XBRL

1
XBRL Enhanced Business Reporting A Consortium
ApproachDr. Robert G. Eccles XBRL
International April 27, 2005Boston, USA
2
Wait a minute enhanced business reporting,
improving the reporting model

• Didn't Sarbanes-Oxley 404 lead to improved
  internal controls and result in better
  information?
• No..SOX targeted improved internal controls over
  financial reporting, however
• Investors, creditors and business executives do
  not use the financial statements as their primary
  tool when making decisions about the allocation
  of capital
• Then, what information is important?

3
Research tells us what is important

• Provide shareholders and others with information
  needed to make decisions
• Financial and nonfinancial value drivers
• Tangible and intangibles assets
• In general, many measures require information
  from outside the Company's financial or business
  systems
• Vast majority of measures are not subject to
  standards or reporting frameworks of any kind

Enhanced Business Reporting Better Information
4
PwC ValueReporting capital markets research
Source PwC ValueReporting Capital Markets Survey
5
PwC ValueReporting capital markets research
Source PwC ValueReporting Capital Markets Survey
6
PwC ValueReporting capital markets research
Source PwC ValueReporting Capital Markets Survey
7
PwC ValueReporting capital markets research
Chemicals
Metals
Mining

• Free Cash Flow
• Strategic Direction
• Manufacturing Costs
• Earnings
• Market Growth
• Performance by Business Segment
• Product Quality
• Quality of Management
• Capital Expenditure
• Utilization of Facilities
• Market Share
• Customer Loyalty

• Market Share
• Energy Prices Supply
• Earnings
• Costs per Ton Delivered
• Market Growth
• Metals Prices
• Capital Expenditures
• Performance by Business Segment
• Potential Supply Globally Locally
• Utilization of Facilities
• Product Quality
• Free Cash Flow
• Age Quality of Plant
• Strategic Direction
• Value of Tangible Assets
• Implementation of New Processes Technologies
• Quality of Management
• Regulatory Environment

• Strategic Direction
• Cash Cost per Ounce/Kg/Ton
• Capital Expenditures
• Earnings
• Existing/Potential Environmental Liabilities
• Health Safety Performance Statistics
• Metal Prices
• Quality of Management
• Acquisition Strategies
• Ounces/Kilograms/Tons Produced per Year
• Performance by Business Segment
• Cost per Ounce/Kg/Ton
• Labor Relations
• Sustainable Development Strategy
• Environmental Policy/Risks
• Potential Supply/Production Globally Locally

Source PwC ValueReporting Capital Markets Survey
8
PwC ValueReporting capital markets research
Source PwC ValueReporting Capital Markets Survey
9
PwC ValueReporting capital markets research
Source PwC ValueReporting Capital Markets Survey
10
PwC ValueReporting capital markets research
Automotive
Entertainment
Utilities

• Market Growth
• Market Share
• Free Cash Flow
• Performance by Business Segment
• Customer Demographics
• Quality of Management
• Earnings
• Strategic Direction
• New Business
• Capital Expenditure

• Cost reduction
• Investment/acquisition strategy
• Margin improvement
• Market growth
• Operating cash flow growth
• Operating profit growth
• Quality of management
• Regulatory environment and price controls
• Risk Management processes
• Strategic direction and focus - integrated vs.
  specialist player

• Earnings
• Free cash flow
• Market Share
• Strategic direction
• Product quality
• Customer satisfaction
• Market Growth
• Facility or capacity investment strategy
• Sales volume
• Performance by business segment
• ROIC

Source PwC ValueReporting Capital Markets Survey
11
Everyone needs better information

• Management to optimize allocation of capital and
  people resources
• Boards of directors to provide the level of
  oversight that shareholders demand
• Investors to more efficiently and effectively
  allocate and price capital
• Regulators to ensure that the capital markets
  are functioning as efficiently and effectively as
  possible

The net result is a higher return on capital for
society as a whole
12
What makes information better?

• Information which is more relevant
• Content matters not the normal boiler plate
• Managements perspective
• Different users have different needs
• Information which is not overly costly to produce
  or consume
• Format matters
• Timing is important
• Focus on analysis not data gathering and
  validation

Both content and format of information enhance
transparency
13
What do you mean content and format?

