ACG 4401 Introduction to XBRL

What is a Supply Chain?

Financial Reporting Supply Chain

Who’s in the Supply Chain? –all stages of the preparation, approval, audit, analysis, and use of financial reports. –Participants in the financial reporting supply chain include: accountants working within organizations, company management, boards of directors, audit committees, outside auditors, standard setters, regulators, investment bankers, lawyers, credit rating agencies, investors, and others.

The International Federation of Accountants Financial Reporting Supply Chain Survey Results (2007)International Federation of Accountants Survey Results Financial Reports have become less useful –Complexity –Burdens of Compliance cause "the essence of the business" to be overlooked. –Similar results were found in the 2008 follow-up survey

The International Federation of Accountants Financial Supply Chain Survey 2008 “despite improvements to the financial reporting process, the usefulness of financial reports has not improved much. The reliability of financial reports has certainly increased and so has the relevance of the information that they provide, but not their understandability.” “Examples of improvements include easier access to financial information (due to progress in web-based information and in XBRL)…”

So what is XBRL? A tool to create efficiency in the Financial Reporting Supply Chain But First......

Networks and Connectivity What is the primary problem with networking/connectivity? –Software applications that do not understand each other … therefore special interfaces must be designed & maintained, etc. –And humans have different understandings and views of data and information produced by the applications

Electronic Data Interchange (EDI) Computer-Computer Exchange of Data Business Data Direct processing Standardized –ANSI X12 US and Canada –EDIFACT International

EDI Components

Electronic Data Interchange Set

XML in Business What if you need to move information from one business application to another within your organization? What if you have data in a number of different databases that you frequently need to integrate, compare, share internally? What if you need to share information with trading partners & others outside your organization? XML provides the necessary rules, syntax & structure to make it possible!

XML How can you appropriately structure information exchanges so that they can be seamless & efficient? –There are 2 parts to the solution: –1) Metadata – adding data about the data … data that gives the data more meaning “Tags” give meaning to the Data –2) Taxonomies - a way to document agreement on the structure of the data being shared … an agreed upon vocabulary defining the rules the metadata must follow Taxonomies create this structure In addition, the solution must be general enough to be able to be applied universally!

Metadata – Data about data - Flickr Flickr

What is this – Untagged Data

What is this?

How can we understand Untagged Data

Tags give meaning to the Data Object Sale GazeboGiver :14:32 Jumphere Carver Stipend Base :54:20 SYSTEM 17001

So how does XML Fit Into This? Extensible Markup Language Markup? –Data being exchanged Sent from computer-to-computer (intra and inter- organizationally) –Defining the data Enclosing the data with descriptions of what the data is –<> Tags used to enclose data Used to create Vocabularies –Standardized sets of tags (kind of like EDI) –XBRL is one such vocabulary –UBL is another

XBRL

XBRL: What is it? XBRL (Extensible Business Reporting Language) is a royalty-free, open specification for software that uses XML data tags to describe financial information for public and private companies and other organizations. XBRL benefits all members of the financial information supply chain by utilizing a standards-based method with which users can prepare, publish in a variety of formats, exchange and analyze financial statements and the information they contain. The world's leading accounting, financial, government and software organizations are involved in the adoption and use of XBRL in the U.S.

Financial Information supply chain

XBRL Defined A Vocabulary Adds Meaning and Context to: –Accounting –Financial –Business Performance Turns data into Information –Understandable Humans and Computer applications –Reusable

Interactive Data XBRL –Liberates financial data from financial documents –How do we validate the data? Huge opportunity for CPA’s

XBRL: adds meaning and context to accounting, financial, and other business performance data, making it understandable, reusable, and precisely interpretable by computer applications. is used to tag each piece of data in a standard way so that it becomes a piece of information that can be validated, stored, and processed by computerized applications. is an XML-based tool box to make computerized accounting and financial and business reporting more effective and efficient. enhances the value of accounting and financial reporting by specifying a standard way to tag “facts” reported by a specific entity, at a specific time, in a specific currency, and under identifiable accounting guidelines (e.g. US GAAP, IFRS). facts can be identified, addressed individually, analyzed in relation to other facts, and reused for other purposes.

XBRL X –eXtensible Beyond original intended use Extended by End User Tags extend use B –Business Financial Statement Reporting R –Reporting Using US GAAP L –Language XML Vocabulary based on XML –Extensible Markup Language –Rules for describing data

XBRL Specification 2.1 (November 2005) Defines rules and syntax for XBRL documents –Taxonomies Dictionaries of standard tags –Instance Contain “facts” and meta-data

Instances and Taxonomies Instance Document –An instance of a companies financial reporting What company What period What currency What purpose What information Taxonomy –Dictionary of what tags can be used to mark-up data

XBRL Information Once in tagged format does NOT need to be re-entered –So HTML statement for SEC –Glossy Printed Annual report for investors –HTML for investor section of web page ALL CAN BE DONE WITH ONE UNDERYLYING DATA SET, XBRL! Eliminate human error

Who is behind XBRL Securities Exchange Commission –Interactive Data! AICPA –Efficiencies to the accounting profession –Re-use of data without manual re-entering XBRL International –Non-profit Organization –Creates Standards FASB –Charged with maintaining US GAAP taxonomy

XBRL Milestones XBRL Timeline

XBRL Mandated Filing Dates Company TypeFinancial StatementsBlock FootnotesDetailed Footnotes > 500 Million in outstanding stock ~ 55 companies Large Companies Small and IFRS reporting companies

The XBRL Structure Tags –Description of what data is 1000 Meta-data converts data to information Attributes –Meta-data (data describing data) 1000 Relationships –Is something described as related to ?

XBRL – Lets put it all together Instance Document –Contain tags describing data –ICU MedicalICU Medical Schema –Contains the definition of the tags LinkBases –Contains relationships between tags Taxonomy –Combination of Schemas (defining elements) and LinkBases (relating elements) –XBRL USXBRL US

Types of LinkBases Presentation –How to organize output E.g. what tags make up Current Assets Calculation –How related tags are summed (+ or -) Definition –Different tag names are related for the same thing Inventory and Merchandise Inventory Label –Machine Readable to Human Readable CashAndCashEquivalents = Cash and Cash Equivalents

So How is This XBRL thing Working?

Columbia Business School’s Center for Excellence in Accounting and Security Analysis “An Evaluation of the current state and future of XBRL and interactive data for investors and analysts” (Dec. 2012) Interviews and surveys with: –preparers; regulators; analysts; investors; XBRL developers; data aggregators; XBRL filing and consumption tool developers Findings: –“In our view, XBRL has succeeded in so far as the objective of providing users with free, interactively-available numerical data from portions of published financial statements and footnotes, as soon as they are filed with the SEC. Most of the analysts and investors we spoke with are interested in and tried to use the footnote data that are XBRL-tagged.” –“We have no doubt that analysis of companies will continue to be based off increasing amounts of data that are structured and delivered to users in an interactive format.” –“However …”