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XBRL Is Not X tremely B oring R eporting L anguage

XBRL Is Not X tremely B oring R eporting L anguage. AGA / ASMC Spring PDC. Joe Kull PricewaterhouseCoopers LLP March 14, 2007. We’ll cover…. What is XBRL? Why its time has come How it works, what it costs Global adoption XBRL in the US.

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XBRL Is Not X tremely B oring R eporting L anguage

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  1. XBRL Is NotXtremely Boring Reporting Language AGA / ASMC Spring PDC Joe Kull PricewaterhouseCoopers LLP March 14, 2007

  2. We’ll cover… • What is XBRL? • Why its time has come • How it works, what it costs • Global adoption • XBRL in the US

  3. So why don’t we ‘containerize’ data and transport it anywhere…..

  4. So What Is XBRL? • It is a tool • An extension of XML • It is an open standard that ‘tags’ quantitative or qualitative data • With the ‘containerized’ data it can be moved over any system • It helps overcome system integration issues by making the data interactive with any system • It is revolutionary by making data a commodity

  5. XBRL Is A Way To Achieve Interactive Data • Application & System Centric System Integrators, developers, architects manually program expensive interfaces and batches that must be modified for every change and new system at every location • Standards & Data Centric Business rules are tied to data source, tagged in an interoperable format so that data is ready in real time for reporting and analysis directly from any system

  6. The Basic Reporting Processes Publish Collect Business Reporting Processes Analyze Validate

  7. The Data Pit

  8. Journal Entries Sub Ledgers General Ledger Financial Reporting xbrlInfo xbrlInclude summaryReportingElement Business Activity Transaction Detail Source Documents XBRL GL And XBRL FR Source Systems Internal Reporting Pipeline Reporting Annual(Quarterly) Reporting Financial Systems Journalize Accounts Payable Accounts Receivable Order Entries Purchasing Fixed Assets Human Resource Payroll Regulatory Reporting Aggregation Consolidation Tax Decision Support Manual Transaction Extract & Transform Late Entries Adjustments Manual Entries Business Activity Management Financial Data Mart/ Repository Business Events Benchmark & Analysis Budgeting & Forcasting Monitor, Audit & Control

  9. Why Now? Consider the Trends… • Time spent doing: • Transactions – cut in half to 34% • Controls – slight increase to 20% • Analytical – almost triple to 40% • Highly Effective Organization more likely to: • Standardize/common processes rules • Pursue process simplification • Use best practices • Cascade metrics through organization • Focus on exception based reporting and analytics • Customize internal reporting

  10. Reporting An Ever Changing Landscape

  11. So how do we create a flexible, yet reliable and timely, reporting process? COSTLY • Hire more people • Application integration • ERP • XML • Proprietary schemas/taxonomies • Standards-based schemas/taxonomies (e.g. XBRL, HR-XML) Solution Options: Cost and Performance Effectiveness EFFICIENT

  12. ‘Standards’ Revolutions • Industrial Revolution • Transportation • Construction • Retail • Medical • Education • Technology IT IS TIME FOR DATA

  13. XML Markup: What Does it Look Like? Gerald Bostock 8080 Floppy Disk Drive San Sushi, CA 94078 +1 (650) 555-1424 Birthdate: 19 October 58 <name>Gerald Bostock</name> <address> <street>8080 Floppy Disk Drive</street> <city>San Sushi</city> <state>California</state> <country>United States of America</country> <postcode>94078</postcode> </address> <telephone>6505551424</telephone> <birthdate>1958-10-19</birthdate> Ordinary Information Metadata: Information About Information

  14. Standardization Presentation Cash & Cash Equivalents References GAAP I.2.(a) Instructions Ad Hoc disclosures Label cashCashEquivalentsAndShortTermInvestments Calculation Cash = Currency + Deposits FormulasCash ≥ 0 Contexts US $ FY2004 Budgeted Validation XBRL – More Than Just Definitions Presentation Comptant et Comptant Equivalents Presentation 現金及び現金等価物 Presentation Гроші та їх еквіваленти Presentation Деньги и их эквиваленты Presentation Kas en Geldmiddelen Presentation 现金与现金等价物 Presentation Geld & Geld nahe Mittel XMLItem XBRL Item XBRL Item