• Enhanced Business Reporting is about content
• Provides information that is actually used for
  decision-making
• It is information that is not always disclosed
• Business community may want to develop standards
  for this type of content (rather than waiting for
  territory regulatory actions)
• XBRL (eXtensible Business Reporting Language) is
  about format
• Current taxonomies are based on accounting
  standards
• Taxonomies for MDA/OFR content are very high
  level
• Taxonomy extensions will provide more relevant
  information

14
What is Enhanced Business Reporting?

• Enhanced information for consumers
• Internationally recognized, voluntary guidelines
  for industry-specific value drivers and key
  performance indicators (KPIs)
• A framework for disclosure of non-financial
  information, e.g., opportunities, risks,
  strategies and plans and about the quality,
  sustainability and variability of cash flows and
  earnings
• Simplified report preparation
• Stronger focus on quality of information, not
  quantity
• Prepare and disseminate information using
  efficient and effective business processes

15
A standardized format matters if information is
to be more useful

• Management to quickly populate a wide range of
  analytical and reporting tools with relevant
  information
• Boards of directors to access and analysis of
  information buried deep within the enterprise
• Investors to more efficiently and effectively
  access and analyze information in business
  reports
• Regulators to more effectively analyze
  information in business reports

The net result is greater transparency of
business information
16
The challenge

• CEOs and management must resolve to report
  externally the same information that is used to
  manage the business
• Boards of directors must determine the optimal
  level of transparency required to ensure that all
  stakeholders have the information needed to make
  decisions
• Investors must demand and use qualitative,
  non-financial information and key performance
  indicators
• Regulators must be willing to trade long-time
  requirements for more relevant and useful
  information

17
The benefits are worth the effort

• Better Management
• Improving the ability of companies to benchmark
  performance against all key performance
  indicators
• This level of benchmarking is impracticable in a
  paper-centric world
• Better Governance
• Directors can better fulfill their fiduciary
  responsibilities to shareholders, e.g., more
  appropriate executive compensation through
  benchmarking
• Better Markets
• The over-emphasis of quarterly earnings will
  decline, as companies provide richer information
  that enables to investors take a longer term view
  
• More efficient and cost-effective regulation

18
One possible model for business reporting
19
One possible framework enhanced business
reporting

• The Market
• Competition
• Regulatory
• Macro-economic

• Performance
• Summary
• Supply chain
• Customers
• Acquisitions
• Innovation
• People
• Sensitivity analysis
• Estimates
• Projections

• Strategy
• Overview
• Strategic priorities
• Operational goals
• Risks and risk management
• Opportunities
• Value drivers

• Financial
• Financial statements
• Segment analysis

Source Report of the Public Company Task Force
to the AICPA Special Committee on Enhanced
Business Reporting, June 2004
20
What do we need to do?

• Work together along industry lines to create
  thoughtful proposals for greater transparency
  involving both simplification and enhancement
• Lead positive change, through a collaborative
  solution, by establishing an international
  Enhanced Business Reporting Consortium of diverse
  stakeholders to improve the quality and
  transparency of information used in
  decision-making

Market collaboration is the best solution for all
participants
21
Are there any alternatives to the EBR Consortium?

• Do nothing and
• Live with uncertainty in the markets about
  strategic intent and future performance, but
  remember, uncertainty breeds market volatility
• Fail to demonstrate that users and providers of
  market capital are committed to hold themselves
  accountable for the quality of the information
  provided to the capital markets
• Fumble an opportunity to build upon the SEC's
  interest in a market-led effort
• One thing is certain
• Failure of the business community to develop and
  present constructive proposals will result in
  future regulatory mandates

22
Companies are trying to explain why they did not
make a target that they didnt set in the first
place

• Enhanced Business Reporting will help companies
  move beyond the earnings game placing more
  emphasis on measures that give a better picture
  of their value, their risks, and their
  opportunities.
• Bob Herz
• Chairman
• Financial Accounting Standards Board

23
What does the SEC think of the Enhanced Business
Reporting Consortium?

• I am encouraged by the Enhanced Business
  Reporting Consortium's efforts to develop a
  voluntary, internationally recognized framework
  for presentation of industry-specific key
  performance indicators and disclosure of
  non-financial information about opportunities,
  risks and management's strategies and plans.
• This effort represents the type of discussion and
  action that should be occurring in the
  marketplace as we all seek to continually improve
  the value of information for the sake of
  investors.
• Don NicolaisenChief AccountantSecurities and
  Exchange Commission

24
We are on the verge of a fundamental
transformation of business reporting practices
Will you join us in providing leadership for
change?
www.ebrconsortium.org
25
XBRL Enhanced Business Reporting A Consortium
ApproachDr. Robert G. Eccles XBRL
International April 27, 2005Boston, USA