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Document Sample
“Business Reporting in
the New Economy”
www.xbrl.org
Presented by
J. Louis Matherne
Director – Information Technology
AICPA
Federation of Schools of Accountancy - 2000 Annual Meeting
December 4 and 5 - San Antonio, Texas
Today‘s Agenda
Who is Involved
Why XBRL
What is XML and XBRL (with demo)
Information Supply Chain - Users &
Benefits
What is Involved
Future Direction
Implications for education
Additionally…
Confirmed New Members (as of 15 November 2000):
Deutche Bundesbank National Center of Charitable
U.S. Department of Statistics
Defense (DFAS) Seattle Pacific University,
Dresdner Kleinwort Center for Professional
Benson Development
Nikkei (Nihon Keizai Global Filings
Shimbun)
Business Wire
New River
Practitioners Publishing Hong Kong Society of
Company Accountants
Innovision
XBRL International is Gaining Strength
XBRL activities occurring in—
United States China & Hong Kong
Canada Malaysia
United Kingdom New Zealand
Taiwan
Australia
Japan
Singapore Netherlands
Germany Nordic Federation (Denmark,
Ireland Norway, Sweden)
France Spain
And on a global level through the—
International Accounting Standards Committee
International Press Telecommunications Council
International Standards Organization
Arthur Levitt Says …
―I would like to see you develop valuation models that result in
consistent, comparable and fair values of assets and liabilities. I
would like to see you hone specific, but plain English definitions
for the types of information you believe should be included in
public disclosure. I would like to see you take your XBRL
project a step further, providing account classifications
for companies in common industries. In short, I challenge
you to turn all of this data into meaningful information for
investors.‖
- Arthur Levitt, Chairman, U.S. Securities & Exchange Commission
October 24, 2000, at the Fall Council of the AICPA (Las Vegas, Nevada)
Why XBRL ?
Improve communication to investors
More efficient aggregation and analysis
More efficient creation of financial statements
Why Now ?
Internet
XML CPA
XBRL & the Internet
"The explosive growth of the Internet is
not only changing the way companies
conduct their business,
it also promises to forever alter the way
they communicate business
performance.‖
- CFO Magazine, February 2000
XBRL: Extensible Business Reporting Language
XBRL is a global e-business language
for financial information, reporting and analysis.
HTML is the language that opened up the internet.
Enabled users to browse the web
Simple problem:
4921 results in a typical search
(e.g. “IBM Fixed Assets”)
Browsing the Web (Content—without Context)
Searching for the word “Mercury” on the Web can provide
a wide variety of results—too many—such as:
Hg
―Content in Context‖ (Industry-specific)
Auto Industry <CAR-MODEL>
Chemical Industry <SYMBOL>
Publishing or <GOD>
Mythology
Music Industry <RECORD-LABEL>
Aerospace Industry <PROGRAM>
Astronomy <PLANET>
XBRL: Extensible Business Reporting Language
XBRL is a global e-business language
for financial information, reporting and analysis.
HTML is the language that opened up the internet.
Enabled users to browse the web.
XML is the next step to using the internet for business.
XML
Widely expected to reduce cost of publishing to
the Net by as much as 50%.
And by next year …
70% of all B2B transactions executed on
the Web will be done using XML.
Gartner Group prediction
XML
XML stands for:
eXtensible
Markup
Language
Universally accepted method of exchanging
information
What Is XML?
