XBRL

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XBRL FEIWhat, Why and How

• Colleen Sayther-Cunningham
• President and CEO
• Financial Executives International

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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

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FEIs 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

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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

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FEI Membership

• FEIs membership includes some of the leading
  CFOs in corporate finance.
• Kerrii Anderson Wendys 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

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FEI Membership Publicly Traded Companies
N9995
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FEI Membership Ownership
N9470
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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)

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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

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What is XBRL?

• Non-techies 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 informations content and structure

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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 companys
  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

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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

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What XBRL is not

• NOT a set of accounting standards
• NOT a detailed chart of accounts
• NOT a GAAP translator

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Who is interested in XBRL?

• Preparers Financial Executives
• Standard setters
• Regulators
• Users

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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.

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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

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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

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Users

• Reduces research costs
• Enables improved modeling and comparison

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SEC Voluntary XBRL Proposal

• 2 documents issued Monday (9/27/04)
• Proposed Rule that would establish Voluntary XBRL
  reporting
• Concept Release on XBRL

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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

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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 staffs ability to review filings more
  timely and efficiently
• Use of tagged data for risk assessment
• Compatibility of XBRL with other Commission
  requirements

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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

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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.

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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 early 2005, also would
continue to file their financial information in
HTML or ASCII format, as currently required. The
voluntary program is intended to help us evaluate
the usefulness of data tagging in general, and
XBRL in particular, to registrants, investors,
the Commission and the marketplace generally. A
companion concept release also being issued today
provides additional information on tagged 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 the Chief Accountant, Division
of Investment Management, and Office of
Information Technology have formed a task force
to assess the implications of tagged data for
filers, investors, the Commission and other
market participants.23 In order to test and
evaluate data tagging, we propose to allow
registrants to supplement their Commission
filings by furnishing financial data on EDGAR as
an exhibit using eXtensible Business Reporting
Language ("XBRL"), beginning with the 2004
calendar year-end reporting season. We currently
expect to permit participation by any registrant
without pre-approval merely by submitting the
exhibit in the required manner.

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.
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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)

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Key issues in Business Finance
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Current Issues impacting financial reporting

• Transparency
• Timeliness of reporting
• Section 404/Internal controls
• Fair value accounting
• Convergence
• Principles-based accounting standard setting

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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

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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)

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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

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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

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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
  managements choices would be more transparent to
  users and easily compared with others

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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

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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 managements financial reporting choices
  more transparent search faciliting technology

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Now is the time for us to fundamentally enhance
Business Reporting using XBRL

• XBRL benefits all members of the financial
  information supply chain.

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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 changefor the better of the
capital markets
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Achieving standards regulatory compliance
Back Office Integrated with XBRL
Financial statement consumers
Common Standard
ERP
CRM
XBRL
ERP
External Reports
Consolidation
Investors Banks SEC IRS
XBRL
Mgmt Reports
XML Web Services
Suppliers

• Information service providers
• Industry-based supply chain (XML XBRL)

• Internal control system glue
• Accounts
• Policies
• Issues Mgmt
• Real-time auditing
• Monitoring

• Common structure
• Auditable trail
• Keys to financial business information

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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

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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.

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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

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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

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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 MDA 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

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Questions?