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Slide 1: XBRL as “Interactive Financial Data” Why should you care about this technology standard?
Slide 2: Demo Greg Adams CFO & COO Edgar Online
Slide 3: "The reason that everyone is not doing their financial reporting using interactive data is simple: it's a new concept. People will use it when they discover how much time and money it can save them, by automating and speeding up the process. We want it at the SEC because it will make the financial reports much more useful. Companies will want interactive data for the same reason. The truth is, it's inevitable -- and if the 21st century has shown us anything thus far, it's that technological change occurs extremely quickly. "As a result, it's not surprising that we're hearing from both filing agents and accounting firms that their clients are suddenly showing greater interest in interactive data. Given its enormous potential, there's no doubt this increased interest in interactive data will soon translate into widespread adoption." Chairman Christopher Cox U.S. Securities and Exchange Commission Quote in January, 2006 Financial Executives Magazine Article On XBRL
Slide 4: Opportunity and Challenge • SEC Chairman Cox vision for interactive financial data – Voluntary Filing Program launched, effective Apr 4, 2005 • Test effectiveness of tagged data • Improve quality of information available to investors – Request for Information, Oct 4, 2005 • • • How best to develop tools that will make “interactive financial data” a reality • How the Commission can meet the original goals of the VFP XBRL as an approved filing format is coming There are a number of challenges that need to be addressed in order to enable broad participation • How do we ensure this is a compelling solution for all companies?
Slide 5: What is XBRL Technology Standard      Finance-specific use of XML Open standard Collaborative market effort – 350 member organizations Consortium established in 1999 Implemented as a regulatory standard Broad Application     Crosses all industries Designed for extensibility Includes XBRL GL Taxonomies: IFRS, US GAAP (e.g. Commercial & Industrial, Banking & Savings Inst., Insurance, Investment Management)… Standardization Presentation Cash & Cash Equivalents Presentation Label CashCashEquivalentsAnd ShortTermInvestments 現金及び現金等価物 References GAAP I.2.(a) Instructions Ad Hoc disclosures XBRL Item Calculation Cash = Currency + Deposits Contexts US $ FY2006, Budgeted Formulas Cash ≥ 0 Validation
Slide 6: Evolving XBRL into a Comprehensive Standard • • • • • Repeatable, controllable business process Reducing the complexity for preparers Resolve deficiencies with US GAAP taxonomy Rendering & analyzing XBRL documents Sustainable ownership of US GAAP taxonomy
Slide 7: External Reporting Business Process Publish XBRL Document & Taxonomy Extend the taxonomy if necessary Review & Validate XBRL Document Create an XBRL document & validate calculations Assess Scope of Reporting & Download Taxonomy Compare & map 10-K / 10-Q to US GAAP Taxonomy Identify a team: Accountant & Developer (XML)
Slide 8: A Few Numbers on Microsoft 10-K • • • • 175 pages printed on 8.5x11 in paper 4400 lines of XML Document validates with two industry tools 213 MSFT elements added to US GAAP taxonomy – Approx 400+ extensions, modifications – Used for 1077 discreet facts • To produce: – Gap analysis to creating file: Approx 2 month staff accountant – Extend taxonomy: 40 hours – Validation: 3 weeks across 3 resources
Slide 9: Complexity for Preparers • A sample of technical detail the accountant must handle • Based on real examples from Microsoft experience in filing under SEC VFP – Three 10-Qs, most recent quarter ended Sept 30, 2005 – Annual report, 10-K, for year ended June 30, 2005 – Included financial statements, notes, management’s discussion and analysis (MD&A) – Presented as a set of questions
Slide 10: In the following example is the highlight a number or a string? Table: Components of finite-lived intangible assets acquired
Slide 11: Are the following numbers positive or negative?
Slide 12: What does decimals=“INF” represent? Can you provide an example? From Income Statements <msft:CashDividendsPerShare contextRef="P1YFY2003" unitRef="USD" decimals="INF">0.08</msft:CashDividendsPerShare> <msft:CashDividendsPerShare contextRef="P1YFY2004" unitRef="USD" decimals="INF">0.16</msft:CashDividendsPerShare> <msft:CashDividendsPerShare contextRef="P1YFY2005" unitRef="USD" decimals="INF">3.40</msft:CashDividendsPerShare>
Slide 13: What does “pure” refer to? When do you use it?
Slide 14: Deficiencies with US GAAP Taxonomies • Lack of comprehensive documentation – Preparer must understand the 6 element types and how applied in an XBRL document – Concepts in US GAAP CI, notes and MD&A spans well over 1500 terms – Preparer must infer and test these in the XBRL document validation process – Extending taxonomies creates opportunity for coding errors • Encoded US GAAP calculations in taxonomies are opaque • Taxonomies incomplete: Need to cover breadth and depth in variety of notes and MD&A disclosures • Need common methodology in XBRL for segment reporting, fiscal year comparatives and so forth
Slide 15: Rendering & Analyzing XBRL Documents • Lack of rendering tools that resemble original files in Word with Excel tables • Taxonomy extensions can negatively impact comparison and analysis • Lack of methodology for context definition • Multiple industry extension taxonomies such as for oil and gas are insufficient for hybrid companies • Standard taxonomy calculations don’t match how companies report – Thousands of registrants each with extensions numbering in the hundreds – Three sets of files required to process XBRL documents
Slide 16: Sustainable Ownership of Taxonomies • Today, US XBRL jurisdiction provides oversight & project management – Members work on volunteer basis – Insufficient funding to evolve into comprehensive list of accounting & disclosure concepts • Lack of change management process – Need to keep in sync with regulation & accounting pronouncements • Need for quality assurance review by domain experts • An example…
Slide 17: Illustrating the Need for Ownership • What is FAS 123(R)? • How many results do you think there are on the Web? – Lots of folks who will sell you an opinion • Who in the US jurisdiction should answer: – What are the basic disclosure requirements for companies for FAS 123(R)? • • Where is its implementation in the US GAAP CI? Do you know what it means for MSFT?
Slide 18: Closing Remarks • Recommend that independent private sector entity provide US GAAP taxonomy ownership & management • Get involved in the VFP – provide feedback so that XBRL evolves in to a compelling solution
Slide 19: Q&A Panel