XBRL: An Update on the Future of Financial Reporting, with Mike Willis

Session Moderator: I must thank Mike Willis for returning to our workshop series to give us an update and peek into the future of XBRL.

Let me introduce Mike quickly and then we'll get onto what you came to "hear!" Mike Willis, CPA is the Partner and Deputy Chief Knowledge Officer of the Audit Practice at PricewaterhouseCoopers, LLP. He brings more than 18 years of experience to the table. He has responsibilities for applications and software tools used by the global audit and accounting profession of PricewaterhouseCoopers. Mr. Willis works with a wide range of internal and client-facing products such as TeamMate, EDGARSCAN, Comperio, TeamAsset, CFODirect and others. Many of the tools Mr. Willis manages are Web-based and incorporate leading edge query, architecture design and extensible formats. Mike serves as the Chairman of the XBRL Steering Committee composed of more than 32 global software, accounting and finance companies charged with creating an international extensible business reporting language (an XML-based open specification).

Mike graduated from the University of Florida's Fisher School of Accounting with a Bachelor of Science degree in Accounting. Mr. Willis is a member of the American Institute of Certified Public Accountants, the Florida Institute of Certified Public Accountants and serves on the Board of Trustees at the University of Florida's Fisher School of Accounting in Gainesville, Florida.

Mike, again, thanks for joining us today. The floor is yours!

Mike Willis: Thank you

To kick things off, I am planning on sharing some information today on the following broad topics:

Overview of XBRL,
Update on where we are
What is planned for the near term
And finally, what you can do

Again, I am Mike Willis, chairman of the XBRL Steering Committee and will share with you in that role today.

I am going to chunk some information in here in various spots and provide the source URL when and where appropriate. Lets start with an overview of XBRL…

Extensible Business Reporting Language (XBRL), formerly code-named XFRML, is an open specification that uses XML-based data tags to describe business reports and financial statements for both public and private companies. XBRL benefits all members of the financial information supply chain.

http://www.xbrl.org/Overview.htm

XBRL is:

  • An Internet standards-based method with which users can prepare, publish (in a variety of formats), exchange and analyze financial statements and the information they contain.
  • Freely licensed permits the automatic exchange and reliable extraction of financial information across all software formats and technologies, including the Internet.
  • Ultimately benefits all users of the financial information supply chain: public and private companies, the accounting profession, regulators, analysts, the investment community, capital markets and lenders, as well as key third parties such as software developers and data aggregators.
  • Does not require a company to disclose any additional information beyond that which they normally disclose under existing accounting standards. Does not require a change to existing accounting standards and is not an expansion of the current disclosure guidance.
  • Improves access to financial information/speeds up access.
  • Reduces time needed to enter financial information more than one time, reducing the risk of data entry error and eliminating the need to manually key information for various formats, (printed financial statement, an HTML document for a company's Web site, an EDGAR filing document, a raw XML file or other specialized reporting formats such as credit reports and loan documents) thereby lowering a company's cost to prepare and distribute its financial statements while improving investor or analyst access to information.
  • Leverages efficiencies of the Internet as today's primary source of financial information by making Web browser searches more accurate and relevant. (More than 80% of major US public companies provide some type of financial disclosure on the Internet.)
  • XBRL meets the needs of today's investors and other users of financial information by providing accurate and reliable information to help them make informed financial decisions.
  • Applicable to all sizes of companies, big or small; private or public and to the entities that govern various statutory reporting processes around the world.
  • Beginning to be included in many of the software applications that companies use to process their accounting information. I will provide some specific examples of this in a few minutes.
  • Is becoming a topic of great interest in the credit analysis and lending arenas.
  • That is a quick overview on XBRL...mainly what it is and what it will enable.

    Where we are.

    The XBRL consortium is almost a year old - an infant in the physical world but a fast growing adolescent in the Internet world. Well beyond its initial growing pains, the consortium now has over 70 members, hailing from all sectors of the business reporting supply chain and representing over 20 jurisdictions. The membership is expected to grow exponentially over the next few months as jurisdictional efforts unfold.

