Extensible Business Reporting Language (“XBRL”) September 10, 2007 http://www.xbrl.org
Mike Willis Founding Chairman, XBRL International Partner, PricewaterhouseCoopers [email protected] Discussion Topics Background Questions? What is XBRL? You are: Where is XBRL relevant? A. In Auditing? What are the benefits / costs? B. In Tax? C. In industry? Where do you implement? D. In government/not-for-profit? How do you realize the benefits? E. Retired and here for the fun of it? You would rate your knowledge of XBRL as: A. Never heard of it B. Heard of it but don’t know what it is C. Aware of it but not sure what it does or why it is relevant
What is XBRL? eXtensible Business Reporting Language International platform for business reporting AnAn information International standard Business that enhances Information the quality and What is XBRL? efficiency of business information for internal and external consumers Format Standard Supply chain understanding of a standardized way to communicate business information Provides information with identity and context that can be understood by a range of software applications allowing seamless interface with databases, business reporting systems and spreadsheets Can be used to enhance compliance processes
1 XBRL – More Than Just Definitions XBRL International, independent non-profit consortium
Develops and maintains the XBRL Standard PresentationPresentationPresentation Recognizes and encourages XBRL best practices (approves taxonomies) Standardization Presentation ГрошіДеньги現金及び現GeldComptant现金与现金Kas та & en и Geld їх ихGeldmiddelen et еквіваленти эквивалентыComptantnahe 金等価 等价物 Mittel 物 Provides a framework for further development Cash & EquivalentsCash Equivalents Facilitates knowledge sharing with members & supports XBRL Jurisdictions Label References GAAP I.2.(a) Sweden Russia cashCashEquivalentsAn United Instructions United France dShortTermInvestments Kingdom Ad Hoc disclosures States XBRLXML IASB Belgium Item China Japan Canada Calculation Denmark Formulas Poland Korea Cash = Currency + Ireland India Deposits Cash ≥ 0 Germany Contexts Spain US $ Netherlands Singapore Switzerland FY2004 Validation Budgeted New Colombia Brazil Italy Zealand Australia United Arab South Africa Argentina Emirates
What does it look like?
Spreadsheets So what. 1. Are not that pervasive in compliance processes What does XBRL look like? 2. Contain many of the control processes relevant Example here to compliance processes Example here 3. Are difficult to manage What does a Taxonomy look like? 4. Are the primary application for aggregation and Example here analysis of information for enterprise decision How does it make your life better? analysis Example here Example here
2 Publish Access Where is XBRL relevant? Business Reporting Processes
Analyze Validate
XBRL Regulatory Adoption – some of The business reporting supply chain those publicly announced Commercial Financial Services and Government Agencies Others Australian Government Canadian Securities Regulators Transaction XBRL XBRL Australian Tax Office KOSDAQ – Korea Layer Ledger External Reporting Committee of European Banking Bank of Spain Supervisors (CEBS)/COREP National Bank of Belgium Internal External Investment, Business Economic Chinese Securities Regulation National Tax Agency of Japan Processes Business Business Lending, Operations Policymaking Commission (CSRC) {sponsoring Reporting Reporting Regulation Shenzen and Shanghai exchanges} New Zealand Exchange Dutch Government U.S. Securities & Exchange Spanish Stock Exchange Commission Commission – 3000 companies Shanghai Stock Exchange s Statistics Dept of Ireland Shenzhen Exchange Singapore ACRA Financial Other Publishers Central Bank of Japan Tokyo Stock Exchange Companies Investors Participants and Data Banks Bundesbank UK Companies House Aggregators Eurostat UK Inland Revenue/HMRC Financial Service Agency of Trading Japan US Federal Financial Institutions Management Auditors Regulators Partners Accountants The Irish Revenue Examination Council (includes FDIC) Software Vendors
3 The Dutch Taxonomy Project http://www.xbrl-ntp.nl/english
“The Dutch government intends to reduce the administrative burden of businesses with 25 percent.”