―XML is a
platform-independent,
self-describing,
expandable,
standard data exchange format‖
XML is Platform Independent
Windows
Unix
Macintosh
Mainframe
XML is Self-Describing
Example:
<DATE>July 26, 1998</DATE>
Describes the information, not the presentation
Format neutral
XML is Extensible
Whereas HTML has a fixed set of tags
<H1>, <B>, <PRE>
XML lets you create your own tags
<sugary-substance>
<Shakespearean-character>
<cash-equivalent>
HTML vs. XML
HTML XML
<html> <purchase_order/>
<body> <stock_number>1002</stock_number>
<p>Purchase Order, Stock Number 1002, 2, <price>100</nrice>
100</p> <number>2</number>
</body> </purchase_order>
</html>
XBRL: A Fragment of a Raw Data
Raw Data in Spreadsheet…
Company Financial Line Item Label Year Value
Statement
Coca Cola Co. Balance Sheet CurrentAssets.CashandCashEqui CurrentAssets.CashandCashEqui 1999 1611
valents valents
Coca Cola Co. Balance Sheet CurrentAssets.CashandCashEqui CurrentAssets.CashandCashEqui 1998 1648
valents valents
Same Raw Data in XML (XBRL) Format
<group>
<group type="CurrentAssets.CashandCashEquivalents">
<item period="1999">$1,611 </item>
<item period="1998">$1,648 </item>
</group>
Who defines the tags?
Tags are defined by industry consortiums
Each industry’s standard tags are commonly
referred to as a taxonomy
Standard .orgs (reporting vs ‗e‘)
Accounting / Auditing
Reporting
„e-Business‟
ASB W3C
IASC OASIS;UN/CEFACT (ebxml)
FASB xml.org
IFAC RosettaNet
SEC ACORD
Territory Institutes
CPAs participate / lead in these What about these?
Who‘s Building Taxonomies?
Accounting Advertising Architecture
Automotive Banking Communication
Economics Education E-Commerce
XBRL
EDI uniquely focused on
is ERP Financial
business reporting
Healthcare HR Insurance
Legal Music News
Publishing Real Estate Retail
Science Software Supply Chain
XBRL Adds Reporting to E-Commerce
Tax Regulators Investors Creditors Lenders Website
One Aggregators One
way way
BUSINESS
ERP G/L Packages CRM
Transaction Creation
2-way 2-way
Suppliers •Orders •Orders Customers
•A/P •A/R
•Delivery •Delivery
XBRL Adds Reporting to E-Commerce
Tax Regulators Investors Creditors Lenders Website
One Aggregators One
way way
XBRL
BUSINESS
ERP G/L Packages CRM
BUSINESS REPORTING
Transaction Creation
2-way 2-way
Suppliers (e-)Commerce
•Orders
•A/P
•Orders
•A/R
Customers
•Delivery •Delivery
OTHER XML INITIATIVES
XML is …
• Published as a recommendation by the W3C (World
Wide Web Consortium)
• Uses tags to give context and structure to the
content
• Provides a common way for disparate systems to
exchange specific information (application
integration)
• Provides a means to separate data from style so a
single source can be output for multiple uses
• Separates data from logic of applications so that it
can be reused for multiple purposes.
XBRL is …
standards-based electronic language for financial
information, reporting and analysis.
enables a dramatic improvement in the processing of
financial reports
XBRL documents can be—
Prepared efficiently
Exchanged reliably
Published more easily
Analyzed quickly
Retrieved by investors simply
to enable smarter investments
… communicates business performance for
the financial reporting supply chain
XBRL …
Today: A Convoluted Information Supply Chain
Credit Banks
Text + Application
Text
Text + Regulatory
10-K
Report Filings EDGAR
GL
Report
+ Statements
Report + in Print
+ Statement
+ + in PDF
C of A
Statement Text
Operational
+ on Web
Data Stores
Corp. Investors
Auditor
XBRL Multiple Uses
Systems Systems Credit
Credit
Credit
Credit
Reporting
Reporting
Reporting
Reporting
XBRL
Creditors
Systems Regulatory
Regulatory
Regulatory
Regulatory
Filings
Filings
Filings
Filings
Financial Investors
XBRL Financial
Financial
Financial
Statements
XBRL
Statements
Statements
Statements
Statements
Statements
Other Statements
For
Statements
For
Sources of For
Financial
For Other
Information Financial
Financial Parties
Performance
Financial
Performance
Performance
Performance
XBRL
Other Other Tax
Tax
Sources of Sources of Tax
Tax
Filings
Filings
Filings
Information Information Filings
What software ‘sees’
is the differentiator
and drives benefits
(here is an example)
Financial Institutions—and their Users
SMALL BUSINESS provides FINANCIAL INSTITUTION with
their information in XBRL and receives loan approval in less
than a day instead of two days—or two weeks.