    Accomplishments to date include:

  • Formal launch efforts completed in two jurisdictions (US and IASC).
  • Formal launch efforts planned in the next few months in five more jurisdictions (Canada, UK, Germany, New Zealand, and Australia)
  • Published the XBRL Business Reporting Specification and the US GAAP Commercial and Industrial taxonomy and actively working on 13 additional taxonomies.
  • Proactively reached out to the corporate reporting community, with the result that six global Fortune 1000 companies are currently "field testing" the published XBRL specification and taxonomy.
  • Much of this is covered in more detail at the http://www.xbrl.orgsite.

    The consortium members are also pleased that several of its members (Navision, Caseware and XBRL Solutions) have released XBRL enabled products and more members are scheduled to do so in the very near term. These accounting software applications enable users to import the XBRL specification and relevant taxonomies; map their reporting structure to the XBRL taxonomy and produce an XBRL document with the click of a mouse.

    The demos of these applications, available on the market today, are very impressive.
    XBRL Solutions has a validator and a taxonomy editor tool that is available to XBRL.org members for use in the field-testing and development efforts. This type of tool set would be used to test and develop XBRL processes and methods. These applications are the very beginning of the market's move into the XML space, enabling companies to move data among the supply chain for increased efficiencies. You should expect to see other XBRL members releasing "enabled" products in the near term.

    We have also drawn the attention of a variety of regulators in jurisdictions around the world. Here in the US, the SEC Chairman, Arthur Levitt, encouraged further XBRL Development during his talk to the fall council of the American Institute of Certified Public Accountants in Las Vegas last week. He had some very encouraging words to say about XBRL. The following is taken from Levitt's address, http://www.accountingweb.com/item/30344/101 available online here.

    "I would like to see you (AICPA) 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."

    In fact, work is currently underway to develop industry-specific taxonomies in areas like mutual fund reporting, government agency accounting, non-profit accounting and others. XBRL.org is very much on track with chairman Levitt's wishes and those wishes of the market place as well.

    We have a number of taxonomies under development at this time, and one existing taxonomy that can be used currently. Financial Reporting for Commercial and Industrial Companies, US GAAP For information regarding this taxonomy please contact Sergio de la Fe, Jr., KPMG LLP or Charles Hoffman, CPA. By the way, the e-mail addresses for all those that I refer to are included at the xbrl.org site.

    Here are some US Taxonomies Under Development

    Financial reporting for Federal departments and agencies, contact Chris Moyer, KPMG Consulting, LLC. or phone 703-271-6976 for information

    Financial reporting for Mutual Funds, contact Gary Ryan, Fidelity Investments, for information

    Financial reporting for Financial Institutions/Banking Alok Ajmera or phone (212) 872-3685

    General ledger transactions, contact Eric Cohen, PricewaterhouseCoopers LLP, for information

    Financial reporting for Not-for-Profit entities, for information contact Ray Bechtold, MIP, Inc., and a special Thanks to Ray for sponsoring the session today!!!

    For information regarding the development of US Taxonomies please contact Sergio de la Fe, Jr., KPMG LLP Co-Chair XBRL.org Domain committee - US or phone 201-505-2032.

    There are also a number of international taxonomies underway:

    Financial reporting for Commercial and Industrial Companies, German GAAP, contact Jörg Furmann, PPA GmbH, for information

    Financial reporting for Commercial and Industrial Companies, Canadian GAAP, contact bob.cuthbertson@caseware.com

    Financial reporting for Commercial and Industrial Companies, Australian GAAP, contact David Hardidge, Ernst & Young, for information

    Financial reporting for Financial Institutions, Australian GAAP, contact David Hardidge, Ernst & Young, for information

    Financial reporting for the public sector, Australian GAAP, contact David Hardidge, Ernst & Young, for information

    Financial reporting for Commercial and Industrial Companies, New Zealand GAAP, contact Mark
    Hucklesby, Ernst & Young, for information

    Financial reporting for Commercial and Industrial Companies, Singapore GAAP, contact Roger Debreceny for information

    For information regarding the development of International Taxonomies please contact Louis Matherne Lmatherne@aicpa.org

    If you have interest in any other particular jurisdiction and/or industry sector's development efforts, please contact Louis Matherne Lmatherne@aicpa.org and Zachary Coffin Zpc1@columbia.edu

    As you can see, there is a lot going on with this around the world. And this is happening due to the efforts of a small group of individuals.