Banco de Espana 3 Reasons why XBRL is important to XBRL SPAIN GOAL MAIN INICIATIVES LATINOAMERICA APPROACH CFOs II. Taxonomies building and implementation CFOs want to tell your own story
2005-2007 Spanish Taxonomies Done / Developing IPP Public Periodic Information Stock Exchange Sup. CFOs don’t want to use standard reporting PGC90 GAAP 1990 ICAC (Government)
SST Property Appraisal Companies Bank of Spain templates
ES-BE-FS Financial Information Exch. Bank of Spain ES-BE-CBx Central Balance Sheet Bank of Spain CFOs need to lower your reporting costs and SEPBLAC Anti Money Laundering Bank of Spain
BP Balance of Payments Bank of Spain enhance your related controls IGAE Public Sector Accounting Gov. Accounting
INE Structural Statistics Nat’l Statistics Institute
RSC Corp. Social Responsibility AECA (Accountants)
LENLOC Rendering of Accounts Local Entities Superv.
4 Closer Look at Supply Chain distortion Closer Look at Supply Chain distortion IBM Form 10-K Cisco Form 10-K
% Provided % Provided Reported Elements Form 10-K Aggregator Reported Elements Form 10-K Aggregator Income Statement 90 43 Income Statement 8066% 53 48% Balance Sheet 78 58 Balance Sheet 78 53 74% 68% Cash Flow Statement 70 39 56% Cash Flow Statement 6473% 47 Total elements provided ~4500 ~500 11% Total elements provided ~450011% ~500
Closer Look at Supply Chain Distortions Cisco Systems - Income Statement
Income Statement
Omissions: In 10K but not Aggregator: Net sales: Product 20,853 Service 3,948 Cost of Sales: Product 6,758 Service 1,372 Omitted Sales and marketing 4,721 General and administrative 959 Total operating expenses 9,255 Interest and other income (loss), net 620
Labelling Errors: Unusual Expense (Income) 26 Total Special Items In-Process R&D 26
Numerical Errors: Element Aggregator 10K % Difference Total Operating Expense 17,385 9,255 87.8%
5 SEC Voluntary Filing Program What application is used to prepare http://www.sec.gov/spotlight/xbrl.htm reports? Includes range of notable filers including: 1. Hyperion Financial Management 3M Company Market Cap = $2 Trillion Adobe •IBM 2. Cartesis ADP • Infosys 3. Oracle Reports Altria • Lehman Brothers Bristol Myers Squibb Company • Lockheed Martin 4. FRx (Microsoft Dynamics) Comcast •Microsoft Dow • Pfizer 5. Cognos Dupont • Peco Energy 6. Office EMC Corporation • PepsiCo Exelon •PNC 7. Other Ford Motor Company • Qualcomm Incorporated Ford Motor Credit Corporation • Satyam Computer Services Ltd. WR Grace • United Technologies General Electric Corporation Hitachi • United States Steel • Xerox Corporation
United Technologies Corporation Reporting and compliance process Current 10-Q Process Flow controls are: 1. Fully automated Supplemental Data 2. Partially automated ERP 3. Partially manual 10-Q in 10-Q in 4. Fully manual ERP HFM Word HTML 5. Don’t have any process controls
ERP
Total Process Review Review Time: and Check and Check 10-Q in 845 Hours XBRL Edgar
6 United Technologies Corporation Future 10-Q Process Flow At the data warehouse……….. What about tagging at the 1. Data quality is a primary concern origin? (Wacoal) ERP 2. Data validation is a problem for the data warehouse personnel to identify and address HFM 10-Q in ERP XBRL 3. Data validation errors are sent back to the XBRL Tagged ‘providing’ application owner for resolution
ERP 4. Updated data is resent ‘upstream’ to the warehouse where it is validated (again) Supplemental Data Edgar 5. See step 3 for next step. XBRL Tagged 6. Data errors are quickly and efficiently identified and addressed Total Process Time: 700 Hours
Key Questions Business Process Change The Prior process validation rules were applied too late in the process to do How does information access work? any good. As a result, the errors were sent back to the banks for ‘correction’ and thus a cycle of error and corrections ensued. Who is responsible for validation?
