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Assurance Track, AS5

21st XBRL International Conference “One Language, Common Vision: Role of XBRL Technology in the Post Crisis Era 19-21 October 2010 Beijing, China. Assurance Track, AS5 The User’s Perspective:  Japanese consumer-side project providing the investor’s point of view on XBRL assurance

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Assurance Track, AS5

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  1. 21st XBRL International Conference“One Language, Common Vision: Role of XBRL Technology in the Post Crisis Era19-21 October 2010Beijing, China Assurance Track, AS5 The User’s Perspective:  Japanese consumer-side project providing the investor’s point of view on XBRL assurance October 19 , 2010 Jun Owada, JICPA, ALTRAN Control Solutions Tadashi Shiozaki, XBRL section manager of Takara Printing Chie Mitsui, Data Analyst, Nomura Research Institute in Japan (NRI)

  2. XBRL was introduced in March 2008 Primary Financial Statements in Annual, Quarterly Securities Reports and Securities Registration Report are scope of XBRL adoption Approx. 41,000 XBRL documents are publicly available (as of 30 September, 2010) XBRL filing in Japan Status of XBRL filing to Japan FSA EDINET

  3. XBRL filing in Japan IFRS adoption roadmap Japan FSA issued the Roadmap to IFRS adoption 2015 or 2016 • NIHON DEMPA KOGYOFRS CO., LTD • Filed IFRS based Annual Securities Report and XBRL documents – IFRS Financial Statements as of 30 March 2010 • Using the IFRS Taxonomy 2009 Japanese label

  4. About Takara Printing Financial printer (Production and sales of printed matter related to the Securities Exchange Act, the Commercial Code of Japan and investor relations (IR), as well as the production and handling of legal and IR-related advertisements.) Owns about 50% of financial reporting market in Japan.

  5. About X-Editor X-Editor is Takara’s disclosure tool, released October, 2004. You can see X-Editor’s XBRL concept at 15th XBRL International conference’s presentation. “Preparing XBRL financial statements without error and without knowledge of XBRL “ And you can also see the X-Editor’s supporting result at 19thXBRL International conference’s presentation. “How we supported 710 submitting in one day”

  6. Process of the submitting, IFRS annual report including XBRL NIHON DEMPA KOGYO X-Editor HTML and XBRL (JP-GAAP only) financial report editor EDINET IFRS XBRL data IFRSF Audit Firm IFRS XBRL data IFRS taxonomy Takara Printing

  7. Result of research 1: Extensions 2: Overwrite label 3: Rules about setting label role

  8. Extensions overview

  9. reason for Extension 1: Difference of account headings rangepreparers: other current assetstaxonomy: other current financial assets other current non-financial assets 2: Japanese accounting customOperating income = Gross profit –(Distribution costs + Other Income – Other expense ) 3: Architecture of IFRS 2009 taxonomyIFRS 2009 taxonomy doesn’t use Dimension.So, we have to extend many taxonomy instatements of changes in equity.

  10. Overwrite label

  11. If label overwrite doesn’t allow (extension + overwrite label) / elements of each primary F/S Label overwrite can reduce extension Accounting concept must be the same Assurance

  12. Rules about setting label role IFRS 2010 taxonomy EDINET 2010 taxonomy Operating income/(loss) Label PositiveOrNegativeLabel Operating income PositiveLabel

  13. What is IFRS Taxonomy? IFRS Taxonomy released by the IFRS Foundation How about IFRS Taxonomy by Country? How about IFRS taxonomy by Industry? Taxonomy extension Semantic assurance work for extension of taxonomy - Comparability? Overwrite Why overwrite? Any difference? Flexibility vs. Comparability Issues From Assurance point of view

  14. Self introduction • Nomura research institute (NRI) collects company‘s financial statements (FS) from EDINET and TDnet. After checking data and standardizing for comparison we provides these data to sell-side analysts, buy-side fund-managers. Researchers and retailers are also our clients. Banks, insurance companies, credit rating companies, and research companies are using financial data in the same way. • Some of those involved are members of XBRL Japan’s financial sector’s working group. Sell side automatically calculating financial indicators then to forecast future cash flow EDINET Nomura Research Institute TDnet Check Standardize Buy side automatically calculating financial indicators Other Banks, insurance companies, Retailers information system for individual investors, etc • NRI is automatically mapping XBRL elements to standardized items using a formula link.

  15. Why do users need to restructure announced figures from FS as compareable items? • For screening for selecting certain performance companies from a lot of them, or investigating their rank of certain aggregate, user may use compareable indicators, —profit-to-sales ratio, year-to-year sales, turnover rates, debt ratio— etc. • Why indicators? Given the various types of revenues, the figures cannot be directly compared. Indicators like the growth orthe efficiency are needed to enable users to make comparisons between thousands of companies. They need to be calculated from original FS. • Why company announce original FS, not useful indicators? Investors select items based on particular investment strategies. Each of them has their own style to analyze. Besides investors analyze original FS for example looking at profitable segments or assets. • XBRL should be helpful in both respects.

