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XBRL

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Data is more complex. Need to decrease costs. Re-using or re-purposing of information expensive ... Avoid costs associated with custom data feeds and re-keying ... – PowerPoint PPT presentation

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Title: XBRL


1
XBRL
  • What you need to know

Jim Brashear, Haynes and Boone, LLP Mark Story,
Securities and Exchange Commission Ed Hodder,
Bowne
NIRI SWRC Conference St. Louis, MO August 21,
2008
2
Agenda
  • Overview of XBRL
  • SEC Interactive Data Initiative
  • XBRL Demonstration
  • Implementing XBRL
  • Discussion of Issues and Implications

3
Why Interactive / Intelligent Data?
  • Need for increased efficiency in business
    information reporting
  • Data producers, processors, and consumers
  • Demands for faster distribution of information
  • Required to report more often
  • Demands for more detail and additional processing
    to ensure accuracy
  • Data is more complex
  • Need to decrease costs
  • Re-using or re-purposing of information expensive
  • Manual processing (re-keying) is prone to errors
  • Increasing costs of manual processing

4
What is XBRL?
  • eXtensible Business Reporting Language
  • XBRL is a use of Extensible Mark-up Language
    (XML) for business and financial reporting
  • Next generation language after HTML
  • HTML tells your computer how to display text
  • XML and XBRL tell your computer how to interpret
    the context of the text
  • Business reporting equivalent of UPC or SKU bar
    code

5
Key XBRL Terms
  • Tag
  • Machine-readable bar code that gives a standard
    definition for each line item in an income
    statement, cash flow statement, or balance sheet
  • Taxonomy
  • A collection of terms to define a reporting
    situation
  • Specific accounting standards (US GAAP, IFRS)
  • Industry segments (e.g., energy, REITs,
    Broker-Dealers, Commercial)
  • Company-specific tags (Extensions)
  • Instance document (XBRL formatted document)
  • Collection of tagged data to describe a specific
    reporting instance

6
What does XBRL do?
  • Lets say we want to report cash and cash
    equivalents of 5 million
  • Instead of just typing 5,000 as text …
  • XBRL wraps around the number coded tags that
    define the context of the number
  • ltus-gaap CashCashEquivalents Decimals"6"unitRef"
    USD"gt5000lt/us-gaap CashCashEquivalentsgt

7
XBRL gives context to numbers
7
8
How does XBRL work?
9
(No Transcript)
10
International Standard
11
XBRL Tags for US GAAP
  • US GAAP Taxonomies
  • Define required disclosures and common reporting
    practices
  • Includes primary financial statements and
    footnotes
  • No changes in current reporting requirements
  • Finalized April 28, 2008
  • Development initiated March 2007
  • Contract with SEC
  • Made available for public review December 4, 2007

12
XBRL US GAAP Scope
  • US GAAP Taxonomy
  • All US GAAP required disclosures plus common
    reporting practices
  • Extensions to taxonomy will still be required
  • Industries
  • - Commercial industrial - Banking
    Savings
  • - Real Estate - Insurance
  • - Broker Dealer
  • Preparers Guide
  • Going forward - Maintenance and Support Plan

13
What could be tagged in a footnote?
  • RDE expense was 6,107 million in 2006, 5,842
    million in 2005 and 5,874 million in 2004.
  • The company incurred expense of 5,682 million in
    2006, 5,379 million in 2005 and 5,339 million
    in 2004 for scientific research and the
    application of scientific advances to the
    development of new and improved products and
    their uses, as well as services and their
    application. Of these amounts, software-related
    expense was 2,842 million, 2,689 million and
    2,626 million in 2006, 2005 and 2004,
    respectively. Included in the expense was a
    charge of 7 million and 1 million in 2006 and
    2005, respectively, for acquired in-process RD.
  • Expense for product-related engineering was 425
    million, 463 million and 535 million in 2006,
    2005 and 2004, respectively.

14
What could be tagged in a footnote?
  • RDE expense was 6,107 million in 2006, 5,842
    million in 2005 and 5,874 million in 2004.
  • The company incurred expense of 5,682 million in
    2006, 5,379 million in 2005 and 5,339 million
    in 2004 for scientific research and the
    application of scientific advances to the
    development of new and improved products and
    their uses, as well as services and their
    application. Of these amounts, software-related
    expense was 2,842 million, 2,689 million and
    2,626 million in 2006, 2005 and 2004,
    respectively. Included in the expense was a
    charge of 7 million and 1 million in 2006 and
    2005, respectively, for acquired in-process RD.
  • Expense for product-related engineering was 425
    million, 463 million and 535 million in 2006,
    2005 and 2004, respectively.

