ENHANCED BUSINESS REPORTING (A Technology Driven Solution) FCM Conference Alan Anderson

1. ENHANCED BUSINESS REPORTING (A Technology Driven Solution) FCM Conference Alan Anderson Senior Vice President AICPA

2. Change in Mind-Set Past Present Future Historical Financial Statements Enhanced Business Reporting • Lagging indicators… • Periodic • Historical • Cost-basis • Financial only • Statements • Looking backward • Leading indicators… • On-demand • Real-time/future • Value-basis • Comprehensive • Custom reports • Looking forward

3. Change in Mind-Set Past Present Future Historical Financial Statements Enhanced Business Reporting • Lagging indicators… • One size fits all (GAAP) • Ignores nonfinancial measures • Reports results of past decisions • Leading indicators… • Tied to mission, vision and values • Tied to factors critical to success • Moves decision criteria to forefront

4. Why? • The current reporting model is no longer sufficient. • Not timely – its after the fact news. • Not informative enough. • Ignores many factors of performance. • So far, calls for change and some action. • Now it’s time for coordinated action.

5. Recommendations are Good but ACTION is better! We Must Build Upon the Foundation to Chart the Path for The Future by: Enhancing Business Reporting

6. ENHANCED BUSINESS REPORTING ELEMENTS CONVERGENCE TO “NEAR REAL TIME” SCALABLE

7. Required qualitative characteristicsof financial and business information • Relevance • Timeliness • Predictive value • Validation of expectations • Reliability • Measurability • Completeness • Neutrality • Unbiased • Comparability • Industry peers • Period-to-period • Understandability • Clear • Coherent • Jargon-free ELEMENT MAPActions • Corporate Accountability • S-O Act §404 internal control • Environmental, Health & Safety (EHS) e.g. Global Reporting Initiative • Social responsibility e.g. AccountAbility 8000 • Risk reporting e.g. COSO Enterprise risk management • Corporate governance e.g. ISS Corporate Governance Quotient • System Reliability • Data assurance • Audit of financial statements • Close expectation gap • SSAE 10 or ISAE 100 • XBRL data tags • Footnote terminology related to XBRL • Systems/process assurance • Examination of S-O Act §404 assertion • SSAE 10 or ISAE 100 • e.g. SysTrust • Process-based • KPIs • Fwd-looking info • Hybrid - Data (where suitable criteria exist) or process • EH&S • Social • Risks/ERM • Corporate governance • Continuous assurance • Continuous audit process using embedded software agents • Financial & Non-Financial Measures • US GAAP/SEC financial statements • Non-financial KPIs • Customer satisfaction • Customer retention • Market share • Product defects • Employee training • Employee satisfaction • Patents held • R&D spending • New product pipeline • Costs per transaction • Industry benchmarking • Revenue per… customer, square foot, ton-mile… • Forward-looking information, NOT prospective financial statements • Value measurement reporting collaborative (VMRC) • Information Dissemination • XBRL • Customizable by users & flexible reporting by CPA • Capital markets • Debt markets • Board of directors • Management • Regulators • Employees • Customers • Suppliers • NGOs • Near real-time • Understandable Disclosures • SEC plain-English • VMRC

8. Element Map:Corporate Accountability • S-O Act §404 internal control • Environmental, Health & Safety (EHS) e.g. Global Reporting Initiative • Social responsibility e.g. Accountability 8000 • Risk reporting e.g. COSO Enterprise risk management • Corporate governance e.g. ISS Corporate Governance Quotient

9. Corporate Accountability Public Trust- 3 Elements Spirit of Transparency Culture of Accountability PUBLIC TRUST People of Integrity “We need to move towards “Principles Based Thinking”, away from more rules” …David Weinstein, EVP Fidelity Investments