  16. What can users hope to XBRL? Since 2008, users have invested in system development to make XBRL available automatically. They have also designed a new business model to use it in real time. However those system doesn’t work as expected. Because of error or unexpected trouble, data are still checked by people. Almost of these problems are not related to XBRL. So what is needed to handledata automatically? For example... １．All information that humans are able to understand unconsciously by seeing it in print on paper has to be written in XBRL, to tell that information to the computer system. ２．It is an unusual experience for users to receive various company's edited data all at once. Each company also has its own understanding. Thus, more rules for editing XBRL are needed. A voluntary meeting of XBRL Japan members had been called, for discussion about some real cases which have difficulties for understanding. I will discuss two cases that were highlighted by NRI at the meeting.

  17. Case1:Two <NetSales> and <OperatingRevenue> CompanyA ElementName： Jpfr-t-cte_OperatingRvenue1 CompanyB ElementName： Jpfr-t-cte_NetSales <Netsales>, <OperatingRevenue> are standard elements which FSA prepared. Both are popular element for indicators. However, the users cannot handle them in the same way. There is no spec to enable them to distinguish the difference on the XBRL file.

  18. Company B has “operating revenue” and “net sales”, which doesn’t have parent-child relationship in each other. It has been operating as software company for more than 20 years.Sales from software is announced. Company A Profile 1605 T,1 Industry mining industry Research, exploration, development, production and sales of oil, natural gas and other mineral resources, other related businesses and investment and lending to the companies engaged in these activities, etc. Company B profile 4827 F,Q Industry Real estate Development and sales of software,since 1987, The revenue from real estate finance (since 2008 ) is 83 %, now. • ”Net sales” has parent element "operating revenue", above itself. • It has been holding company since 2008. “Operating revenues” is including dividend revenue, too. Today, consolidated financial statement are complicated, however those information are important for investors, too.

  19. What did we find at Workshop? (1) • Case1 • Can we say, those elements are same unique element? (item?) • Since they have different parent elements at their presentation-link, we checked for calculation-link.Both companies made extensions on the calculation link correctly. • Based on current XBRL specifications, these elements are correct. • One question that was raised. Should we use both the element name and the calculation link as factor of unique element? • If authority recognized that it must be a rule for operation, userwould be fine. However difficulties could arise with the issuer’s side? Company A <NetSales> <OperatingRevenue> Company B <NetSales> <OperatingRevenue> ?

  20. Calculationdefinition CompanyB CompanyA Greenicon means extension links, Gray icon means base taxonomy’s links. Companies changed parent-child relation for the element “Operating revenue”, so now the calculation relations are correct. OK !

  21. Case:2 Three <AllowanceForDoubtfulAccounts> • we are able to know the potential risk of the company by seeing some types of allowances. CompanyC ElementName： AllowanceForDoubtfulAccountsIOAByGroup CompanyD ElementName： AllowanceForDoubtfulAccountsLongTermLoansReceivable CompanyE ElementName: AllowanceForDoubtfulAccountsClaimsInBankruptcyReorganizationClaimsAndOther

  22. What did we find at Workshop? (2) • Case2 • One filing agency explained about cases of company D and E, "They might choose these elements intentionally for emphasizing their situation to investors using specific “allowance” elements. • Since those elements' standard label are the same, users aren't aware of these difference by normal PDF. All of them are the same “allowance for doubtful account”. • This is a real case which only XBRL can tell correct meaning to investors. • We hadn't had gotten them in this case before. So next question that was raised. “Did the auditor see XBRL? “ • Currently, users have to contact the company by telephone directly if there is any suspicious. • Without expert ( accountant level )assurance, XBRL cannot be distributed dynamically.

  23. Conclusion What we would like to share…. • Should we handle item's uniqueness using element name and calculation link, even parent-child relationship of the presentation link together? Should we treat those links as definition information of element? • How we believe credibility of hidden (from print view) information? (link information) • We would like to know whether auditors also checked them, using XBRL function. • If company made unintentional mistake for selecting element or making calculation-link, is it correct report as audited FS?

  24. What should we do for next step? • We, user-members of XBRL Japan are going to continue to hold some work-shops this way. • Finding out next issues and discussing what we should consider for better usage of XBRL. • We hope that our challenge will contribute for improving usage of XBRL.

  25. For better usage of XBRL • XBRL has large potential to be reliable information for the capital market. • However, all this potential depends on the correctness of data. • System can check certain part, human has to check other part. • To ensure the reliability of the XBRL data, it must be ascertained that each part is correct The work of the experienced auditor, who knows how to test the human element in creating financial statements, can be invaluable in ensuring the reliability of the XBRL data.

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