15
What are the benefits?
  • Giving data context makes it intelligent
    data that can be
  • Reused
  • Repurposed
  • Exchanged
  • Submitted
  • Machine processed

16
The XBRL value proposition
  • Businesses
  • More efficient preparation of financial
    statements and management reporting
  • Financial reports created once and re-used many
    times, e.g. as printed reports, Web pages, or
    regulatory filings.
  • Analysts, Investors and Regulators
  • Enhanced distribution and usability of existing
    financial statement information
  • Automated analysis tools
  • Less re-keying of financial information.
  • Financial Publishers and Data Aggregators
  • More efficient data collection
  • Avoid costs associated with custom data feeds and
    re-keying
  • Fewer errors
  • More time to focus on analysis
  • Software Vendors
  • Use XBRL for data export and import (e.g.
    transactions and reports)
  • Potential for full interoperability with other
    financial and analytical applications

17
Easier analysis and reporting
  • Data automatically extracted into spreadsheets
    and documents with no re-keying
  • Reduction in data-entry errors
  • Enhanced ability to create reports
  • Faster disclosure and distribution to
    shareholders, analysts and management
  • Analysis will be significantly easier and faster

17
18
Faster Disclosure and Dissemination
  • For small and mid-size companies, third party
    data aggregators can take weeks to post
    companies financials
  • With machine readable data
  • Financials will be accessible immediately
  • Larger volumes of data become easier to analyze
  • So small and mid-cap companies will have a better
    chance of getting analyst coverage

18
19
Increased Accuracy and Comparability
  • Today, after companies report in EDGAR,
    aggregators normalize, database and often distort
    data
  • Aggregators employ labor intensive, error prone
    process to rekeying information
  • Use their own proprietary applications, applying
    their own rules for consolidating
  • With XBRL, companies adhere to common set of
    reporting elements but can add company-specific
    reporting labels (extensions) without changing
    underlying definitions
  • Financials not perfectly comparable but as
    reported data will be substantially more
    comparable
  • Financial data already tagged, no need for the
    investment community to re-key the data

19
20
More efficient internal processing
  • Fully-developed XBRL implementation has potential
    benefits beyond external reporting
  • Speed the timeline for financial closing and
    reporting
  • Eliminate manual processes
  • Increase accuracy
  • Reduce reporting costs
  • Facilitate rapid, frequent internal analysis

21
Improved Disclosure Controls
Today
XBRL Web Services
  • Automated
  • Integrated within enterprise processes/cost
    effective
  • Proactive/timely
  • Visible/transparent to management stakeholders
  • More Secure
  • Manual
  • Physically connected to internal data store
  • Segregated in each business unit/redundant costs
  • Periodic/reactive/untimely
  • Opaque/deep in organizational processes
  • Less secure

22
Agenda
  • Overview of XBRL
  • SEC Interactive Data Initiative
  • XBRL Demonstration
  • Implementing XBRL
  • Discussion of Issues and Implications

23
SEC Role in XBRL
  • Markets function best when all the information
    that market participants need is available to
    them when they want it, and in a form they can
    use it.
  • Thats why the Commission is so keen on
    interactive data for financial reporting.
  • Im not thinking years. Im thinking months.
  • And the SEC will play a leadership role.

SEC Chairman Christopher Cox January 2006
24
SEC XBRL Program
  • April 2005, SEC launched voluntary test filer
    program to encourage companies to use XBRL
  • January 2006, SEC offered incentives to
    participate
  • Expedited reviews of registration statements
  • Inform WKSI if Form 10-K is selected for review
    within 30 days after filing and undertake to
    comment within 45-60 days of filing
  • October 2007, SEC announced new Division of
    Interactive Disclosure
  • January 2008, SEC CIFiR subcommittee recommended
    mandating XBRL
  • May 2008, SEC approved two XBRL rule proposals
  • Public company submissions to EDGAR
  • Mutual fund risk/return summary data submission

25
Support for XBRL
  • XBRL principally advocated by companies with a
    commercial stake in promoting interactive data
  • Enthusiastic support from XBRL vendors and data
    recipients
  • analysts, academics, researchers, regulators,
    information aggregators and other data
    intermediaries
  • Limited demand from reporting companies and
    investors

