![Contact: David Miller Assurance Manager (714) 913-2622 [email_address] J. Todd Brumley Director – Business Development (714) 338-2477 [email_address]](https://image.slidesharecdn.com/xbrlpowerpointpresentationfeijanuary132010-12942975681367-phpapp01/85/XBRL-An-Overview-and-Update-37-320.jpg)
XBRL: An Overview and Update
- 1. XBRL An Overview and Update Presentation by David Miller January 13, 2010
- 2. Agenda Building the case for XBRL Introduction to XBRL SEC XBRL Mandate: What we’ve learned so far What Should I Do Now?
- 3. Financial Reporting Internal Reporting Building the Case for XBRL
- 4. Building the Case for XBRL Financial Reporting Financial reporting, in most cases, is a requirement of doing business. “ The objective of general purpose external financial reporting is to provide information that is useful to present and potential investors and creditors and others in making investment, credit, and similar resource allocation decisions.” - FASB Conceptual Framework for Financial Reporting, July, 2006 In a recent survey of financial reporting supply chain constituents, the International Federation of Accountants concluded that financial reports have become less useful due to increased complexity.
- 5. Building the Case for XBRL Financial Reporting
- 6. Building the Case for XBRL Financial Reporting The financial reporting model of today is manual and disjointed.
- 7. Building the Case for XBRL Financial Reporting - Based on results of the CFA Institute Member Survey: XBRL, November 2009
- 8. Building the Case for XBRL Financial Reporting Manual extraction and re-keying of data is error prone, laborious and adds no value ~80 of analysts time spent gathering data and only 20% analyzing Data aggregators combine financial statement line items e.g. Intellectual property separately reported on face by preparer, but combined with Other (income) and expense by 3 rd party aggregator Done in the name of comparability, but do you want the aggregator to be making those decisions for your report? Potentially diminishes comparability if aggregated numbers comprised of heterogeneous inputs Typical 10-K contains 3,500 elements, yet, the average analysts report uses < 300 of those elements Cost of Capital Burden = 140 basis points
- 9. Building the Case for XBRL Financial Reporting Financial reporting is disjointed SEC IRS FDIC (e.g. bank call reports) Creditors (e.g. debt covenant compliance) Et cetera Although the financial information ultimately stems from the transactions entered into by the entity, the reporting requirements can be vastly different Not always easy to repurpose the core information in the various reporting formats required.
- 10. Building the Case for XBRL Internal Reporting Disparate accounting and ERP systems They don’t always communicate well with each other International operations Local vs. reporting GAAP Corporate consolidations done manually in spreadsheets Error prone Internal control environment Too much reliance on manual controls and spreadsheets
- 11. An Introduction to XBRL What is it? What it’s not How it works Two main flavors Benefits & success stories
- 12. An Introduction to XBRL What is it? e X tensible B usiness R eporting L anguage eXtensible – elements can be added or customized to fit your reporting needs Business Reporting – not just for external financial reporting XBRL is a mark-up language based on XML, akin to HTML A means of assigning ‘machine-readable’ context to business data Often likened to bar codes A globally recognized standard XBRL International – standard setting consortium
- 13. An Introduction to XBRL What it’s not A standard, limited chart of accounts US GAAP taxonomy has over ~17,000 tag elements A GAAP translator A software tool or application But rather a standard language to be used by software tools and applications A set of accounting standards Not designed for human consumption
- 14. An Introduction to XBRL How it Works What’s in a tag? Label Description Data type Balance type Period type Reference Presentation Calculation
- 15. An Introduction to XBRL What is it?