  15. XBRL XBRL XBRL The Business Reporting Supply Chain XBRL Financial Statements XBRL-GL The Journal Standard Transaction Standards Business Operations Internal Financial Reporting External Financial Reporting Investment, Lending, and Regulation Processes Collaboration is KEY!!! Companies Financial Publishers and Data Aggregators Investors Participants Trading Partners Management Accountants Auditors Regulators Software Vendors

  16. XBRL International • Consortium began in 1998 • Currently 450 company members • Governance by an International Steering Committee • Established Jurisdictions • At Large Representatives • Board of Advisors • Standards Board

  17. XBRL Jurisdictions NO SE FI NL DE CZ DK IASB LU PL RU HU CA SI UK AT UA IR BE TR US SP GR CN FR PT LB JP IT KR CH IN MT VZ HK AE CO SG BR Established Jurisdictions AU ZA Provisional Jurisdictions NZ AR in Construction & in Project

  18. Software Vendors Include:

  19. XBRL Regulatory Adoption – Publicly Announced Government Agencies • Australian Tax Office • Committee of European Banking Supervisors (CEBS)/COREP • Chinese Securities Regulation Commission (CSRC) {sponsoring Shenzen and Shanghai exchanges} • Dutch Tax Authority • Dutch Water Authority • Spanish Stock Exchange Commission – 3000 companies • Statistics Dept of Ireland • Other • Bank of Japan • Bundesbank • Eurostat • Financial Service Agency of Japan • The Irish Revenue Commercial Financial Services and Others • Canadian Securities Regulators • KOSDAQ – Korea • Bank of Spain • National Bank of Belgium • National Tax Agency of Japan • New Zealand Exchange • U.S. Securities & Exchange Commission • Shanghai Stock Exchange s • Shenzhen Exchange • Tokyo Stock Exchange • UK Companies House • UK Inland Revenue/HMRC • US Federal Financial Institutions Examination Council (includes FDIC)

  20. US Public Sector Pilot Programs • US Department of Interior, National Park Service: Convert annual financial reporting process of 386 US park areas into an automated, straight through reporting architecture using XBRL Standards-Based Reporting • US Department of Housing and Urban Development: Demonstrate improved data management through systems interoperability -- loan servicing and property accounting to other Department-wide systems • Securities & Exchange Commission • Looking at state/local pilots with AGA

  21. US Agencies Adopt XBRL • US Federal Financial Institutions Examination Council mandated XBRL for quarterly Call Reports from banks October 2005 • Results demonstrate value compared to legacy processes • More accurate data –100% data received met mathematical requirements vs. 70% • Faster data inflow – less than one day after quarter end vs. weeks after quarter end • Increased productivity – 550 to 600 banks/analyst vs. 450 to 500 • Faster data access – within 1 day of receipt vs. several days • Greater efficiency – workload complete 41 days after calendar quarter vs. 48 days • SEC began a voluntary filing program and strongly support the use of the standard and the move to interactive data

  22. Not Convinced? • Chairman Cox of the SEC • United Technologies’ John Stantial • Harvard Business Review

  23. XBRL – Preparer’s Viewpoint • John Stantial • Director of Financial Reporting • United Technologies Corporation

  24. Background – United Technologies • $47B international conglomerate • Six principal segments: • Otis • Carrier • UTC Fire & Security • Pratt & Whitney • Hamilton Sundstrand • Sikorsky • Component of the Dow Jones • Industrial Index

  25. Costs, Resources and Tools • Initial investment of $300 • 80 hours on first filing, now down to 4 • Total investment of $40k and 600 hours • Commercial tools used • Virtually all work done in house by existing resources • No new information is being required • Technical knowledge of XML is not necessarily a requirement • Focus moves from format to content

  26. The Benefits Beyond SEC Reporting • Single source for ALL possible external reporting • Benchmarking, peer comaprisons, research • Internal consistency across all locations • Enhanced control • Significant reduction to manual handling/manipulation of data • Facilitates, with increased reliability of ad hoc data requests

  27. Big 6 White Paper • ‘in a world of ‘mass customization’, standard financial statements have less and less meaning… and why in a digitized world, shouldn’t users have access to information more frequently?’ • Experts agree, the current system of reporting and auditing will need to change--toward public release of more non-financial information…..customized to the user… and accessed far more frequently …it is time to launch a process that will lead to the development of a new business reporting model… • ‘global XBRL initiative….likely to revolutionize the entire company reporting model…..’

