XFRML

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Business Reporting inthe 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
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Todays 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

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Additionally
Confirmed New Members (as of 15 November 2000)

• National Center of Charitable Statistics
• Seattle Pacific University, Center for
  Professional Development
• Global Filings
• Business Wire
• Hong Kong Society of Accountants
• Innovision

• Deutche Bundesbank
• U.S. Department of Defense (DFAS)
• Dresdner Kleinwort Benson
• Nikkei (Nihon Keizai Shimbun)
• New River
• Practitioners Publishing Company

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XBRL International is Gaining Strength

• China Hong Kong
• Malaysia
• New Zealand
• Taiwan
• Japan
• Netherlands
• Nordic Federation (Denmark, Norway, Sweden)
• Spain

• XBRL activities occurring in
• United States
• Canada
• United Kingdom
• Australia
• Singapore
• Germany
• Ireland
• France

• And on a global level through the
• International Accounting Standards Committee
• International Press Telecommunications Council
• International Standards Organization

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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)

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Why XBRL ?

• Improve communication to investors
• More efficient aggregation and analysis
• More efficient creation of financial statements

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Why Now ?
Internet
XML
CPA
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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

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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

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Simple problem 4921 results in a typical
search (e.g. IBM Fixed Assets)
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Browsing the Web (Contentwithout Context)
Searching for the word Mercury on the Web can
provide a wide variety of resultstoo manysuch
as
Hg
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Content in Context (Industry-specific)
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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.
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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
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XML
XML stands for eXtensible Markup
Language Universally accepted method of
exchanging information
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What Is XML?

• XML is a
• platform-independent,
• self-describing,
• expandable,
• standard data exchange format

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XML is Platform Independent

• Windows
• Unix
• Macintosh
• Mainframe

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XML is Self-Describing

• Example
• ltDATEgtJuly 26, 1998lt/DATEgt
• Describes the information, not the presentation
• Format neutral

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XML is Extensible

• Whereas HTML has a fixed set of tags
• ltH1gt, ltBgt, ltPREgt
• XML lets you create your own tags
• ltsugary-substancegt
• ltShakespearean-charactergt
• ltcash-equivalentgt

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HTML vs. XML

• HTML
• lthtmlgt
• ltbodygt
• ltpgtPurchase Order, Stock Number 1002, 2,
  100lt/pgt
• lt/bodygt
• lt/htmlgt

• XML
• ltpurchase_order/gt
• ltstock_numbergt1002lt/stock_numbergt
• ltpricegt100lt/nricegt
• ltnumbergt2lt/numbergt
• lt/purchase_ordergt

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XBRL A Fragment of a Raw Data

• Raw Data in Spreadsheet

• Same Raw Data in XML (XBRL) Format

ltgroupgt ltgroup type"CurrentAssets.CashandCashEqui
valents"gt ltitem period"1999"gt1,611
lt/itemgt ltitem period"1998"gt1,648
lt/itemgt lt/groupgt
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Who defines the tags?

• Tags are defined by industry consortiums
• Each industrys standard tags are commonly
  referred to as a taxonomy

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Standard .orgs (reporting vs e)
Accounting / Auditing Reporting
e-Business

• ASB
• IASC
• FASB
• IFAC
• SEC
• Territory Institutes

• W3C
• OASISUN/CEFACT (ebxml)
• xml.org
• RosettaNet
• ACORD

What about these?
CPAs participate / lead in these
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Whos Building Taxonomies?
XBRL is uniquely focused on business reporting
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XBRL Adds Reporting to E-Commerce
BUSINESS
Customers
Suppliers
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XBRL Adds Reporting to E-Commerce
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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.

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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

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communicates business performance for the
financial reporting supply chain
XBRL
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Today A Convoluted Information Supply Chain
Operational Data Stores
Investors
Corp.
Auditor
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XBRL Multiple Uses
XBRL
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What software sees is the differentiator and
drives benefits (here is an example)
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Financial Institutionsand their Users

• SMALL BUSINESS provides FINANCIAL INSTITUTION
  with their information in XBRL and receives loan
  approval in less than a day instead of two
  daysor two weeks.

