Sonja Simon Head of Group Accounting and Reporting

1. Sonja SimonHead of Group Accounting and Reporting XBRL Financial Statements @ SAP

2. SAP’s XBRL Motivation • Requirement to provide XBRL data to the SEC starting with financial statements for 2011 • Requirement to electronically file financial statements with German Company Register with XBRL as one permitted format • SAP as a software company wants to be an early mover rather than a late follower • Support “SAP runs SAP” campaign - outsourcing not an option Compliance SAP‘s XBRL Motivation Business Opportunity ProcessImprovements • SAP views XBRL as helpful for streamlining financial reporting processes (e.g. matching note disclosures with disclosure requirements)

3. SAP‘s XBRL Adoption Process Prepare Company-specific Taxonomy Define XBRL Strategy Align financial statements with IFRS Taxonomy Prepare & publish XBRL data 1 2 3 4 • Key Objectives Identified • „Hardcopy“ financial statements and XBRL data should look similar => Minimize differences between them • Align with original IFRS XBRL taxonomy as much as possible => Minimize number of company-specific tags (extensions) • Use tools from SAP portfolio to design our taxonomy and prepare the XBRL data=> No use of external support • Use 2009/2010 year end closing as a learning cycle=> Learning experience more important than outcome • Consider resource constraints=> 2009: Limit tagging to primary statements, no tagging of individual note disclosures, just block tagging • => 2010: Start detailed tagging of the notes

4. SAP‘s XBRL Adoption Process Prepare Company-specific Taxonomy Define XBRL Strategy Align financial statements with IFRS Taxonomy Prepare & publish XBRL data 1 2 3 4 • Objective • Align “hardcopy” IFRS financial statements with XBRL taxonomy as far as necessary to make the “hardcopy” financials and XBRL data look as identical as possible • Align naming of financial statement line items (e.g. from “net income” to “profit”) • Align classification (e.g. split former item “other assets” into “other financial assets” and “other non-financial assets”) • Major Challenges • The IFRS taxonomy currently lacks some basic line items (e.g. no tag for “operating profit”) resp. industry-specific line items (e.g. “Software revenue”)=> decision needed in each case: classify under existing tags or add an extension • Some inconsistencies in IFRS (e.g. Are prepayments made financial assets? IAS 1.78: yes; IAS 32.AG11: No)=> decision needed in each case: which view to follow • How to handle immaterial balance sheet items? (e.g. inventories at SAP)=> decision needed in each case: tag according IFRS taxonomy or classify under other tags

5. SAP‘s XBRL Adoption Process Prepare Company-specific Taxonomy Define XBRL Strategy Align financial statements with IFRS Taxonomy Prepare & publish XBRL data 1 2 3 4 • Approach • Use of SAP BusinessObjects XBRL Publishing application by UBmatrix as the tool to prepare taxonomy • Close alignment with the respective product area in SAP • Experience • Significant number of company-specific tags in the income statement (e.g. revenue sub-items, operating profit subtotal), and also the cash flow statement. Fewer extensions needed in the other statements • Number of extensions increased considerably during the detailed tagging of the notes due to • Company-specific disclosures (segment reporting, share based compensation plans) • Disclosures made due to German GAAP requirements (list of subsidiaries including revenue / equity etc.)

6. SAP‘s XBRL Adoption Process Prepare Company-specific Taxonomy Define XBRL Strategy Align financial statements with IFRS Taxonomy Prepare & publish XBRL data 1 2 3 4 • Preparation Approach • Use the same data that are used for the „hardcopy“ report, i.e. numbers in euro million after rounding)=> data will be extracted from an excel file (“one source of truth”) used for the preparation of the hardcopy report as well as the basis for the XBRL tagging using SAP’s Disclosure Management tool. • Minimize manual efforts and potential for errors • Publication Approach • Publication on SAP website together with HTML- and PDF-Version of annual report

7. Benefits identified • Forced us to take a „fresh look“ at SAP‘s financial statements and notes • Terminology in financial statements is now more closely aligned with IFRS standards • Detailed tagging of notes required a two-way match – from required disclosures to notes and vice versa • Effective check for completeness of disclosures and inconsistencies between disclosures made • Fresh look at disclosures that require extensions  either company specific data (e.g. segments) or voluntary disclosures which could potentially be deleted • Reconsider rearranging certain information (e.g. moved all accounting policies to one section of the notes) • Focus on required disclosures and eliminate voluntary, non-value added or clearly immaterial disclosures • Integrated business rules add additional checks • Summary: XBRL improved completeness, presentation and clarity of SAP‘s financial statements

8. Lessons learned • Benefits will only be realized if: • The project is approached as an opportunity to improve financial reporting rather than simply fulfilling a regulatory requirement • The project team is staffed with both accounting and IT experts – this point is critical! • Start early! You will need time to: • Familiarize yourself with the technical aspects of tagging • Fully understand the IFRS taxonomy and how to properly create extensions when needed • Critically review all extensions – a predefined tag might be available where you do not expect it

9. Future Developments • Currently most companies in the US use a service provider • Going forward, companies will realize the benefits from an in-house solution and be less willing to accept the risks associated with a service provider (time constraints, only limited control over final product etc.) • Software developers must offer solutions which integrate the process of producing and simultaneously XBRL tagging financial statements • Potential synergies between producing financial statements and XBRL tagging: • Integrated disclosure checklist (completeness and plausibility checks) • Integrated business rules • Obvious checks, e.g. assets = liabilities + equity • Complex checks, e.g. warning message if significant changes compared to prior year should be explainted • Automation of checks will reduce manual efforts , ensure completeness and consistencies of checks performed and shorten time required to finalize reporting • Tagging in different languages based on the official XBRL resp. IFRS translations

10. SEC‘s no-action : Acceptance of XBRL files of IFRS financial statements? • Recently, the SEC has decided to postpone the acceptance of IFRS XBRL files previously scheduled for July 2011 („no action“) • The SEC will use the delay to further analyze the main differences between the US GAAP / IFRS taxonomy • The main differences between those taxonomies relate to the following: • US GAAP taxonomy was developed using companies‘ disclosures as a basis. If those disclosures could be traced to GAAP, an appropriate tag was developed. IFRS taxonomy is based directly on the IFRS standards. • US GAAP taxonomy offers commonly used tags – but only if those can be traced to GAAP. IFRS taxonomy will soon introduce commonly used tags – irregardless whether these can be traced to GAAP • US GAAP taxonomy provides definitions to the tags (explanations about the expected content). The IFRS taxonomy does not because it is derived directly from the IFRS standards. • What will be future bring? When will the SEC accept XBRL files of IFRS financial statements?

11. Thank you!