  28. Harvard Business Review • “Wacoal, a Kyoto-based maker of lingerie, has use XBRL to enhance its ability to aggregrate operating information from the 24 proprietary IT systems used by its businesses in 23 countries. Wacoal needed six months and $50 million to implement the system-a sixth of the time and a third of the money that would have been required for a traditional ERP solution it had considered.’ [Harvard Business Review, February 2007, Breakthrough Ideas for 2007]

  29. SEC Chairman Cox-March 07 JoA • ‘XBRL is a tool, a way to use financial information in the same way we use almost every other kind of information today on the Internet.’ • ‘The genius of what I call interactive data is that the computer standards are open source and market driven. …XBRL can be used to tag data of all kinds both numbers and text. So if you’ve got a complicated mixture of text and numbers in a government report to the EPA, ……[it canb be produced] in XBRL format, for the benefit of both the provider and the government agency.’

  30. Jake was dying. His wife sat at the bedside. He looked up and said weakly: "I have something I must confess." "There's no need to, " his wife lovingly replied. "No," he insisted, "I want to die in peace. I slept with your sister, your best friend, and her best friend!"

  31. "I know," she replied, now just rest and let the poison work."

  32. These processes are pervasive all along the business reporting supply chain Companies Financial Publishers and Data Aggregators Investors Central Banks Trading Partners Auditors Regulators Management Accountants Software Vendors XBRL Ledger XBRL External Reporting Processes Business Operations Internal Business Reporting External Business Reporting Investment, Lending & Regulation Agencies Economic Policy Making Participants

  33. Public Taxonomies Time 2000 2001 2002 2003 2004 2005 2006 XBRL Taxonomy Growth February, 2005 US GAAP C&I US GAAP Bank US GAAP Ins SEC Certification Mgmt Report Accountants Report MD&A This does not include any private taxonomies such as those prepared for statutory purposes. Nov, 2005 General Ledger June, 2004 IFRS GAAP NZ GAAP UK GAAP July, 2005 China Framework IFRS GAAP US GAAP Invest Mgt January, 2004 UK GAAP 2.0 Canada GAAP June, 2001 General Ledger

  34. Tools Time 2000 2001 2002 2003 2004 2005 2006 XBRL Tools Growth(Representative Listing) FDIC Vendors DBI Financial Systems, Inc.FinArchFRS Global Financial Reporting & AnalyticsIDOM, Inc.Information Technology, Inc.Fidelity Regulatory SolutionsJack Henry & Associates Inc. Semansys Integrator Semansys Analyzer Core Filings Clarity Systems Microsoft Business Solutions Snappy Reports Carthesis FR Solutions J2R Batavia Data Driver Semansys Deployment Manager Metapraxis Adobe DecisionSoft True North High Ridge Technologies UBMatrix Automator Pro IBS Open Digital Reporting Ipedo EII Software AG Covarity Hyperion Fujitsu XWand Fujitsu Oracle XBI Software IBMatrix SAP UBMatrix Converter Rivet Software XBRL Solutions UBMatrix Tool Kit SavaNet DynAccSys Xabra Caseware Semansys Composer Hitachi CBRP Hitachi Ximba Allocation Solutions Navision Creative Solutions Hitachi XiRute Edgar-Online IMetrix

  35. XBRL-US, Inc • SEC dedicated funds • Spun off from AICPA September 2006 • CEO hired December 2006 • VP, Internet Strategies and Member Services • VP, Domain and Taxonomy Development • VP, Adoption and Communication • Interim Board in place • Mission: to support the implementation of XBRL in the United States through the development of US-specific taxonomies for use by the public and private sectors working with a goal of interoperability between sectors, and by promoting adoption of XBRL through the collaboration of business reporting supply chain participants. • Adoption strategy • Build awareness • Develop membership to represent supply chain • Establish XBRL-US, Inc. as primary source of information, education, research • Establish pilot programs

  36. EBR – JoA, June 2005 • ‘‘the more closely external reporting mirrors internal reporting, the more efficient it will be’ • ‘after decades of increasingly complex reporting requirements, disclosures [are] difficult for even the most sophisticated users to understand. …disclosure requirements and reporting processes [are] inefficient and error-prone’

  37. Why Participate Now? • Eliminate learning curve • Open and flexible program • Establish processes and controls • Influence the development of taxonomies, tools, processes • Potential for increased analyst/investor visibility • Begin exploring potential benefits and future opportunities • No valid reason not to!

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