Average Time for Loan Processing—1.75 days
90% + time spent on Mechanics
Value-added Analysis and Decision-making? <10%
Mechanics With => Better
More Time for AnalysisXBRL? Analysis => Less Risk
Or
Mechanics Analysis Mechanics Analysis Mechanics Analysis Mechanics Analysis
Process more loans in the same amount of time
Who Benefits?
XBRL Working Model: Supply Chain & Beneficiaries
Today
XBRL for Financial
Statements
Internal External Investment
Processes Business
Financial Financial and Lending
Operations
Reporting Reporting Analysis
Financial
Publishers
Companies Investors
Participants and Data
Aggregators
Trading Management
Auditors Regulators
Partners Accountants
Software Vendors
Benefits to Today's Users
1. Reduce cost of analyzing and reporting
financial information
2. Increase speed and efficiency of business
decisions
3. Enhance the distribution and access of
existing financial statement information
4. More readily exchanged
5. Increase and enhance analysis
Benefits
1. Reduce cost of analyzing and reporting
financial information
2. Increase the speed and efficiency of business decisions
3. Enhance the distribution and usability of existing financial
statement information
Example: Cost Reduction
International Subsidiaries:
• Large multi-national corporation uses XBRL to
quickly roll–up, analyze and publish the financial
statements of numerous subsidiaries—
– in different countries
– with different languages
– using different GAAP
– on different computer systems
Benefits
1. Reduce cost of analyzing and reporting financial
information
2. Increase the speed and efficiency of
business decisions
3. Enhance the distribution and usability of existing financial
statement information
Example: Efficient Decisions
• Major mutual fund company feeds XBRL-ized
information to customers to differentiate their funds
as more objective and reliable investments
• An investor uses XBRL to compare the financials for
a range of companies—
Belonging to different revenue levels
Located within an industry sector
Along multiple analytical criteria
Benefits
1. Reduce cost of analyzing and reporting financial
information
2. Increase the speed and efficiency of business decisions
3. Enhance the distribution and usability of
existing financial statement information
Example: Credit
Loan Approval:
• Small Business provides Bank with their financial information
in XBRL and receives loan approval in 1 minute instead of 2
days
Credit Approval:
• Company approves customer credit request with automated
assessment processes facilitated by XBRL
Line of Credit:
• Company provides capital markets with financial information
in XBRL and receives expedited line of credit
Development & Adoption Strategy
XBRL Timeline
Currently
– www.xbrl.org web site demos cover a variety of
uses
– Core reporting standard plus one document type
released 7/31
– Pilot implementations at US- and non-US
companies of various sizes & industries and by
vendor/working committee
– Registration of draft with XML Schema Directories
Roadmap for Financial Reporting Taxonomies
Financial Reporting Across Jurisdictions
Today
Illustrative Taxonomy
Development Matrix U.S. IAS U.K. Germany Australia Canada
US GAAP
Commercial & Industrial
Commercial & Industrial …
…
Done …
… …
… …
… …
… …
…
Industry Specific Reporting
(C&I) Companies
(C&I) Companies
US GAAP
CC & I, extended to
& I, extended to …
… …
… …
… …
… …
… …
…
Mutual Funds
Software Companies
US GAAP
CC & I, extended to
& I, extended to …
… …
… …
… …
… …
… …
…
Media & Entertainment
Media & Entertainment
US GAAP
CC & I, extended to
& I, extended to …
… …
… …
… …
… …
… …
…
Media Agriculture
& Entertainment
US GAAP
Financial Services
Financial Services …
… …
… …
… …
… …
… …
…
Companies
Companies
…
… …
… …
… …
… …
… …
… …
…
Within FY01
Timeline – and beyond
Working/publishing the balance of the matrix over the next 18 to
24 months
Significant Adoption anticipated in this 18 to 24 month
timeframe
App to fin rep
XBRL Taxonomies Under Development
Commercial and Industrial Companies, US GAAP -
