1. Five axioms and the future of tagging Miklos A. Vasarhelyi KPMG Professor of AIS Rutgers Business School Senior Technology Consultant AT&T Laboratories University of Kansas April 24, 2009

2. XBRL Research Symposium – University of Kansas - Miklos A. Vasarhelyi Five axioms- the future of tagging 2 Outline Introduction 5 Axioms Additional considerations Conclusions

3. XBRL Research Symposium – University of Kansas - Miklos A. Vasarhelyi Five axioms- the future of tagging 3 Knowledge and Structure Tabular numerical Information Free Semantic FormatStructured semantic format Tagged detailed Semantic Information Tagged Coarse Semantic Information Understandability Automation understandable Expressing complex concepts Comparability Structured storage Globality Expressing Nuances Paucity Measuring Business Expressing Complex Concepts

4. XBRL Research Symposium – University of Kansas - Miklos A. Vasarhelyi Five axioms- the future of tagging 4 Outline Introduction 5 Axioms The educational context Additional considerations Conclusions

5. XBRL Research Symposium – University of Kansas - Miklos A. Vasarhelyi Five axioms- the future of tagging 5 Axioms Tagging will force substantial standardization of reporting Tagging will create a language of its own Tagging will lead to greater granularity of data Tagging will accelerate the route to continuous reporting Universal tagging will follow tagging by sectors

6. XBRL Research Symposium – University of Kansas - Miklos A. Vasarhelyi Five axioms- the future of tagging 6 Axiom 1 Tagging will force substantial standardization of reporting –Extension taxonomies will be viewed negatively as presenting lack of transparency –IFRS dialects will present the apples and oranges of measurement in the global context –Foreign currency conversion will make these substantially more complex –Prior to the 2 nd wave there will be rationalization of mandatory reporting structures (expanded Dutch model)

7. XBRL Research Symposium – University of Kansas - Miklos A. Vasarhelyi Five axioms- the future of tagging 7 Axiom 2 Tagging will create a language of its own –There will be a move towards taxonomy recognized utterances limiting the types of information to be added to annual statements Focus of education will be on this dictionary Data elements within the ERP will dominate this dictionary Simple semantics will eventually prevail –Predefined quantitative metrics will dominate over semantic utterances or ad-hoc measurements Computation of these metrics will be core to teaching but somewhat irrelevant as they will be provided by software and the formuli (calculations) in the structure of the taxonomies

8. XBRL Research Symposium – University of Kansas - Miklos A. Vasarhelyi Five axioms- the future of tagging 8 Axiom 3 Tagging will lead to greater granularity of data –The mapping of corporate statement data and ERP structures will substantially increase allowing time sequential disclosure without manual manipulation –Traditional limitations to the quantity of data are rapidly disappearing in the free storage and cycle area The difficulties are more in the willingness of management to provide transparency under the guise of competitive impairment and on the existence of obsolete, incompetent, and misguided legislation –E.g. aspects of reg FD and Sarbanes Oxley

9. XBRL Research Symposium – University of Kansas - Miklos A. Vasarhelyi Five axioms- the future of tagging 9 Axiom 4 Tagging will accelerate the route to continuous reporting –Tagging will allow low cost continuous repetition or “addition” to existing statements –Statements will be very different in format / a new type of annual report with accounting principles focusing on atoms of data not reports –Hyperlinks to “external” sources of data will be increasingly found in the corporate information portals –Variable information update periods will be prevalent on the information portals

10. XBRL Research Symposium – University of Kansas - Miklos A. Vasarhelyi Five axioms- the future of tagging 10 Axiom 5 Universal tagging will follow tagging by sectors –There are over 400 groups generating XML derivative standards to create system interoperability –There has been little effort to create coherence in these standard to void obliquity of data structures –There will be substantial societal costs to bring together these standards in the 2 nd wave 1 st wave: development of many sectorial interoperability standards 2 nd wave: development of mapping and coherence of these standards 3 rd wave: development of clustering standards for macrointeroperabily

11. XBRL Research Symposium – University of Kansas - Miklos A. Vasarhelyi Five axioms- the future of tagging 11 Outline Introduction 5 Axioms Additional considerations Conclusions

12. XBRL Research Symposium – University of Kansas - Miklos A. Vasarhelyi Five axioms- the future of tagging 12 Financial Statement Presentation Purely electronic and a part of a wide corporate information portal –The question is who controls this portal: the firm or value adders such as Bloomberg / Edgar Online –Consequently students will have to have analytical skills that involve gathering and managing data from different sources –In particular accountants will be more like the financial analysts of today as opposed to bookkeepers Standard setters will eventually focus on the content /comparability of data provisioning by companies as format will be irrelevant –Consequently students will have to have skills of data integration and decision support

13. XBRL Research Symposium – University of Kansas - Miklos A. Vasarhelyi Five axioms- the future of tagging 13 Information Theory Reapplied Valuation bases can be reinstated (fair value) Decision relevant bases must be created and kept updated – exit values, market values, competitive position valuation, price level valuation, etc Tradeoff of information provisioning must be changed and re-evaluated frequently For the students –Improved expertise in archival search –Substantial training in valuation / appraisal –Understanding of information versus decision context –Obsolescence of substantive part of the current curriculum

14. XBRL Research Symposium – University of Kansas - Miklos A. Vasarhelyi Five axioms- the future of tagging 14 Better Data and Better Analytics Should accountants be the providers of data or analytics? Should accountants be involved in strategy setting? Should accountants be designing ERP systems? Should accountants be designing ERP information structures? Should accountants be designing the tens of thousands of ERP reports?

15. XBRL Research Symposium – University of Kansas - Miklos A. Vasarhelyi Five axioms- the future of tagging 15 Outline Introduction 5 Axioms Additional considerations Conclusions

16. XBRL Research Symposium – University of Kansas - Miklos A. Vasarhelyi Five axioms- the future of tagging 16 Will tagging prevail? Inevitably!!! XBRL is infrastructure therefore will eventually be forgotten Measurement structures will be affected by a feedforward effect –Granularity –Pressure to comply –Standardization Who has dominance? Business prevailed in the last decade government will have an upper hand for a while Integration of reporting structures – a la Dutch Effort A conspiracy theory –Democratic forces favor heterogeneous reporting structures and porous controls