Overview of XBRL and its Impact on Accounting, Assurance and ...

Overview of XBRL and its Impact on Accounting, Assurance and Global Financial Reporting

Introduction

Yossef Newman, Senior Manager – National Project Manager for [email protected]

Agenda

• Introduction• What is XBRL and how does it work• XBRL momentum around the globe • XBRL at the IASB - the IFRS taxonomy and

Convergence• XBRL impact on Assurance and Attestation• Conclusion, Questions & Resources

What is XBRL

What is XBRL

XBRL stands for the Extensible Business Reporting Language.

XBRL consists of thousands of “tags” that correspond to the concepts and information included in financial reports such as balance sheets and income statements.

XBRL can be thought of as a “Bar Code” system for financial information, allowing financial statements to be read and understood by a computer.

XBRL is doing for business reporting what bar coding did for product distribution

What we say to investors

What they hear

Consolidated Statements of Operationsfor the year ended June 30, 2004

11.03.6Earnings per share

blahblahBlah

448925Profit

blahblahBlah blah blah

blahblahBlah

blahblahBlah blah

blahblahBlah

Financial information as reported today is expensive to

consume

A 2004 article in Barron’s titled “Opening the Books” noted

“Putting financial data in ready-to-crunch condition might seem a trivial detail….

…until you consider that Wall Street currently spends 80% of its time and money in data mining and 20% on actual analysis…..what data pros call the 80-20 rule."

“a standardized data format could flip the 80-20 rule, allowing analysts to spend most of their time assessing rather than gathering financial data.”

Back to our Introduction…

Introduction

Yossef Newman, Senior Manager - National Project Manager for [email protected]

<speaker_info>

<name>Yossef Newman</name>

<title>Senior Manager</title>

<group>National Project Manager for XBRL</group>

<contact_info>

<email>[email protected]</email>

<tel_number>212.436.6424</tel_number>

</contact_info>

</speaker_info>

Ordinary Information

Metadata: Information about

information

What is XBRL - Background

XBRL has been under development since 1999, when the concept was presented to the AICPA.

The AICPA then lead the establishment of the XBRL Consortium and the development of XBRL as a public standard.

Currently over 400 member organizations from around the world participate in the XBRL Consortium’s development efforts.

Participants include professional services firms, software developers and trade organizations as well as exchanges, financial regulators, tax authorities and many others.

How does it Work

How does it work

• Taxonomies• Elements• Extension Taxonomies• Instance Documents

Taxonomies

An XBRL TAXONOMY is a dictionary of financial reporting terms or concepts. Separate Taxonomies are developed for different reporting purposes such as US GAAP, IFRS, Bank Regulatory reporting etc.

The concepts captured in a taxonomy are referred to as ELEMENTS. These Elements form the core of XBRL.

An XBRL Element

XBRLElementXBRL

ElementFinancial

Reporting ConceptFinancial

Reporting Concept

Extension Taxonomies

An EXTENSION TAXONOMY allows a company to create and customize concepts and elements for their particular reporting practices. Extension taxonomies import then build on, or “extend” the core reporting taxonomy.

US GAAPPrimaryTerms

US GAAPFS

Terms

US GAAPBank Terms

First Raleigh BankTerms

Foundation terms

Industry Terms

Company Specific Terms

Instance Documents

An Instance Document is your XBRL financial report.

Instance Documents will include• Values (ex. numbers, blocks of text etc)

• Tags to identify the values

• Taxonomy references – Telling you where the tags are defined

• Context – Information describing the reporting entity and period

• Units/Measure – Information on unit of measure, currency etc.