Published
Federal Departments, US
Mutual Funds, US
Financial Institutions, US
Commercial and Industrial, IASC
Commercial and Industrial, German GAAP
App to fin rep
XBRL Taxonomies Under Development
Commercial and Industrial, Canadian GAAP
Commercial and Industrial, Australian GAAP
Commercial and Industrial, New Zealand GAAP
Commercial and Industrial, Singapore GAAP
Financial Institutions, Australian GAAP
Public Sector, Australian GAAP
General Ledger Transactions
Not for profit financial reporting
XBRL Development & Adoption
Adoption
Tool Development
Taxonomy Development
-00
-01
-02
-03
-00
-01
-02
De c
De c
De c
Jun
Jun
Jun
Jun
XBRL Working Model: Planned Specifications
Today
XBRL for G/L XBRL for Financial
Journal Entry Statements XBRL for
Reporting Regulatory Filings
Internal External Investment
Processes Business
Financial Financial and Lending
Operations
Reporting Reporting Analysis
XBRL for Business XBRL for Audit XBRL for
Event Reporting Schedules Tax Filings
Financial
Publishers
Companies Investors
Participants and Data
Aggregators
Trading Management
Auditors Regulators
Partners Accountants
Software Vendors
XBRL Uses
XBRL for Financial Statements
XBRL for General Ledger
XBRL for Journal Entry Reporting
XBRL for Credit Line Reporting
XBRL for Mutual Fund Performance
XBRL for Economic Indicators
XBRL for Performance-related Press Releases
XBRL for Risk Reporting
XBRL for Regulatory Filings
XBRL for Tax Filings
XBRL for Assurance Schedules
XBRL for Authoritative Literature
XBRL for “Business” Reporting
Balanced Scorecard, Benchmarking, and other performance
reporting
quiz
So when will this happen??
A. Never.
B. After I retire.
C. Before I retire but too late for me to have to
worry about it.
D. Sooner than I want to admit, but I still have
enough time to procrastinate.
E. Next five years.
F. Next two to three years.
quiz
Implications for
Education
Technology enables change
Producer & Client & Assurer &
Creator Consumer Advisor
Business Opportunities IS Consulting
Business Issues
Internal
Control
Applications Financial
Applications
Enabling
Technologies
PCs
Technology enables change
Producer & Client & Assurer &
Creator Consumer Advisor
Business Opportunities ????
Business Issues
Data
Centric
New
Applications Reporting
Systems
Enabling XBRL
Technologies
XML
The 21st Century Annual Report (ICAEW 1998)
Reporting in a period of change
The “old” system The ”new” system
Shareholder focus Stakeholder focus
Paper based Web based
Standardized information Customized information
Company controlled Information available from a variety
information on performance and of sources
prospects
Periodic reporting Continuous reporting
Distribution of information Dialogue
Financial statements Broader range of performance
measures
Past performance Greater emphasis on future prospects
Historical cost Substantial value-based information
Audit of accounts Assurance of underlying system
Nationally orientated Globally based
Essentially static system Continuously changing model
Preparer-led regulations Satisfying market-place demands
TODAY: Business Reporting on Eurostoxx 100 Websites
Eurotop 100 Eurostoxx 50
Companies with web site 100 100
Financial reporting:
Annual report 99 100
Interim report (at least Half year report) 64 90
Audit report 53 66
Five years summary 47 62
Financial ratios 24 38
International Accounting Standards (IASC) 5 8
Formats:
PDF (First generation) 86 88
HTML (Second generation) 49 48
Excel (Third generation) 12 12
XBRL (Fourth generation) 0 0
Information about strategy 54 80
Environmental reporting 34 40
Shareholders:
Shareholders’ structure 31 46
Shareholders’ news 83 84
Shareholders’ meetings 34 54
Press releases 94 94
Mailing list 28 42
(Bonsón et al., 2000)
Importance of Reporting
“…[W]hat excites the CEO is the ability
to know what the business is doing at
any given point in time, react quickly
to market shifts and competitive
threats and remain in tight control
while empowering employees to make
informed decisions more quickly.