Who is responsible for analysis? Legacy Processor
Who is responsible for reporting?
Validation
7 Business Process Change
The current process explicitly defines the data requirements and related business & validation rules such that they can be applied at the bank level. This simply shift enabled a Current50% increase in data quality, a 98% acceleration in analytical processes and dramatic improvements in the efficiency of the overall process. What are the benefits and costs?
Lets look at an example From proprietary to infrastructure Candy? Match the infrastructure to the standard General Standardization Impacts 1. Rail Road A. RJ 11 Lower costs 2. Telegraph B. 40’ x 8.5’ x 8’ Higher precision 3. Electricity C. UPC Increasing volumes 4. Telephone D. HTML / SOAP / Web Services Accelerated frequencies 5. Shipping E. 4’ 8.5” Enhanced resource allocations 6. Products F. RJ 45 More efficient processes 7. Networking G. Rosettanet, MDDL, XBRL New markets 8. Internet H. Morse Code 9. Information I. 220V, 50Hz
8 Port of Rotterdam evolution Analytical concepts are: 1. Embedded in specific applications 2. Redundant across applications 3. Inflexible to adjust to market changes 4. Difficult to synchronize across a variety of applications 5. Opaque and difficult to manage and coordinate 6. Others?
The integration of disparate systems are: Primary Costs 1. Based upon the physical integration of various Collaboration across silos software applications Process reengineering / design 2. Implemented by systems integrators and Change management consultants Taxonomy development – (aka information 3. Inflexible when considering incremental systems architecture) of newly acquired entities Software enhancements 4. Not that supportive of your current compliance Embedded in new versions process needs Available plug-ins New applications? (Taxonomy Management, Validation) http://www.xbrl.org/tools
9 Standardization drives efficiencies Analysis today Standardized ledger Time / Resources applied to: Enables standardized interface & transparency Accessing data Enables standardized rules (and controls) Inputting data into analytical application Correcting validation and input errors Simple Demo Performing analytics XBRL Globalized Ledger Analyzing analytical results Rules Engine Data Rules Asking follow-up questions X = (D7/F8) Scalable from Quickbooks to large ERPs Y = (D7/D8) Making decisions
Software
What changes XBRL Enabled Analysis Data = Time / Resources applied to: Standardized data XBRL GL Display Accessing data Display Standardized rules Rules = Result Result XBRL Inputting data into analytical application Automated access Formulas Correcting validation and input errors Automated validation Performing analytics Automated analysis Analyzing analytical results Web service Data Rules Asking follow-up questions Data Rules Data Rules X = (D7/F8) Data Rules Data Y = Rules(D7/D8) Analyzing answers to questions Data Rules Data + Rules Data Rules Data Rules Making decisions RulesSoftware Engine Software
10 What does this type of process enhancement look like? Process Improvements Here are a couple of product demos: Disparate data accessed in a more automated manner Edgar-Online IMetric Data validations automated/performed by providers http://www.edgar-online.com Data & Rules are: transparent & reusable http://www.edgar-online.com/products/imetrix.aspx independent of software = more adaptable to changes Rivet Software Crossfire Analytics are: http://www.rivetsoftware.com lower cost = accelerate frequency http://www.rivetsoftware.com/content/index.cfm?fuseac more consistent tion=showContent&contentID=195&navID=166 applied against deeper levels of data http://www.rivetsoftware.com/resources/files/CrossfireL Explicit connectivity of data with policies & standards aunch/CrossfireAnalystReportCreation.htm Review is more timely and automated Decreased effort for a variety of presentations
The business reporting supply chain
Internal External Investment, Business Economic Where do Processes Business Business Lending, Operations Policymaking you implement? Reporting Reporting Regulation
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11 How to identify the optimal implementation location? Key Implementation Questions? Manual, untimely, inaccurate, incomplete aggregation or What critical information is not available in a timely, consolidation processes accurate or complete manner? Manual access (cut & paste) Where is there the most pain? Consumer or inadequate validation Is poor data quality a common topic? Analytics embedded/opaque rather than shared Are there common controls that have different Implicit knowledge required (e.g. policies) implementation concepts depending upon the software? Sourcing from wide range of disparate sources Is there a track record of collaboration or silo oriented Multiple ledgers accessed within common processes efforts? Lack of ‘standard chart of accounts’ implementation Where is there the largest opportunity for cost savings? International operations & processes (e.g. language) Do you have the proper tools? And training? Others?? Does your organizational culture favor ‘big bang’ or evolutionary change?
