XBRL & FEI
What, Why and How
Colleen Sayther-Cunningham
President and CEO
Financial Executives International
Who Is FEI?
• The professional association of choice for
senior-level corporate financial executives
Over 15,000 members from companies both public and
private, crossing all industry sectors
CFOs, VPs of Finance, Controllers, Treasurers and Tax
Executives
• The definitive voice of corporate finance
Advocating for the interests of our members before the SEC,
FASB, IASB, PCAOB and Congress
• A member-service-oriented organization
Dedicated to the professional development of our members
Peer networking, information, career planning, conferences,
publications, research
FEI’s Mission
• To be the preeminent professional association of
choice for the corporate financial executive by:
NETWORKING: Providing forums for peer networking
KNOWLEDGE: Alerting members to emerging issues
ADVOCACY: Advocating the views of financial executives
ETHICAL LEADERSHIP: Promoting ethical conduct
Financial Executives Research
Foundation (FERF)
• Independent non-profit research affiliate of
FEI that offers in-depth objective research on
relevant topics
• Research publications and alerts
• Ask the Researcher
• Interactive Forum from peers (FELIX)
• Distance learning with FERFPros
• Supported by voluntary, tax-deductible
contributions and subscriptions from
corporations, FEI chapters and individuals
FEI Membership
• FEI’s membership includes some of the
leading CFOs in corporate finance.
Kerrii Anderson Wendy’s International
Susan Decker Yahoo!
Gary Fayard Coca-Cola Company
Robert Lumpkins Cargill, Inc.
Pedro Reinhard Dow Chemical
Jim Schneider Dell Computer
Tom Schoewe Wal-Mart Stores
David Sidwell Morgan Stanley
FEI Membership
Publicly Traded Companies
F1000 F100 NYSE NASDAQ
(n=2,742) (n=3,300)
At least one 702 89 1,005 714
member
CFOs 421 57 603 505
Controllers 322 52 400 187
N=9995
FEI Membership
Ownership
Public 51%
Private 44%
5%
Not-for-profit
0% 20% 40% 60% 80% 100%
N=9470
FEI National
Technical Committees
• Benefits Finance (CBF)
• Corporate Finance (CCF)
• Corporate Reporting (CCR)
• Finance & Information Technology (CFIT)
• Government Business (CGB)
• Private Companies (CPC)
• Taxation (COT)
Transformation of Financial
Reporting
• Verge of a fundamental transformation of
financial reporting practices
• Trend towards transparency driven by
increased public scrutiny, increased
regulatory oversight and the emergence of
new technology
• Driving a need for new standards for
information integrity, reporting transparency
and system integration
What is XBRL?
• Non-techie’s point of view
– eXtensible Business Reporting Language
– An open global electronic standard for defining
financial terms consistently allowing for the
exchange and dissemination of corporate reporting
information
– Each piece of data is assigned a unique,
predefined data tag (like a barcode) identifying the
information’s content and structure
What is XBRL?
– Through tagging of data, XBRL will enable
• Streamlining of financial reporting processes
• Enhanced analysis of financial reports
• Can facilitate the acquistion and integration of related
financial information within a company’s financial reports
• Communication of financial performance more effectively
to analysts and investors
– Tags give data an identity and context that can be
understood by various software applications that
allow the data to interface with databases, financial
reporting systems and spreadsheets
What is XBRL?
• Taxonomies
– A Standard description and classification system
for business reporting and financial data
– Tags consist of specific financial data (eg, line
items in financial statements) and words or labels
(eg, headers in the notes to financial statements)
– Taxonomy may, therefore, include a tag for the
balance sheet line item “inventory” as well as tags
for components (“raw materials”, etc.) disclosed in
the notes
What XBRL is not
• NOT a set of accounting standards
• NOT a detailed chart of accounts
• NOT a GAAP translator
Who is interested in XBRL?
• Preparers – Financial Executives
• Standard setters
• Regulators
• Users
Financial Executives
• Have a critical responsibility to communicate
operational results to stakeholders
• Growing demand for efficient delivery in an
interactive medium
• Better decision making
• Internal control environment enhanced
through less retyping, more system
integration, etc.
Standard Setters
FASB established an XBRL fellow position in
2003
FASB created the XBRL fellowship to
investigate ways XBRL and related
technologies can be used to improve
corporate financial reporting and to develop
policy recommendations on XBRL's role in
FASB's standards-setting activities.