    As the chair of the XBRL effort, the effort of the volunteers in XBRL is clearly and unequivocally understood. While there are approximately 70 companies currently participating, it is really the individuals working within XBRL that make it happen.

    I would like to express a large dose of gratitude to this group of individuals whose vision, knowledge, and hard work has proven so beneficial to all of the member companies. This relatively small group knows what is possible and what it will take to fulfill all of the objectives for XBRL. To those people, "THANK YOU."

    Now that I have that out of the way; here is what they signed up for...and it is a lot of work! But you can already see that from the list of taxonomy development efforts listed above.

    What is planned for the near term

    The XBRL consortium is making strong headway in fulfilling its goal of becoming an independent, international organization and will take the important step of formally spinning out from its founding organization, the AICPA. This has been proposed to the AICPA Board and we are seeking a formal resolution to effect this transaction. This move will ensure that the necessary international framework is based upon a global orientation and that participating jurisdictions and industries take full responsibility for development of their individual taxonomies.

    Formal XBRL launch events are scheduled in the next few months for the IASC, Canada, Australia and Germany. This is expected to exponentially increase both XBRL membership and the availability of resources for developing taxonomies in several jurisdictions that are seeking to make their corporate reporting supply chains e-business enabled. Expect that additional XBRL products (tax reports, statutory and regulatory reports, etc.) will go from the strategy document to the working group effort in the near term.

    As some of you know, XBRL uses the XML Schema concept in its design. The W3C, the authoritative body that issued the 1.0 specification for XML, has recently issued XML Schema as a Candidate Recommendation. A Candidate Recommendation is a stable Working Draft that the Director of the W3C has proposed to the community for implementation experience and feedback. This means that developers can begin using the information in the working draft with the knowledge that the specification is still open to public comment, but is well on its way to recommendation status.

    This is very good news for XBRL and for those software developers who are planning on developing XBRL enabled solutions. This recent activity at the W3C is the "tolling bell" that the XML implementation efforts leveraging XML Schema are about to start in a commercial form around the world. To help spread the XBRL message around the world, we are planning the following events:

    Today, we had an October 31, 2000 - Amsterdam - XBRL Symposium

    November 2-3, 2000 - Huelva, Spain. XBRL Presentation at the 5th International Conference on Artificial Intelligence and Emerging Technologies in Accounting, Finance and Tax. (Contact Professor Enrique Bonson, conference director, at bonson@uhu.es, to register)

    November 3, 2000 - Huelva, Spain. XBRL Symposium. Contact Professor Enrique Bonson (University of Huelva) at bonson@uhu.es to register and for more information.

    November 7, 2000 - Frankfurt, Germany - Organizing meeting for XBRL Germany for existing XBRL members. Contact Heimo Saubach at heimo.saubach@ppaworld.com for logistics.

    November 8, 2000 - Copenhagen, Denmark - XBRL Symposium and organizing meeting for the Nordic Federation. Contact lk@fsr.dk to register and for more information.

    November 9, 2000 - Vancouver, British Columbia, Canada - XBRL Developers Conference. (XBRL Steering Committee Members Only) Contact Diane_Mueller@acl.com for registration and additional information.

    November 9, 2000 - Zurich, Switzerland - Organizing meeting for XBRL Switzerland for existing XBRL members. Contact Urs Kamber at urs.kamber@ch.pwcglobal.com and Mathew Thomson at mt@fsg.ch for logistics.