10. Data assurance Audit of financial statements Close expectation gap SSAE 10 or ISAE 100 XBRL data tags Footnote terminology related to XBRL Systems/process assurance Examination of S-O Act §404 assertion SSAE 10 or ISAE 100 e.g. SysTrust Process-based KPIs Fwd-looking info Hybrid - Data (where suitable criteria exist) or process EH&S Social Risks/ERM Corporate governance Continuous assurance Continuous audit process using embedded software agents Element Map:Systems Reliability

11. Systems Reliability For Example- - IT Shop Floor Cost Human Capital

12. US GAAP/SEC financial statements Non-financial KPIs Customer satisfaction Customer retention Market share Product defects Employee training Employee satisfaction Patents held R&D spending New product pipeline Costs per transaction Industry benchmarking Revenue per… customer, square foot, ton-mile Forward-looking information, NOT prospective financial statements Value measurement reporting collaborative (VMRC) Element Map:Financial and Non Financial Measures

13. Financial & Non Financial Measures For Example - - Operating Financial Forecasted Operating Data & Performance Measures Linkage Forecasted Financial Data Forecasted by Users Forecasted by Users High-Level Data and Performance Measures Financial Statements and Related Disclosures Linkage

14. XBRL Customizable by users & flexible reporting by CPA Capital markets Debt markets Board of directors Management Regulators Employees Customers Suppliers NGOs Near Real Time Element Map:Information Dissemination

15. Information Dissemination What The Common Platform: XBRL The Reporting Supply Chain XBRL for Regulatory Filings Internal External Investment Business Processes Processes Financial Financial and Lending Operations Reporting Reporting Analysis XBRL for Business XBRL for Audit XBRL for Event Reporting Schedules Credit Filings Financial Publishers Companies Investors Participants Participants and Data Aggregators Trading Management Auditors Regulators Partners Accountants Software Vendors

16. Element Map:Understandable Disclosures • SEC plain-English • VMRC • Much more to be done here!

17. Understandable Disclosures Plain English ? Transform Future State: Easy to Understand English Current Situation: Greek to the Average Person (Difficult to Understand)

18. Understandable Disclosures Spirit of Transparency Corporations have an obligation to provide willingly to shareholders and other stakeholders the information needed to make decisions. Tier Three Company Specific Info Tier Two Industry Based Standards Tier One Globally Generally Accepted Accounting Principles The Three-Tier Model of Corporate Transparency

19. Next Steps in Moving Forward I:Identification of key stakeholders whose collaborative involvement is critical to successful development & implementation MISSION: To collaborate with investors, creditors, regulators, management, & other stakeholdersto improve the quality & transparency of information used for decision-making II:Overarching goal of making better information available to investors & creditors, helping them to see organizations through the eyes of management Special Committee on Enhanced Business Reporting

20. Customers of Enhanced Business Reporting Employees Management Academics Customers Suppliers Investors and Creditors Auditors Regulators Competitors Standard Setters

21. THE END GAME IMPLEMENTATION of enhanced business reporting through collaboration with, commitment from, & support of: • SEC • FASB • Banks and other users • Public Company Accounting Oversight Board (PCAOB) • Large Fund Managers (e.g., Vanguard, TIAA-CREF) • Council of Institutional Investors • FEI • Think Tanks (e.g., Brookings)

22. How is this going to get accomplished? • The AICPA has established a Special Committee on Enhanced Business to reporting to Concurrently: • Identify the migration path needed to get it done • Get Companies to Pilot ideasAnd • Build consensus and support from users

23. Building upon the Foundation Historical Financial Statements Enhanced Business Reporting Online, Real-time, Transparent, and Forward-Looking • Lagging indicators… • Periodic • Historical • Cost-basis • Financial only • Statements • Looking backward • Leading indicators… • On-demand • Real-time/future • Value-basis • Comprehensive • Custom reports • Looking forward

24. Tax Regulators Investors Creditors Lenders Website External Reporting On Demand -Aggregation/Benchmarking Layer Reporting standards Monitoring Control and Assurance Performance Measures Performance Measures Up Stream Value Chain Down Stream Value Chain Transactions GL Insider Trading Others Exogenous Data Sources Exogenous Data Sources

25. Questions?