IASB also a supporter of XBRL – in fact, it
seems to be getting more traction
internationally
Regulators
• SEC announced in July 2004 an
initiative to assess the benefits of
tagged data and its potential for
improving the timeliness, accuracy and
analysis
Users
• Reduces research costs
• Enables improved modeling and
comparison
SEC Voluntary XBRL Proposal
• 2 documents issued Monday (9/27/04)
• Proposed Rule that would establish
Voluntary XBRL reporting
• Concept Release on XBRL
SEC Proposed Rule – Voluntary
Reporting
• Establish a voluntary program allowing
registrants to file supplemental financial
information using XBRL
• Filed via an exhibit to specified SEC filings
• Would begin with 2004 calendar year-end
reporting
• Comment deadline is 30 days after publication
in Federal Register
SEC Proposed Rule – Voluntary
Reporting
• SEC would like to study:
– Search capability of EDGAR database
– Capability to perform financial comparisons
amongst registrants
– Ability to perform financial analysis (ratios, etc.)
– Impact on staff’s ability to review filings more
timely and efficiently
– Use of tagged data for risk assessment
– Compatibility of XBRL with other Commission
requirements
SEC Concept Release on XBRL
• Seeking public comment on:
– Benefits of tagging data to improve reporting
quality and efficiency
– Implications of tagging data for filers, investors,
the Commission and other market participants
– Adequacy and efficacy of XBRL as a format for
reporting financial information
– Comment deadline is 45 days after publication in
Federal Register
SEC Concept Release on XBRL
• Essential Elements of Data Tagging
– Technology to administer the tags
– Standard definitions to describe the tages
– A means of presenting and analyzing the
tagged data – software, etc.
[Release Nos. 33-8496, 34-50453, 35-27894, 39-2498, IC-26622; File
Number S7-35-04]
XBRL VOLUNTARY FINANCIAL REPORTING PROGRAM ON THE EDGAR
SYSTEM
AGENCY: Securities and Exchange Commission.
ACTION: Proposed rule.
SUMMARY: We are proposing rule amendments to enable registrants to submit
voluntarily supplemental tagged financial information using the eXtensible Business
Reporting Language (XBRL) format as exhibits to specified EDGAR filings under the
Securities Exchange Act of 1934 and the Investment Company Act of 1940.
… “we are evaluating
Registrants choosing to participate in the voluntary program, expected to begin in
early 2005, also would continue to file their financial information in HTML or ASCII
data in Commission filings would provide help us
whether tagged currently required. The voluntary program is intended to a better
format, as
evaluate the and obtain necessary information and, if so,
means to provideusefulness of data tagging in general, and XBRL in particular, to
registrants, investors, the Commission XBRL tagged data in
whether we should permit or require and the marketplace generally. A companion
concept release also being issued today provides additional information on tagged
Commission filings”.…
data and solicits comment on the development of data tagging.
BACKGROUND: All registrants who file with the Commission are now generally
required to file electronically on the Commission's Electronic Data Gathering,
Analysis and Retrieval System ("EDGAR")……
As discussed in the accompanying concept release, we are evaluating whether
tagged data in Commission filings would provide a better means to provide and
obtain necessary information and, if so, whether we should permit or require XBRL
tagged data in Commission filings.22 The Division of Corporation Finance, Office of
XBRL: Cheaper, Better, Faster
• Reduces the cost of preparing, publishing and
analyzing information (CHEAPER)
• Increases efficiency of business decisions,
real-time reporting, deeper analysis capability,
reduces margin for human error, more
accessible and easier to use, enhances
comparability (BETTER)
• Automates the migration of information from
systems to financial statements, increases
the speed of data use and related decisions,
easier to transfer data (FASTER)
Key issues in
Business & Finance
Current Issues impacting
financial reporting
• Transparency
• Timeliness of reporting
• Section 404/Internal controls
• Fair value accounting
• Convergence
• Principles-based accounting standard
setting
How linked to XBRL initiative?
• Move towards transparency
– If items were tagged and identified more
information could be made available for investors
and analysts to analyze in the manner that chose
to do so
• Enhances information acquisition, evaluation and
combination
– Improves transparency without additional
disclosures
– Newfound discovery capabilities
– Can benefit nonprofessional users
“The annual report of the 21st
century will not be annual and
it will not be a report: it will be
an up to date, informative
dialogue”
- Alan Benjamin in the 21st
Century Annual Report (2000)
How linked to XBRL initiative?