- 17. An Introduction to XBRL Two Main Flavors XBRL FR Has received the most attention so far The focus of the SEC XBRL Mandate Used to tag financial statements for external reporting XBRL GL Not as much in the public eye, but potentially much more powerful GL does not stand for General Ledger Not just for account balances or accounting The aim is to standardize the detail at the level of events, entries and business triggers Can represent any fields in a typical ERP system Ability to roll-up and drill-down Universal, standardized language Allows seamless integration between disparate systems Can be used in conjunction with XBRL FR
- 18. An Introduction to XBRL Benefits Transparency Especially if data is tagged at deep levels (XBRL GL) Limited benefit to preparer if only FS are tagged, but users/consumers still benefit Transferability/Reusability Automation and integration Accuracy Eliminate the need to re-key data Mitigate risk of formula errors Fannie Mae - $1.5 billion restatement due to simple spreadsheet transposition error Cost reduction
- 19. An Introduction to XBRL Success stories FDIC/FFIEC example ~8,000 banks reporting Error rate dropped from 68% to 5% Processing time dropped from 45 days to 2 days Personnel resources dropped from 1,000 people to less than 200 These improvements were achieved by pushing the data model/structure, validation and analytics to the preparer in the form of taxonomies and validators United Technologies Reporting time pre-XBRL = approximately 845 hours (20% proofing, etc.) Using XBRL, cut reporting time by approximately 200 hours Will ultimately cut reporting costs by approximately 25%
- 20. SEC XBRL Mandate Timeline Reporting requirements What we’ve learned so far
- 21. SEC XBRL Mandate Timeline Large Accelerated Filers > $5B Public Float (~500 Companies) All Other Large Accelerated Filers All Remaining Filers June 15, 2009 June 15, 2010 June 15, 2011 June 15, 2012 June 15, 2013 Liability: “ As filed” Detail tagging of notes/schedules Liability: “ As furnished” Block tagging of footnotes Detail tagging of financials
- 22. SEC XBRL Mandate Reporting Requirements Year 1 - Block tagging of footnotes
- 23. SEC XBRL Mandate Reporting Requirements Year 2 Block tag each note Block tag each schedule Tag each accounting policy within Significant Accounting Policies footnote Tag each quantitative disclosure within footnotes and schedules
- 24. SEC XBRL Mandate Reporting Requirements Applicable to Quarterly and annual reports Form 8-K (if financial information is presented) Certain registration statements (if financial information is presented) Grace period 30-day grace period ONLY for first XBRL filing (Year 1 Requirements) 30-day grace period ONLY for first detail tagged XBRL filing (Year 2 Requirements) All other filings must be made contemporaneously with filing of traditional report Post XBRL verson on corporate website Failure to file will result in filer being deemed not current with their Exchange Act reports
- 25. SEC XBRL Mandate What We’ve Learned So Far Steep learning curve , but it drops off substantially with subsequent filings Underscores the importance of starting to prepare now! Element selection In some cases, a tag with a narrower definition should have been used In some cases, a tag with a broader definition should have been used Understand the element - read the definition Many errors related to improperly tagging negative numbers The taxonomy was designed so most elements have positive values Extensions Avoid unnecessary extensions Create new element ONLY IF an appropriate element does not exist in the standard taxonomy Context references vs. new tags Extension tags should be neutral (no company names, periods, etc.)
- 26. SEC XBRL Mandate What We’ve Learned So Far Labels Should agree to the traditional HTML document Can be extended without creating a new tag element When mapping elements to your financials, the tag definition is more important than the element name, label or balance type attributes Parentheticals should be included in labels and separately tagged. Rendering Tagging integrity more important than aesthetics Differences in tabs, indents, spacing, etc. are OK Usefulness of XBRL is dependent on integrity of the tags assigned to financial data Management Review Critical function Remember, they are YOUR tags (even if outsourced)
- 27. What Should You Do Now? Implementation alternatives
- 28. What Should You Do Now? Get Started! The mapping process can be very time-consuming Especially for detailed tagging requirements Iron out kinks before you’re required to file One of the most important considerations is whether to outsource or do it in-house Management perspective is key Do you view XBRL as just another compliance burden, or an opportunity to develop a competitive advantage?