    November 10, 2000 - Geneva, Switzerland - XBRL briefings. Contact Zach Coffin at ZacharyCoffin@email.com if interested in meeting.

    November 13, 2000 - Dublin, Ireland - XBRL Symposium. Contact Simone Doran at dorans@icai.ie to register and for more information.

    November 14, 2000 - London, UK - XBRL Briefings. Contact Zach Coffin at ZacharyCoffin@email.com if interested in meeting.

    November 14, 2000 - Lahore, Pakistan - XBRL Briefing to IFAC. Contact Louis Matherne at lmatherne@aicpa.org for more information.

    …and back in the US.

    November. 16, 2000 - Rochester, New York - New York State Society CPAs Emerging Technologies Conferences - Developing Reports with XML and XBRL - Visit www.nysscpa.org for information and to register online.

    November. 21, 2000 - New York City, New York - New York State Society CPAs Emerging Technologies Conferences - Developing Reports with XML and XBRL - Visit www.nysscpa.org for information and to register online.

    December 3, 2000 - Washington, DC, USA - XBRL Symposium. Contact Zach Coffin at ZacharyCoffin@email.com and Karyn Waller at kwaller@aicpa.org to register and for more information.

    December 11, 2000 (Tentative) Toronto, Canada - XBRL Symposium. Contact Howard Rosenthal at hsrosenthal@alumni.uwaterloo.ca for more information.

    An incredible list of sessions coming soon to locations near you... And a great THANK YOU to those involved in organizing these sessions!! A special note of appreciation to Zack Coffin, the Chair of the Liaison Working Group for his undying efforts and incredible frequent flyer program.

    Ryan: What does XML do?

    Mike Willis: Great Question. It transports data between disparate software applications. That enables us to integrate entire supply chains, tying companies together in their ability to exchange data over the web. XML also reduces the cost to publish information to the web. By some estimates the cost savings are from 30 to 60 % and some companies are already realizing these savings

    Ryan: Is there anything similar to it working now?

    Mike Willis: EDI has been there for 30 years. That is sort of what we are talking about, but for an entire supply chain. Rosettanet is another XML consortium for the IT sector: 42 leading companies that came together 3 years ago. They have developed a language for use in the IT supply chain and it is in production at 37 of the 42 participating companies right now. They estimate that the move to the rosettanet language and the internet platform will save EACH of the participants $14 million per MONTH.

    Mike Willis: I have given an overview of XBRL; so lets take a few questions before I outline what you might do next.

    Todd Boyle: Hi Mike- regarding the cost savings I have an estimate over $100 billion based on various job types.

    Mike Willis: Absolutely. XML is the 'how' e-business actually gets done. XBRL is the use of XML for the business reporting supply chain and it may be useful to think of reporting as a supply chain. In the 'paper paradigm' world in which we live today, the publishing of documents is sort of the end of the road for most companies and preparers. However, in the e-business world, providing information to others in your supply chain will help them and they will help you.

    Ryan: Is XML code similar to HTML?

    Mike Willis: Ryan.... yes. they are both offspring of the same parent, SGML. XML is the use of tags that provides the date with extensibility. You can read more about XML at xml.org, oasis.org, or the w3c.org site.

    Now while XML tags the data for software applications to 'read'; what we as humans see is the same as we see today, at least for now. At some point, users will demand a richer experience; but that is still a ways off.

    Michael van Breda: Are there online examples of XBRL out there somewhere that one can view to get a practical "view" of what we're talking about?

    Mike Willis: Michael..... you are a great straight man, here are some demos.