26
Most Issuers Unenthusiastic
  • Reporting companies bear the cost to provide
    interactive data to benefit external user groups
  • Limited current benefit to well-covered companies
    from adding additional step to existing
    disclosure process
  • May increase visibility for smaller issuers
  • Internal benefits are not well-understood

27
Pilot Program Participation
  • Relatively few companies volunteered to
    participate in the SECs XBRL pilot program
  • Several have commercial stake in XBRL
  • Other companies are including XBRL in their
    earnings releases and other external reports

28
Proposed Rule Summary
  • Require certain registrants to provide financial
    statements in XBRL
  • Tagged disclosures include primary financial
    statements, notes and schedules
  • Also company and form identifier information
  • Supplements disclosure using existing EDGAR
    electronic filing formats
  • Does not replace EDGAR
  • Existing ASCII or HTML filing formats still
    required
  • Apply to domestic and foreign companies using
    U.S. GAAP
  • Eventually to apply to foreign private issuers
    using IFRS

29
XBRL Does Not Affect Substance
  • Rules change disclosure format, not substance
  • XBRL submissions would be provided as exhibits
    identified in Item 601(b) of Schedule S-K
  • Must use most-current tags released by XBRL U.S.
    or IASCF per the EDGAR manual
  • Includes tags such as company name, form type,
    etc.
  • Company-specific extension taxonomies would be
    allowed if no standard tag could be applied to a
    financial statement element
  • If the issuer uses a different name (e.g., gross
    margin) for a standard XBRL element (e.g., gross
    profit), the issuer should change the label of
    the standard XBRL element rather than creating an
    extension element

30
XBRL Submissions
  • Document types covered by XBRL rulemaking
  • Annual and quarterly reports
  • Transition reports
  • Securities Act registration statements
  • SEC considering mandatory XBRL submission of
  • Executive compensation disclosure, but data tag
    taxonomy not complete
  • Financial information in Form 8-K and 6-K

31
Data Tagging Financial Statements
  • The face of the financial statements would be
    tagged
  • Balance Sheet
  • Income Statement
  • Statement of Comprehensive Income
  • Statement of Cash Flows
  • Statement of Owners Equity
  • XBRL exhibit must contain the same elements as
    the HTML and ASCII filings
  • Partial XBRL presentation is prohibited
  • E.g., cannot exclude from XBRL prior-period
    information

32
Data Tagging Footnotes
  • The financial statement footnotes and schedules
    also would also be tagged
  • Levels of detail in footnote tagging
  • Each footnote separately tagged as a block of
    text
  • Each significant accounting policy separately
    tagged as a block of text
  • Each table separately tagged as a block of text
  • Each amount (monetary value, percentage and
    number) separately tagged within each footnote
  • Each narrative disclosure required by SEC rules
    and U.S. GAAP or IFRS separately tagged
  • Phase-in of each issuers footnote tagging
  • First year, only must tag each footnote as a
    block of text
  • Full tagging after issuers first year of XBRL
    submissions

33
XBRL Submission Timing
  • For initial and amended filings, a company must
    at the same time …
  • File the ASCII or HTML report or registration
    statement via EDGAR
  • Submit the XBRL exhibit via EDGAR
  • Post the XBRL exhibit on companys website, if it
    maintains one
  • SEC may amend to same day as EDGAR filing date
  • Hosted third party link should be sufficient, but
    link to the SECs website is not
  • Two exceptions
  • 30 day grace period for a filers very first XBRL
    exhibit
  • 30 day grace period for a filers first XBRL
    exhibit that includes detailed tagging of the
    footnotes and schedules
  • Exceptions are for the first filing of any type
    of submission - not the first filing of each type
    of submission

34
Phase-in of Mandatory XBRL
  • Three-year phase-in schedule proposed
  • Issuers may elect to provide XBRL exhibits
    earlier than mandated
  • Fiscal periods ending on or after December 15,
    2008
  • Domestic and foreign large accelerated filers
    that use U.S. GAAP and have world-wide public
    float above 5 billion
  • Public float determined as of the end of the most
    recent second fiscal quarter
  • Estimate would cover approximately 500 companies
  • Fiscal periods ending on or after December 15,
    2009
  • All other domestic and foreign large accelerated
    filers that use U.S. GAAP
  • Fiscal periods ending on or after December 15,
    2010
  • All remaining filers using U.S. GAAP, including
    smaller reporting companies
  • All foreign private issuers that use IFRS