Year End Earnings Release Call
August 10, 1999
John Chambers
Cisco CEO
”
Best Practice
“ Virtual Close … has, in my
The
opinion, just as much impact
on a company’s future success
or lack thereof as the well-
published e-commerce area.
Year End Earnings Release Call
August 10, 1999
John Chambers
Cisco CEO ”
On the Independent Audit
“[T]he audit remains rooted in historical
reviews while transactions are
increasingly processed in a real-time
manner.
…
We believe real-time auditing is not only
possible, but it is necessary for the
independent audit to survive in the
information age.”
- Emerson’s 2000 Big Five Annual Report, p. 14
Lunch
Questions for Discussion
To what extent will corporate accountants need to know
transactional/operational or reporting level XML data standards to
understand/interpret operating activities?
What insights to the transactional or operational level XML data
standards will external accountants and auditors need to have to
provide assurance?
Should students (accounting and IT) become XML experts?
Lunch
Questions for Discussion
What additional modifications to our current regulatory
environment (like digital signatures) might facilitate enhanced
reporting?
If Linux can be developed in a collaborative fashion to become a
competitor to Windows; would the same open community
framework approach work for the development of business
reporting?
What will these e-business changes mean to the content of your
course materials?
Lunch
Questions for Discussion
If the virtual close becomes the norm, what implications
would that have on reporting?….internal reporting AND
external reporting.
How will a data centric verses document centric world
impact audit services? What opportunities does it create?
Request of FSA
Support XBRL
Membership
Review and comment on XBRL taxonomies
Encourage adoption – Help build the case for XBRL
Identify good XBRL examples
Research implications of XBRL
Publish
Global Collaboration – Circles of Influence
Integrate XBRL into graduate programs of accounting
―I can provide you with any piece of financial
information, from any company, in any
language, according to any set of generally
accepted accounting principles, anywhere on
this earth – including on this cell phone, or up
in that airplane.‖
XBRL – ride the light…
Useful References and Additional Information
Useful References
WWW.XBRL.org
Useful References and Additional Information
Useful References
Journal of Accountancy article, ―XBRL – How to Turn Data Into Strategy‖
– http://www.aicpa.org/pubs/jofa/aug2000/zarowin.htm
CFO Magazines article, ―How the Web was Won‖ about Online IR
– http://www.cfonet.com/html/Articles/CFO/2000/00FEhowt.html
Scientific American article, ―XML and the Second-Generation Web‖
– http://www.sciam.com/1999/0599issue/0599bosak.html
FASB’s Electronic Distribution of Business Reporting Information
– http://www.rutgers.edu/Accounting/raw/fasb
IASC’s Business Reporting on the Internet
– http://www.iasc.org.uk/frame/cen3_26.htm
XBRL Website
– http://www.xbrl.org
For additional information, please contact
Mike Willis, XBRL Committee Chair & Strategy Working Group Co-chair
(813) 340-0932 or mike.willis@us.pwcglobal.com
Louis Matherne, XBRL Strategy Working Group Co-chair
(212) 596-6027 or Lmatherne@aicpa.org
Zachary Coffin, Liaison Chair
(213) 955-8508 or zcoffin@kpmg.com