    The following are demos which show the capabilities of XBRL which are available at XBRL.org

  • Great Plains Financial Statement demo: Complete set of financial statements prepared using XBRL. Does not require XML parser on the client side.
  • Taxonomy Viewer Prototype: Allows you to view the AICPA Taxonomy for Commercial and Industrial Companies. Microsoft Access 2000, Microsoft Access 97
  • Financial Statement Repository: This is a repository of 5 financial statements prepared using XBRL. (This information can be used to create demos showing automated and reliable extraction and comparison of financial information.)
  • Accountant report creation demo: Access database which has several functions which import XML from a document, export to various formats including XML, HTML, RTF, and text. Microsoft Access 2000, Microsoft Access 97
  • Comparing Two Companies: This is an ASP page which extracts information from two companies and compares the financial information.
  • Simple Extraction of Information: This is an ASP page which extracts a single piece of information from an XBRL Instance document.
  • XBRL Right Now, Journal of Accountancy Article Demo: Journal of Accountancy Article Demo.
  • Receive a SOAP response: A web page which sends a message to a SOAP Server (in XBRL) and receives a response in SOAP.
  • All of these demos are available to you right now, just check them out at the xbrl.org site.

    Michael van Breda: Wonderful demos. I am hoping, hoping that finally we might move accounting into the 21st century and stop teaching what I call medieval arithmetic!

    Robert C. Holmes: I have heard the criticism that XBRL is so complex it will be hard for the average accountant to learn and use it.

    Mike Willis: I would say see for yourself. If you are comfortable with a GL then you will be comfortable with XBRL.

    Todd Boyle: Regarding complexity- yes the low-level technology is complex but CPAs won't be down in the plumbing.

    Kathe Deck: Do you have any predictions when XBRL enabled software may be available or standard for those of us with very little "clout" in the supply chain?

    Mike Willis: Kathe, you can use applications today from the vendors I mentioned.......and many of them releasing now are 'middleware' vendors. The Navision package is as easy to use as their existing financial package.

    Neal Hannon: Navision 2.6 includes XBRL today. You can get a demo of the software from them.

    Joe Marshall: EDI has a tremendous number of document variants depending on the trading partners. Is there something about XBRL that will reduce this or is this a hoped-for result of the taxonomy efforts?

    Mike Willis: Joe, yes. With the XBRL participants being the leading companies in the reporting supply chain we hope that the document types will be agreed to.

    Todd Boyle: Mike--based on your comment to Joe are you saying XBRL is a significant vocabulary or format to transport transaction data like EDI?

    Mike Willis: Todd, the current focus is on the reporting end of the deal. A space that is under construction by several hundred supply chain consortiums around the world. IF, accountants choose to grasp this opportunity, the value that we can bring to the decision making process is significant.

    Ryan: How will XML change the way we as accountants work?

    Chris Jordan: How do you see XBRL fitting into the proposed UDDI schema?

    Mike Willis: Lets talk for a few minutes on what you might do next.

    The XBRL Internet language is still in its formative stages and many of the early prognostications are still the responsibility of XBRL consortium membership. With the remarkable progress already made and more headway expected, the consortium's vision of e-business for the business reporting supply chain is taking shape and its path to future adoption is clear. It is up to "us" to move this forward. So if you have an interest in XBRL, there are a number of things that one might do to further the XBRL effort. Here are some thoughts on this that are designed for specific types of participants from preparers to users to software vendors to educators.

    Anyone reading this:

  • Visit http://www.xbrl.org. Join XBRL and/or contribute to the effort
  • Get on the XBRL mailing list. To be put on our mailing list, please go to http://www.xbrl.org/Register/ and register at the website
  • Join the XBRL Public discussion at http://www.xbrl.org/PublicDiscussion.htm.
  • Get presentation materials at http://www.xbrl.org/BriefingRoom.htm
  • Check out the demo's at http://www.xbrl.org/Demos/demos.htm
  • These are the demos I mentioned a few minutes ago

    Neal Hannon: Visit the XBRL educational resources site at web.bryant.edu/xbrl

    Mike Willis: Absolutely

    Corporate readers:

  • Engage in the development of the relevant jurisdictional and industry taxonomies. Don't wait here, just do it
  • Upgrade your software applications and tools to those that are XBRL enabled
  • Draft your financial statements in XBRL and post them to your site
  • Analysts/Creditors/Shareholders:

