic lives. Costs related to the development of a web site from planning,
design, implementation and maintenance should be accounted for differently, e.g.
infrastructure and initial set-up are to be capitalized. How do auditors measure the
useful economic lives of Web sites, domain names, subscribers and goodwill
(Coppin, 2001)?
As a sign of increasing usage of the Internet for business KPMG (2001)
reports the following:
• Several companies highlighted the use of the Internet in core insurance
operations, within their financial statements.
• Companies are disclosing legal issues related to e-commerce on their financial
statements.
• Some companies have integrated their comments on e-commerce into the
Chairman’s/Chief Executive’s statement in order to emphasize that e-commerce
is an integral part of their business activities rather than just a distribution
tool.
• A number of insurers are using Internet technology to support their intermediaries.
• A major international assurance company offers its customers the ability to
apply for mortgages and pensions on-line and to obtain valuations of their
pensions and unit trusts.
• A major insurer has developed an Internet concept for retail consumers, which
gives quotes for motor insurance after six questions. It selects the most
competitive quote from a panel of insurers. It has also developed Internet joint
ventures with a car manufacturer.
To approach some of these control issues above the authors propose the
development of a framework called e-CAP (Electronic Commerce Accepted
Practice). E-CAP’s purpose is providing guidelines for systematically and properly
dealing with the processing of electronic transactions.
Table 6 contains examples of some issues affecting electronic commerce.
The impact of the connectivity age is vast. Though it is early days for ecommerce,
there is an urgent need for professional people (IT professionals,
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