• Timeliness
– Capital markets rely on timely and reliable
information for the allocation of capital
resources
– Access information more quickly
– Faster processing
– Accelerated filing deadlines can be easier
to accomplish
How linked to XBRL?
• Section 404/internal controls
– A reporting format such as XBRL could enable
easier documentation of internal controls – less
manual intervention and massaging
– Can enable the integration of disparate systems to
optimize the internal control process
– Can be a critical tool for enabling compliance with
404 – monitoring can occur real time
How linked to XBRL?
• Fair value accounting
– A lot of concern regarding the reliability
(verfiability) of determining appropriate fair
value – if assumption disclosures were
tagged – management’s choices would be
more transparent to users and easily
compared with others
How linked to XBRL?
• Convergence
– May be less important in an XBRL
environment. Could adapt to country
reporting regimes much more easily.
– Comparability is enhanced
– Complimentary toward objective of a single
set of high quality, understandable and
enforceable global accounting standards
How linked to XBRL?
• Principles-based accounting standards
– If information is tagged – much easier to determine
judgments made by management – analysts could
easily adjust for their own analysis
– Comparability is enhanced across companies –
makes management’s financial reporting choices
more transparent – search faciliting technology
Now is the time for us
to fundamentally enhance
Business Reporting using XBRL
XBRL benefits all members of
the financial information
supply chain.
What needs to change?
• Manual processes for moving business information through to
reporting
• Need for greater accuracy, efficiency and timeliness
• Lack of focus on reusability of external reporting
• Deeper analysis hindered
• Transparency is only as good as the content (information)
provided
• Opacity level remains high
• Uninformed decisions are the status quo
We all need to change…for the better of the
capital markets
Achieving standards & regulatory compliance
Back Office
Integrated Financial
with XBRL statement
Common consumers
Standard
ERP
CRM
ERP XBRL
Reporting External Reports
Consolidation Investors
XBRL Banks
Mgmt Reports SEC
XML & IRS
Suppliers
Internal Web Services
Control
Docs • Information service
• Internal control providers
system ‘glue’ • Common structure • Industry-based supply chain
• Accounts • Auditable trail (XML + XBRL)
• Policies • Keys to financial &
• Issues Mgmt business information
•…
• Real-time
auditing
• Monitoring
Internal Considerations
Awareness and implementations of XBRL is limited, but
growing
Confusion over XBRL as an internal and/or external
reporting solution
Enabled software – many vendors have enabled software,
but others are in development
Implementing will impact the internal business rules
governing data and the people who use/process it
Existing business process will have to be re-examined as
part of implementation for efficiencies and risk
considerations
Managing and maintaining XBRL taxonomies for
internal/external reporting will require an ongoing effort
External Considerations
• Approach to collaboration
• Information requirements (vs. Forms approach to date)
• Structured filings
• Common vocabularies (taxonomies)
Development strategy (collaborative)
Extensions, tools, archiving
• Diverse e-filing methods
• Crisp transitions
• Communications
• Other - Legal record; signatures; security; etc.
We are at the turning point!
• Increased disclosure and transparency requirements
Need for programmable, efficient and reliable processing –
not manual
Companies & auditors seek solutions that automate and
reduce the cost of compliance & reporting
Industry expects effective throughput that improves
analysis & comprehension of company financial statements
Regulators need similar efficiencies to better understand
disclosures, compliance and “results”
We are at the turning point!
• Key enablers: Standards, technology & connectivity
XBRL embodies both accounting and technology standard:
US Financial Reporting Taxonomy
SEC concept release builds momentum for XBRL adoption
Software vendors will soon deliver XBRL-enabled
applications
Service providers are converting historical financials into
XBRL stores
XML and other technologies are ubiquitous
Widely available inexpensive connectivity
A Call to Action
• SEC Program
Identify participation candidates
Work with FEI CCR & CFIT Committees to determine positions, tagging
requirements and filing methodology (create sub bullets w/specific
committees)
Establish a coordinated project plan, identify participant companies,
coordinate resources and communicate progress
• Market Adoption
Evolve the business cases for companies to improve their reporting supply
chain with XBRL
Establish a technical sub-committee within XBRL to drive market enablement
Evolve MD&A taxonomy to reflect “Interpretive Guidance” that will address
SEC issues
• Corporate Reporting Standards
Leading the discussion on who is responsible for corporate reporting
standards
Create a methodology to update standards & policies
Questions?