  • XBRL enable your data extraction tools and analytical models
  • Visit with the software members of XBRL and see what they are doing to make your life easier
  • Include "XBRL Format" as a "premium reporting format". Ask Companies about it
  • Students & Educators:

  • Visit www.xbrl.org and read about the Academic Competition
  • Include XBRL Taxonomy development and testing in your courses. Students won't use paper in the future as the optimal reporting format.
  • Ask potential employers and School Trustees if they are "XBRL users?"
  • Accountants in Public Practice:

  • Engage your clients and their audit committees on this topic
  • Ask your software vendors if the next upgrade includes XBRL enablement?
  • Train your staff and partners on this topic and with relevant tools.
  • Software Vendors:

  • XBRL enable your applications
  • Communicate with your licensees on this topic and determine additional needs.
  • Consider the additional feature opportunities for future versions as this information becomes more extensible.
  • There are many of you who may have an interest in joining the XBRL organization and getting more involved in the effort. Please let me or Louis Matherne know if you are interested in a private email. Additionally, there are a number of working groups within XBRL.org who are active in their efforts. Here is a list of these efforts. Please feel free to contact these working group chairs if you have an interest in these efforts.

    Here is a quick list of the XBRL working group chairs.

    Specifications Workgroup David Vun Kannon; Dvunkannon@kpmg.com and Luther Hampton; Lhampton@e-numerate.com

    Tools Workgroup: Eric E. Cohen; Eric.e.cohen@us.pwcglobal.com Ralph Hodgson; Rhodgson@us.ibm.com

    Communication/PR Workgroup: Christy Reichhelm; ChristyR@Microsoft.com David Colgren; dcolgren@colcomgroup.com

    Liaison Workgroup: Zack Coffin - International Chair; zcoffin@kpmg.com Liv Watson - US Domestic Chair; Liv1@wworld.com

    Education Workgroup: Neal Hannon; Nhannon@tiac.net Jenia Gorfunkel; Jenia_gorfunkel@strandardandpoors.com

    Website Workgroup: Geni Whitehouse; Gwhitehouse@navision-us.com

    Implementation: Mark Schnitzer; Mark.schnitzer@msdw.com

    Strategy: Mike Willis; mike.willis@us.pwcglobal.com Louis Matherne; Lmatherne@aicpa.org

    You can find the XBRL Membership information at http://www.xbrl.org.

    Take a look through the xbrl.org and then come join us in the e-business enablement of the business reporting supply chain.

    Any final questions??

    And maybe some thoughts for topics to cover 'next time!'

    Todd Boyle: What are the top XBRL write-up applications for CPAs?

    Mike Willis: Todd. Navision's package is the one that I mentioned earlier. However, I would not classify it as a 'write-up' application. It is more of a full-fledged GL package and reporting platform. The write-up space may be one that another vendor might fill of maybe Navision......

    Todd Boyle: The CPA needs a data standard to get data from GLs to their write-up application.

    Mike Willis: The Navision application allows the user to map from whatever they are using directly into the XBRL taxonomy. They have a demo if you want to get a copy to check it out.

    Michael van Breda: I need to check out all these wonderful sites that you have offered us. After that I am sure that I'll have a slew of questions. Hope you will come back.

    Jennifer@F9.com: I have read that XBRL resembles a database (multi-dimensional) and am unclear how we as a software vendor would publish reports in a presentation oriented format - I know I need to investigate more but if you could elaborate on this, that would be helpful.

    Mike Willis: Jennifer, to think of XML as a database is one concept, and that is how software applications might think of it. But to humans, it might look the same way it does today....... like a document.

    Session Moderator: Mike - thanks so much for being here today. You are a wealth of information! I look forward to the next session. For those of you who have ideas about issues regarding XBRL that you want to talk to Mike about, please let us know.

    Thanks to all of you who joined us today - what a great session!!

    Mike Willis: Ok, thank you for participating and I look forward to working with some of you in the future.

    Workshop sponsored by:
    MIP


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