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Transcript
XBRL & FEI
What, Why and How
Colleen 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 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 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
• SEC adopts Final Rule in March, 2005
Users
• Reduces research costs
• Enables improved modeling and
comparison
SEC Voluntary XBRL Proposal
• 2 documents issued September, 2004
• Proposed Rule that would establish
Voluntary XBRL reporting
• Concept Release on XBRL
• Final Rule released effective March 16,
2005
SEC Voluntary Reporting
Program
• Establish a voluntary program allowing
registrants to file supplemental financial
information using XBRL
• Filed via an exhibit to specified SEC
filings
• Effective March 16, 2005 – but delayed
until April 4, 2005
SEC Voluntary Reporting
Program
• 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
• Public comment was requested 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 was November 15th, 2004
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.
Registrants choosing to participate in the voluntary
program,
expected to begin in
… “we
are evaluating
2005, also would continue to file their financial information in HTML or ASCII
whetherearly
tagged
data in Commission filings would provide a better
format, as currently required. The voluntary program is intended to help us
means to
provide
and obtain
necessary
information
if so, to
evaluate
the usefulness
of data
tagging in general,
and XBRLand,
in particular,
investors,
theor
Commission
the marketplace
generally.
whetherregistrants,
we should
permit
require and
XBRL
tagged data
in 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)
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
(verifiability) 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 facilitating 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
with XBRL
Financial
statement
consumers
Common
Standard
CRM
ERP
XBRL
ERP
External Reports
Reporting
Consolidation
XBRL
Mgmt Reports
Internal
Control
Docs
• Internal control
system ‘glue’
• Accounts
• Policies
• Issues Mgmt
•…
• Real-time
auditing
• Monitoring
XML &
Web Services
• Common structure
• Auditable trail
• Keys to financial &
business information
Suppliers
Investors
Banks
SEC
IRS
• Information service
providers
• Industry-based supply chain
(XML + XBRL)
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
 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?