Average Time for Loan Processing1.75 days
Value-added Analysis and Decision-making?
90 time spent on Mechanics
With XBRL?
More Time for Analysis gt Better Analysis gt Less
Risk
Or
Mechanics
Analysis
Mechanics
Analysis
Mechanics
Analysis
Mechanics
Analysis
Process more loans in the same amount of time
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Who Benefits?
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XBRL Working Model Supply Chain Beneficiaries
Today XBRL for Financial Statements
External
Internal
Investment
Business
Processes
Processes
Financial
Financial
and Lending
Operations
Reporting
Reporting
Analysis
Financial
Publishers
Companies
Investors
Participants
Participants
and Data
Aggregators
Trading
Management
Auditors
Regulators
Partners
Accountants
Software Vendors
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Benefits to Today's Users

• 1. Reduce cost of analyzing and reporting
  financial information
• 2. Increase speed and efficiency of business
  decisions
• Enhance the distribution and access of existing
  financial statement information
• More readily exchanged
• Increase and enhance analysis

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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

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Example Cost Reduction

• International Subsidiaries
• Large multi-national corporation uses XBRL to
  quickly rollup, analyze and publish the
  financial statements of numerous subsidiaries
• in different countries
• with different languages
• using different GAAP
• on different computer systems

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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

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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

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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

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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

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Development Adoption Strategy
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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

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Roadmap for Financial Reporting Taxonomies
Today
Within FY01
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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

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XBRL Taxonomies Under Development
App to fin rep

• 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

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XBRL Taxonomies Under Development
App to fin rep

• 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

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XBRL Development Adoption
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XBRL Working Model Planned Specifications
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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

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So when will this happen??
quiz

• Never.
• After I retire.
• Before I retire but too late for me to have to
  worry about it.
• Sooner than I want to admit, but I still have
  enough time to procrastinate.
• Next five years.
• Next two to three years.

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quiz
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When Will It Reach Critical Mass?

• The phonograph is of no commercial use
• - Thomas Edison, 1880
• Everything that can be invented has been
  invented
• - Charles Duel, Director US Patent Office, 1899
• Who the hell wants to hear actors talking?
• - Harvey Warner, 1927
• I think there is a world market for about five
  computers
• - Thomas J Watson, Chairman, IBM, 1943
• There is no reason for any individual to have a
  computer in their home
• - Ken Oloson, President of Digital Equipment
  Corp., 1977

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Implications for Education
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Technology enables change
IS Consulting
Internal Control
FinancialApplications
PCs
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Technology enables change
????
Data Centric
New Reporting Systems
XBRLXML
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The 21st Century Annual Report (ICAEW 1998)
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TODAY Business Reporting on Eurostoxx 100
Websites
(Bonsón et al., 2000)
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Importance of Reporting
What 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.

John Chambers Cisco CEO
Year End Earnings Release Call August 10, 1999
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Best Practice
The Virtual Close has, in my opinion, just as
much impact on a companys future success or lack
thereof as the well-published e-commerce area.
John Chambers Cisco CEO
Year End Earnings Release Call August 10, 1999
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On the Independent Audit

• The 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.
• - Emersons 2000 Big Five Annual Report, p. 14

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Questions for Discussion
Lunch

• 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?

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Questions for Discussion
Lunch

• 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?

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Questions for Discussion
Lunch

• 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?

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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

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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
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Useful References and Additional Information

• Useful References

WWW.XBRL.org
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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/2000/00FEh
  owt.html
• Scientific American article, XML and the
  Second-Generation Web
• http//www.sciam.com/1999/0599issue/0599bosak.html
  
• FASBs Electronic Distribution of Business
  Reporting Information
• http//www.rutgers.edu/Accounting/raw/fasb
• IASCs 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
• [phone] or mike.willis_at_us.pwcglobal.com
• Louis Matherne, XBRL Strategy Working Group
  Co-chair
• [phone] or Lmatherne_at_aicpa.org
• Zachary Coffin, Liaison Chair

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