35
Non-compliance
  • Filers that do not timely submit to EDGAR and
    post on their website the required XBRL exhibits
    would be
  • Deemed not current with their Exchange Act
    reports
  • Ineligible for short forms S-3, F-3 and S-8
  • Ineligible for abbreviated S-4 or F-3 information
  • Ineligible for Rule 144 resale exemption safe
    harbor
  • Issuer would regain timely filed status upon
    submitting XBRL exhibit, only if the filing was
    otherwise timely
  • Only redeems late XBRL submission
  • Automatic hardship exemption for up to 6 days
  • Covers late XBRL submissions due to unexpected
    technical difficulties
  • Issuer may apply to SEC for continuing hardship
    exemption

36
Liability
  • The SEC rulemaking distinguishes among
  • Human readable data as displayed in an XBRL
    viewer available on the SECs website
  • Data in the XBRL files submitted via EDGAR
  • Data in the XBRL file posted on the companys
    website
  • Viewable data would be subject to the same
    liability as the corresponding data in an EDGAR
    filing in ASCII or HTML
  • E.g., materially accurate amounts and statements
  • Companies would not be permitted to use
    cautionary statements that required XBRL
    submissions should not be relied on in making
    investment decisions

37
Limited Liability for Technical XBRL Errors
  • Data in the XBRL exhibit would be subject to
    limited liability
  • Similar to liability under the voluntary XBRL
    program
  • Data deemed furnished (not filed)
  • Excluded from officer certification of financial
    statements
  • Data in the XBRL exhibit which fails to meet the
    Rule 405 tagging and related requirements would
    be protected from liability if
  • Issuer made good faith efforts to comply (e.g.,
    using XBRL verification tools) and
  • Issuer corrected the failure as soon as
    reasonably practicable after becoming aware of it

38
Agenda
  • Overview of XBRL
  • SEC Interactive Data Initiative
  • XBRL Demonstration
  • Implementing XBRL
  • Discussion of Issues and Implications

39
(No Transcript)
40
Agenda
  • Overview of XBRL
  • SEC Interactive Data Initiative
  • XBRL Demonstration
  • Implementing XBRL
  • Discussion of Issues and Implications

41
Issuer Awareness of XBRL
  • Most companies are only beginning to develop an
    awareness of XBRL
  • Current focus is almost entirely on the use of
    XBRL in external reporting
  • Little focus on other XBRL advantages
  • Little implementation planning

42
Prepare for XBRL
  • What should you be doing to get ready for XBRL?
  • People
  • Processes
  • Technology
  • Vendors

43
XBRL Challenges
  • Companies should begin to understand the
    complexities, challenges and consequences of XBRL
    implementation
  • Begin to develop awareness of XBRL among senior
    executives
  • Begin implementation planning process

1. People 2. Data 3. Software 4.
Process 5. Submit
44
Misconceptions About XBRL
45
XBRL Implementation
  • Companies must analyze
  • XBRL implementation costs and steps
  • Changes to current processes
  • Companies could simply append XBRL conversion to
    their current disclosure process
  • Limited benefits to the issuer
  • Companies would need integrate XBRL into
    accounting systems to get the full benefit
  • Most financial reporting systems do not currently
    generate XBRL data
  • Fully implementing XBRL into enterprise financial
    systems would be more complex, time-consuming and
    costly

46
Implementation Approaches
  • Do-It-Yourself
  • Acquire and install tagging software
  • 1-3 people tag/review/approve XBRL exhibit
  • Requires internal/consultant expertise
  • Test and submit for filing
  • Vendor Services
  • Vendor provides tagging capabilities
  • Iterative review of XBRL exhibit
  • Knowledge transfer and training
  • Minimize need for internal/consultant expertise
  • Test and submit for filing
  • Comprehensive list of vendors on XBRL US website
  • http//xbrl.us/vendors/

47
XBRL and Internal Controls
  • XBRL implementation will affect current
    disclosure controls and internal controls
    processes
  • Need to review accuracy of tagging and production
    of XBRL exhibit
  • During implementation of XBRL reporting
  • May require parallel work streams on existing and
    new XBRL processes
  • Parallel work streams likely will involve the
    same personnel, causing distraction during peak
    times, with potential adverse effects on closing
    and disclosure timelines

48
Personnel Considerations
  • Most companies lack personnel with expertise in
    XBRL reporting
  • Companies may incur additional expense to hire
    new employees or consultants
  • XBRL implementation may involve a learning curve
    for employees in the disclosure process
  • XBRL reporting requires a scarce skill-set
  • Employee who understands both accounting concepts
    and how XBRL tags and XML hierarchies operate in
    multiple financial calculations