Common implementation areas Compliance/consolidation/aggregation processes Spreadsheet aggregation processes Standardized or ‘Virtual warehouse’ Standardized Ledgers, Journals, etc. How do you realize the Analytical processes (controls, internal audit) benefits? Reporting processes Business Intelligence Corporate Policies <<<<<<<< Entity services <<<<<<<<<<< Others??
12 Overcome the barriers Identify the ROI Project Scope Benefit examples Budget approval Costs, Time, Completeness, etc. Process persistency Inertia of existing process Quality/Accuracy (data error rates) Understanding of existing process problems Transparency (information, policies, analytics, rules) Others?? Misunderstanding of proposed solution Cost examples Silo orientation Training Available tools <<<<<<<< Design/reengineering/Taxonomy development Tool costs (upgrade existing tools, plug-ins, incremental apps) Taxonomy design Implementation time Others?? Change management Others??
What you do next? Educate yourself and your team see Appendix for sources and case studies XBRL conferences and sessions Extensible Business Reporting Talk with others who have implemented Language (“XBRL”) Investigate/target process areas September 10, 2007 Develop Project plan and ROI assessment http://www.xbrl.org Assess tooling needs, availability, fit Implement and assess cost/benefit realities Mike Willis Founding Chairman, XBRL International Partner, PricewaterhouseCoopers [email protected]
13 Relevant Resources IMA Suggested Reading: http://www.imanet.org/research_technology_reading.asp SEC XBRL VFP SEC http://www.sec.gov/spotlight/xbrl.htm XBRL Appendix http://www.xbrl.org XBRL GL http://www.xbrl.org/GLTaxonomy/ Tools http://www.xbrl.org/tools Products and Services http://www.xbrl.org/productsandservices XBRL US Site http://www.xbrl/us SEC VFP http://xbrl.org/us/frontend.aspx?clk=LK&val=27 SEC VFP Coaching http://www.xbrl.org/us/coaching/ Resources http://xbrl.org/us/frontend.aspx?clk=LK&val=35 FEI XBRL http://www.fei.org/advocacy/xbrl.cfm CFO.com XBRL site http://www.cfo.com/guides/guide.cfm/8310234
Suggested Reading Demonstrations Global Ledger Practices Guide for Study Edgar-Online IMetric http://www.gl.iphix.net/ ROI on XBRL: http://www.aicpa.org/pubs/jofa/jun2007/stantial.htm http://www.edgar-online.com Hitachi Blogs: http://www.edgar-online.com/products/imetrix.aspx http://blog.hitachixbrl.com/2006/10/05/welcome/ http://blog.hitachixbrl.com/2007/01/16/the-entity-problem/ Rivet Software Crossfire http://blog.hitachixbrl.com/2007/01/30/relationships-matter/ http://www.rivetsoftware.com http://blog.hitachixbrl.com/2007/02/13/in-pursuit-of-process/ http://www.rivetsoftware.com/content/index.cfm?fuseac http://blog.hitachixbrl.com/2007/01/09/master-data-management- the-xbrl-way/ tion=showContent&contentID=195&navID=166 http://blog.hitachixbrl.com/2006/12/08/adaptation-or-evolution- http://www.rivetsoftware.com/resources/files/CrossfireL what-is-your-xbrl-strategy/ XBRL Ledger white paper: aunch/CrossfireAnalystReportCreation.htm http://www.imanet.org/pdf/8xbrl.pdf Google OneBox FFIEC White Paper: http://www.iphix.net/resources/nunavut.htm http://www.xbrl.org/us/us/FFIEC%20White%20Paper%2002Feb2006.pdf
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