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Steps for Filing Your First 10Q/10K. Michael Ohata Director Reporting Standards - Microsoft Walter Hamscher President & CEO - Standard Advantage. Started with 10Q, for quarter ending December 31, 2004 Set out to complete financial information WITH notes and management discussion & analysis
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Steps for Filing Your First 10Q/10K Michael Ohata Director Reporting Standards - Microsoft Walter Hamscher President & CEO - Standard Advantage
Started with 10Q, for quarter ending December 31, 2004 Set out to complete financial information WITH notes and management discussion & analysis Scenario: Tagged in Excel and Word Ensured external reporting team provide quality assurance Started prior to Voluntary Program to provide feedback to SEC, consortium, software vendors Assess what it takes for other companies Test the limits of the US GAAP taxonomies, tagging narrative parts Test first-hand how desktop scenario really works Identify solution / tool gaps Define business process required What We Did & Why
Publish Instance Document & Taxonomy Create an instance document and validate calculations Review & Validate Instance Document Extend the taxonomy if necessary Assess Scope of Reporting & Download Taxonomy Compare & map 10K/10Q to GAAP Taxonomy Identify a team: Accountant & Developer (XML) Steps in Producing 10Q / 10K
A Few Numbers • Developing taxonomy: 60 hours (iterative process) • Revving after US GAAP taxonomies released: 20 hours • Creating instance document: 60 hours • Extensions for financial statements: 7 • Extensions for MD&A: 200 • Calculation linkbase edits: 300 • QA review: 40 hours
And a Few Pain Points (Preparer’s Perspective) • Working in Beta software • 6 tools to complete 10Q and conduct QA • Deconstructing tables in MD&A: Fluid presentation in Word not readily structured into data • Tools struggle with complexity of technology: Either in your face or hidden • Needing to write and edit XML… • Asking external reporting team to read XML (not kidding) – No simple tools to render the XBRL • Extending taxonomy really does require XBRL technologist
What We Learned & Observed (Preparer’s Perspective) • Tagging data represents new task – need simple UI • We need guidance or best practices (e.g. Context definitions represent ONE-THIRD of the XML in 10Q) • In near to mid-term the doc filed with SEC is an XML doc • Tools in the “v1” stage…they should only get better • Taxonomy extensions and validation process puts XBRL in face of the user (preparer): Complex
A Milestone The Source file://c:/dev/microsoft.com/raw/MSFT_2Q2005_10Q.doc The Filing http://www.sec.gov/Archives/edgar/data/789019/000119312505020639/0001193125-05-020639-index.htm The Instance file://c:/temp/microsoft.com/msft/MSFT-10Q-2004-12-31/index.html The Facts file://c:/temp/microsoft.com/msft/MSFT-Facts.csv
Key Points • Several people (roles) were involved, so it’s not too surprising that several tools involved. • Review requires a paradigm shift from presentation view to data viewpoint. • The MSFT 10Q was the first XBRL document ever sent to the SEC that: • Used XBRL 2.1; • Used the 2004-08 US GAAP taxonomy; • Had an extension that was compliant with FRTA CR4; • Encompassed everything in the 10-Q, including Notes. • Mapping gets easier every quarter • Pre-release software evolves rapidly
Mapping and extending a taxonomy:The crux of XBRL-ification • 1st Pass: Match concepts from existing taxonomy to items disclosed; note gaps and duplications
For example • file://C:/dev/microsoft.com/fin/2004-12-31/10Q%20Gap%20Analysis_MSFT+MO+WcH.xls
Mapping and extending a taxonomy:The crux of XBRL-ification • 1st Pass: Match concepts from existing taxonomy to items disclosed; note gaps and duplications • 1st Decision: use the entire base taxonomy, or just the element declarations?
Mapping and extending a taxonomy:The crux of XBRL-ification • 1st Pass: Match concepts from existing taxonomy to items disclosed; note gaps and duplications • 1st Decision: use the entire base taxonomy, or just the element declarations? • 2nd Pass: Add elements (periods and credit/debit flags), update element labels, and rearrange presentation nesting and order. • 2nd Decision: Comprehensive or minimal calculations? • 3rd Pass (calculations): Edit and add calculations. • 3rd Decision: FRTA-compliant extension, or not? • 4th Pass: Document the taxonomy extension.
Challenges • Expectation management • Defining and agreeing disclosure goals • 3rd party confidentiality (if prior to disclosure) • Mapping (extension) requires both accounting and technical understanding • Segment reporting • MD&A Structure and consistency • Reconciling GAAP vs. Management financial data for consolidation file://c:/temp/microsoft.com/msft/MSFT-10Q-2004-12-31/index.html
What We Learned (Wish List):One Technologist’s Perspective • Tool support for modularization of base taxonomies into smaller components • Automate the correspondence of original calculations to XBRL calculations • Automate the generation of segments and scenarios
Best Practices and Resources • Thursday Tutorial: “Preparing for the SEC Voluntary Filing Programme” • Covers most technical and disclosure issues • Addresses several key preparation process • Uses multiple vendor tools • Collaborative effort of Big 4 firm representatives • Future events are being planned • http://www.XBRL.org/us • http://www.XBRL.org/tools
Steps for Filing Your First 10Q/10K Michael Ohata Director Reporting Standards - Microsoft Walter Hamscher President & CEO - Standard Advantage