Also – See handout

So what can I do with XBRL

XBRL Adoption around the Globe

USUS

UKUK

JPJP

NLNLSESE

CNCN

ZAZAAUAU

DEDE

DK

Financial Regulators

PilotPilot CommittedCommitted LiveLive

IEIECEBSCEBS

CSRCCSRCBEBE

ESES

CACA UKUK

IEIE

AUAU

NONO

JPJP

NZNZ

NLNLDEDE

CNCN

Tax Authorities

PilotPilot CommittedCommitted

ESES

OECDOECD

USUS

Exchanges

NASDAQNASDAQ

Sao PauloSao Paulo

NZSENZSEASXASXJohannesburgJohannesburg

Shenzhen

EuroNextEuroNext KSX

TokyoTokyo

SingaporeSingapore

LuxLux

Pilot LiveEval

TSXTSX

OMXOMX

LSELSECSECSE

DeutscheBörse

DeutscheBörse

Shanghai

Taipei

BME SWXSWX

Standard Setters

AICPAAICPA

ICAAICAA

ICAEWICAEW

NIVRANIVRA IDWIDW

KICPAKICPAJICPAJICPA

ICPASICPAS

CICACICA FARFARIASBIASB

FASBFASB

ICANZICANZ

KASBKASBICAIICAI

CSRCCSRC

SAICASAICA

ICAIICAI

XBRL Adoption Highlights• US – SEC Voluntary Reporting Program and financial

commitment to fund completion of US GAAP Taxonomies

• US – FDIC/Federal Reserve/OCC, Call Modernization Project

• US – Members of the Financial Systems Integration Committee of the Federal CFO’s Council have endorsed XBRL for use in the exchange of financial data between Federal agencies

• EU – Netherlands, National Taxonomy Project quickly moving ahead with the goal of transitional all enterprise to government reporting in that country to XBRL

**CONTINUED**

XBRL Adoption Highlights

• EU – Committee of European Banking Supervisors is now working on a taxonomy to support credit risk reporting

• Japan – Japan's Financial Services Agency plans to introduce XBRL as part of a major revision of EDI-Net, the Agency’s electronic disclosure system, scheduled in time for earnings reporting for fiscal year 2008. TSX XBRL Pilot program

• China – Two exchanges, Shanghai (SSE) and Shenzhen (SZSE), live on XBRL based regulatory filings

• GLOBAL – The Tax XML Committee of OASIS (Organization for the Advancement of Structured Information Standards) has endorsed XBRL as having the potential to improve both tax compliance and taxpayer services. The Committee includes senior representatives from many of the major taxation authorities from around the world.

Highlight:The SEC Voluntary Reporting Program

Purpose of the Voluntary Program

“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.”

Voluntary Program - Participation

Voluntary Program - Participation

• Twenty Four Companies in “Test Group”• Six more participating informally• Eighty filings• Both US and Non US based companies• Quarterly reports, Annual reports and

earnings release information

SEC Recent Developments

• XBRL-U.S. has been transitioned to a newly formed independent, not-for-profit corporation (XBRL US, Inc.)

• The new entity will be governed by a board of directors consisting of high profile industry leaders from throughout the business reporting supply chain.

• The contract with XBRL U.S. Inc. calls for the completion of the U.S. taxonomies in less than one year

In September 2006, the SEC publicly confirmed its commitment of $5.5 million to fund the completion of the XBRL U.S. GAAP Taxonomies

In connection with the SEC support, several key changes in the current XBRL-U.S. organization are taking place

Chairman Cox… my favorite quote…

“Investors and their directors have a right to the information. Complete. Clear.

Comprehensible. It's quite simple, really. If someone orders a steak, you don't give them a cow and a meat cleaver. Investors should get all the information they need — and they should get it in a form they can use. Making our mandated disclosures actually useful to

investors is the idea behind another SEC initiative: interactive data.”

XBRL at the IASB

The IFRS taxonomy and Convergence

XBRL at the IASB

• IFRS Taxonomy• Convergence• XBRL and Multi-GAAP reporting

XBRL at the IASB – IFRS Taxonomy

• IFRS-GP taxonomy includes the latest versions of most IFRSs (including IASs and Interpretations) approved up to 12/31/05

• GP “Core” supplemented by modular “linkbases”, concepts are shared, presentation/relationships vary

• Extensions created by local jurisdictions to customize GP and linkbases (Currently NL, DE, BE, ES, AU, IT)

• Multi Language support Approved translations - ES, PTFinal Draft – NL, PL, IT, DE, JPDraft – FR

XBRL at the IASB – IFRS Taxonomy

XBRL at the IASB - Convergence

One of the objectives of the IASC Foundation is

"to bring about convergence of national accounting standards and International Accounting Standards and

International Financial Reporting Standards to high quality solutions".

Consistent with this objective, the IASC Foundation XBRL Team is developing theories and XBRL

mechanisms to compare taxonomies and to signal equivalent concepts

XBRL at the IASB - Convergence

One of the objectives of the IASC Foundation is

"to bring about convergence of national accounting standards and International Accounting Standards and

International Financial Reporting Standards to high quality solutions".

Consistent with this objective, the IASC Foundation XBRL Team is developing theories and XBRL

mechanisms to compare taxonomies and to signal equivalent concepts

XBRL at the IASB - Convergence

XBRL at the IASB – Multi-GAAP Rept

DisclaimerXBRL IS NOT AND ACCOUNTING STANDARD

XBRL will never tell you…• when to recognize revenue• if you qualify for hedge accounting• whether you are required to consolidate a subsidiary

XBRL provides a mechanism for communicating revenue or off balance sheet risk once you have determined what it is.