- 29. What Should You Do Now? Implementation Alternatives: Outsource Pros It’s generally easy You don’t have to learn XBRL in detail Utilize expertise of service provider Cons May not be as efficient for Level IV filing (Year 2 requirements) Increased demand in Year 2 could potentially strain outsourced service providers and lead to potential delays in filing Missed opportunity to develop competitive advantage through deeply embedded tagging Key Considerations They are still YOUR tags 83% of filers used this alternative
- 30. What Should You Do Now? Implementation Alternatives: In-House>Bolt-On Pros Simple “drag & drop” solutions exist NOT cost prohibitive Excel add-in software tools available for ~$1,000 No significant change to current financial reporting workflow Cons You have to learn XBRL Doesn’t provide the benefits/advantages of a deeply embedded solution May not be able to roll-forward the tags from year-to-year (tag full financials every year)
- 31. What Should You Do Now? Implementation Alternatives: In-House>Bolt-On Key Considerations Identify the following: Who will be the key players within your organization Best practice is to build multi-discipline team (including accounting and IT) What software tool(s) will you use? Tagging Process Map your financials to the standard US GAAP taxonomy Extend the taxonomy by creating necessary additional elements Tag the financials (“drag-and-drop” simplicity in many cases) Create XBRL document QC and Validate XBRL document Submit XBRL document 90% of filers used one of these two alternatives
- 32. What Should You Do Now? Implementation Alternatives: In-House>Embedded
- 33. What Should You Do Now? Implementation Alternatives: In-House>Embedded Pros Data standardization at the transaction level Fully integrated Seamless drill-down and roll-up Automation Potential to reduce reporting costs and improve efficiency Cons Costly Key Considerations Does your current ERP provider currently offer or plan to offer XBRL integration? Do you have multiple locations? Disparate systems? Complex consolidation?
- 34. What About Assurance? Syntax validation DOES NOT mean the proper tags were used, only that the tags met the mechanical specification requirements Assurance NOT required SOP 09-1 AUP engagement AT section 101 Examination of an assertion about XBRL-tagged data AT section 601 Compliance attestation
- 35. Resources XBRL International – www.xbrl.org XBRL US – www.xbrl.us SEC XBRL Page – http://xbrl.sec.gov EDGAR Filer Manual – http://www.sec.gov/info/edgar/edgarmanuals.htm SEC Ruling – http://www.sec.gov/rules/final/2009/33-9002.pdf Software and Service Providers – www.xbrl.us/vendors
- 37. Contact: David Miller Assurance Manager (714) 913-2622 [email_address] J. Todd Brumley Director – Business Development (714) 338-2477 [email_address]
Editor's Notes
- #2: Recent survey of financial professionals still shows that only ~50% awareness and ~10% usage Mixed group Public Private XBRL can benefit both
- #5: SEC Advisory Committee on Improvements to Financial Reporting -2007
- #6: Cardinal Rule – Never buy anything you don’t understand
- #18: Standardizing systems vs. standardizing data
- #19: Accuracy still dependent on the accuracy of the underlying data
- #20: Both examples highlight the benefits of fully integrated solution – XBRL FR & XBRL GL
- #22: Starts with the first interim period ending after cutoff date NO MD&A…yet
- #26: Some filers with ~50% of tags as extensions Undermines comparability objective 30 of 410 submissions during second wave of filings contained errors Element selection is critical More narrow example: Payments for repurchase of equity vs. payments for repurchase of common stock More broad example: Consolidation policy vs. Organization, Consolidation, and Presentation of Financial Statements Disclosure
- #29: Consider internal controls and processes over XBRL tagging, whether in-house or outsourced Reach out to service providers for training and assistance
- #30: 300 elements – ok 3,500 elements – might put significant strain on outsource providers
- #33: Early on, goods tagged at the stores Quickly realized it was more efficient and effective to push it up the supply chain and tag it at the mfg. Same analogy applies to tagging financial data
- #35: SOP 09-1 Generally used to evaluate whether: The selected tags are appropriate The rendering accurately reflects the traditional report The XBRL files comply with other aspects of XBRL requirements Consistent tags used from year-to-year. Proper use of contexts and other meta data Use of report restricted to specified parties No opinion expressed AT section 101 Suitable and available criteria required Scope of engagement may be difficult to establish As the reporting process evolves and moves more toward real-time, data-level reporting, the assurance provided on such data will also have to evolve. No clear answers yet.