49
Personnel Impacts
  • External Reporting Group
  • Impact MEDIUM
  • 1-3 resources to learn and create/review XBRL
  • Inform Audit Committee (might request
    presentation)
  • Investor Relations
  • Impact LOW
  • Knowledgeable of activity
  • Legal Department
  • Impact LOW
  • Prepare wording for EDGAR submission
  • Other Management and Board of Directors
  • Impact LOW
  • Educate about SEC mandate and process changes

50
Steps to get you started 1. Get Educated
  • Read the Preparers Guide
  • Understanding and using taxonomies
  • Creating extensions and instance documents
  • Validating and rendering
  • Reviewing instance documents
  • Rules of thumb, e.g.,
  • Preparers must verify they are using the most
    updated version of the taxonomy available on the
    XBRL US web site.
  • Must use elements that exist in the public
    taxonomy whenever possible
  • Tag each individual note in its entirety as a
    single block of text.
  • Review case studies 3M, Comcast, Microsoft,
    Morgan Stanley

51
Steps to get you started 1. Get Educated
  • Review the collection of business and financials
    elements
  • www.xbrl.us

52
Steps to get you started 1. Get Educated
  • Listen to webcasts, attend training programs
  • Explore alternatives in XBRL creation
  • Outsourcing and do-it-yourself tools
  • Talk to your current service providers
  • Review multiple service and tool providers
  • Find demos, contact info and training services at
    www.xbrl.us
  • Talk to Voluntary Filer participants
  • Review other filers XBRL documents (www.sec.gov)
  • Use one of the free or trial tools to test out
    XBRL creation
  • Read the PCAOBs Staff Answers and Questions on
    XBRL

53
Steps to get you started
  • Estimate time and cost commitments
  • Develop the plan
  • Identify the internal team
  • Determine responsibilities
  • Discuss pros and cons with management,
  • Advise management on mandate
  • Gain commitment on timing of participating
  • Discuss broader XBRL implementation
  • Think through the process from start to finish
  • Start now!

54
Agenda
  • Overview of XBRL
  • SEC Interactive Data Initiative
  • XBRL Demonstration
  • Implementing XBRL
  • Discussion of Issues and Implications

55
Implications
  • Technology-driven regulation
  • The SEC notes in the rulemaking We continue to
    update our filing standards and systems as
    technologies improve.
  • Should the fact that technology facilitates
    faster or additional disclosure result in a
    regulatory mandate?
  • In what ways might improved technology drive
    further disclosure requirements?

56
Implications
  • Auditor Involvement
  • SECs proposed rule would not require an auditor
    to consider the XBRL submission as part of its
    review of other information that accompanies
    audited financial statements or is otherwise
    published by the company
  • To what extent should an issuer involve its
    independent auditor in the creation of XBRL data?
  • XBRL creation is part of disclosure controls

57
Implications
  • Limited Liability
  • SECs proposed rule would protect company from
    liability for errors in the XBRL exhibit, but not
    the human readable display of that data
  • As a practical matter, is that a distinction
    without a difference?

58
Implications
  • Picking Winners
  • Rulemaking asks Is it appropriate to require
    public companies to provide interactive data
    using XBRL?
  • Shifting cost burden to reporting companies
  • The SEC notes in the rulemaking to the extent
    that investors are currently required to pay for
    … disclosure … that has been extracted and
    reformatted into interactive data format by third
    party resources, the availability of interactive
    data in Commission filings would allow investors
    to avoid additional costs….
  • Is it appropriate to require issuers to bear the
    costs of facilitating new ways for investors,
    analysts, and others to retrieve and use
    financial information?

59
Implications
  • Investor Relations
  • XBRL will enable users to automatically extract a
    limited set of tagged data elements from the full
    financial statements
  • May lead to users interpreting selected bits of
    data outside the context of the full instance
    document supplied by the reporting company
  • E.g., figures without explanatory notes
  • Will enabling investors to parse bits of data or
    pull data more frequently create volatility or
    other issues?
  • Will XBRL drive more questions for companies
    because analysts and investors can more easily
    analyze data?
  • Will XBRL limit companies ability to emphasize
    particular data, because they cannot control the
    display format?

60
Web Resources
  • www.sec.gov/spotlight/xbrl.htm
  • XBRL at the SEC
  • www.xbrl.org
  • XBRL International
  • xbrl.us
  • XBRL US
  • www.us.kpmg.com/microsite/xbrl/train/86/86.htm
  • KPMGs XBRL tutorial
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