XBRL at the IASB – Multi-GAAP Rept

"The global debates over the "right" way to do accounting might never be settled. We may never have a global accounting Esperanto. But if the development of taxonomies for data tagging progresses sufficiently, some day in the future it may well be possible for the users of financial information to render it according to any accounting regime they choose: US GAAP, IFRS, or any other system."

SEC Chairman Christopher CoxRemarks at the 12th XBRL International Conference Tokyo, Japan

XBRL at the IASB – Multi-GAAP Rept

Looking ahead…• Joint SEC/CESR Work Plan on Enhanced Financial

Reporting – work plan includes a focus on interactive data

• XBRL-GL, building momentum and capacity for true multi-GAAP reporting

• IFRS in the SEC’s XBRL pilot ?

XBRLAssurance and

Attestation

XBRL Assurance and Attestation

• U.S. and Global Working Groups• AT 101 and PCAOB Staff QA• Attestation under the SEC Voluntary Reporting

Program

U.S. and Global Working Groups

AICPA - Special Working Group on Assurance and XBRL

• Broader/longer term considerations, ex. XBRL attestation when there is no “conventional document”, Data level assurance, Impact on materiality, authentication and digital signatures etc.

• Focus on AT 101 attest guidance, i.e. does the XBRL “reflect the same information” as the related conventional document.

AICPA – ASEC, XBRL US Assurance Task Force

XBRL International - Working Group on Assurance and XBRL

AT 101 and PCAOB Staff QA

AT 101 Interpretation 5• Developed by AICPA Special Working Group on

Assurance and XBRL• Issued September 2003• Accuracy of an XBRL document relative to an

underlying conventional document• Appropriate use of XBRL taxonomies and application

of the XBRL standard

PCAOB Staff QA• Issued May 2005• Adopts most of the AT 101 guidance/illustration

Attestation under the SEC VFP

Attestation under the SEC VFP

Attestation onXBRL

Attestation under the SEC VFP

“We have examined the accompanying XBRL-Related Documents of United Technologies Corporation (the “Corporation”), presented as Exhibit 100 to the Corporation’s Current Report on Form 8-K, which reflect the data presented in the Corporation’s Quarterly Report on Form 10-Q for the quarter and nine-months ended September 30, 2005. The Corporation’s management is responsible for the XBRL-Related Documents. Our responsibility is to express an opinion based on our examination…”

“We have also reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements of the Corporation as of September 30, 2005, and for the three and nine-month periods then ended, the objective of which was the expression of limited assurance…”

“In our opinion, the XBRL-Related Documents of United Technologies Corporation referred to above accurately reflect, in all material respects, the data presented in the Corporation’s Quarterly Report on Form 10-Q for the quarter and nine-months ended September 30, 2005, in conformity with the US GAAP—Commercial and Industrial Taxonomy…”

Attestation under the SEC VFP

Traditional attestation embedded within

XBRL

Attestation under the SEC VFP

<UTX:AccountantsInformationName contextRef="Context1">PricewaterhouseCoopers LLP

</UTX:AccountantsInformationName>

<UTX:AccountantsInformationSignature contextRef="Context1">/s/ PricewaterhouseCoopers LLP

</UTX:AccountantsInformationSignature>

<UTX:ReportInformationReportBody contextRef="Context1">We have reviewed the accompanying condensed consolidated balancesheet of United Technologies Corporation (the "Corporation") and its subsidiaries as of September 30, 2005, and…. In our opinion, the information set forth in the accompanying condensed consolidatedbalance sheet as of …

</UTX:ReportInformationReportBody>

XBRLOther Areas of

Impact

The business information supply chain

ExternalFinancialReporting

BusinessOperations

InternalFinancialReporting

Investment,Lending,

RegulationProcesses

Participants

AuditorsTradingPartners

Investors

FinancialPublishersand Data

Aggregators

Regulators

Software Vendors

ManagementAccountants

Companies

Economic Policymaking

XBRL within the organization

CentralBanks

XBRLLedger

XBRL“Financial Statements”

SEC VFP is focused on XBRL “FR”XBRL within the organization

XBRL within the organization

Additional Resources

Websiteswww.xbrl.orgwww.xbrl.org/us/secvfpwww.sec.gov/spotlight/xbrl.htmwww.iasb.org/xbrl

Softwarewww.xbrl.org/TechSupport

XBRL technical discussion groupswww.groups.yahoo.com/group/xbrl-public/www.groups.yahoo.com/group/XBRL-GL-Public/

Conclusion & Questions