XBRL & FEI What, Why and How Colleen Sayther-Cunningham President and CEO Financial Executives International

Who Is FEI? The professional association of choice for senior-level corporate financial executives The professional association of choice for senior-level corporate financial executives Over 15,000 members from companies both public and private, crossing all industry sectors Over 15,000 members from companies both public and private, crossing all industry sectors CFOs, VPs of Finance, Controllers, Treasurers and Tax Executives CFOs, VPs of Finance, Controllers, Treasurers and Tax Executives The definitive voice of corporate finance The definitive voice of corporate finance Advocating for the interests of our members before the SEC, FASB, IASB, PCAOB and Congress Advocating for the interests of our members before the SEC, FASB, IASB, PCAOB and Congress A member-service-oriented organization A member-service-oriented organization Dedicated to the professional development of our members Dedicated to the professional development of our members Peer networking, information, career planning, conferences, publications, research Peer networking, information, career planning, conferences, publications, research

FEI’s Mission To be the preeminent professional association of choice for the corporate financial executive by: To be the preeminent professional association of choice for the corporate financial executive by: NETWORKING: Providing forums for peer networking NETWORKING: Providing forums for peer networking KNOWLEDGE: Alerting members to emerging issues KNOWLEDGE: Alerting members to emerging issues ADVOCACY: Advocating the views of financial executives ADVOCACY: Advocating the views of financial executives ETHICAL LEADERSHIP: Promoting ethical conduct ETHICAL LEADERSHIP: Promoting ethical conduct

Financial Executives Research Foundation (FERF) Independent non-profit research affiliate of FEI that offers in-depth objective research on relevant topics Independent non-profit research affiliate of FEI that offers in-depth objective research on relevant topics Research publications and alerts Research publications and alerts Ask the Researcher Ask the Researcher Interactive Forum from peers (FELIX) Interactive Forum from peers (FELIX) Distance learning with FERFPros Distance learning with FERFPros Supported by voluntary, tax-deductible contributions and subscriptions from corporations, FEI chapters and individuals Supported by voluntary, tax-deductible contributions and subscriptions from corporations, FEI chapters and individuals

FEI Membership FEI’s membership includes some of the leading CFOs in corporate finance. FEI’s membership includes some of the leading CFOs in corporate finance.  Kerrii Anderson Wendy’s International  Susan Decker Yahoo!  Gary Fayard Coca-Cola Company  Robert Lumpkins Cargill, Inc.  Pedro Reinhard Dow Chemical  Jim Schneider Dell Computer  Tom Schoewe Wal-Mart Stores  David Sidwell Morgan Stanley

N=9995 F1000 F1000 F100 F100 NYSE (n=2,742) NASDAQ (n=3,300) At least one member , CFOs Controllers FEI Membership Publicly Traded Companies

N=9470 FEI Membership Ownership

FEI National Technical Committees Benefits Finance (CBF) Benefits Finance (CBF) Corporate Finance (CCF) Corporate Finance (CCF) Corporate Reporting (CCR) Corporate Reporting (CCR) Finance & Information Technology (CFIT) Finance & Information Technology (CFIT) Government Business (CGB) Government Business (CGB) Private Companies (CPC) Private Companies (CPC) Taxation (COT) Taxation (COT)

Transformation of Financial Reporting Verge of a fundamental transformation of financial reporting practices Verge of a fundamental transformation of financial reporting practices Trend towards transparency driven by increased public scrutiny, increased regulatory oversight and the emergence of new technology Trend towards transparency driven by increased public scrutiny, increased regulatory oversight and the emergence of new technology Driving a need for new standards for information integrity, reporting transparency and system integration Driving a need for new standards for information integrity, reporting transparency and system integration

What is XBRL? Non-techie’s point of view Non-techie’s point of view –eXtensible Business Reporting Language –An open global electronic standard for defining financial terms consistently allowing for the exchange and dissemination of corporate reporting information –Each piece of data is assigned a unique, predefined data tag (like a barcode) identifying the information’s content and structure

What is XBRL? –Through tagging of data, XBRL will enable Streamlining of financial reporting processesStreamlining of financial reporting processes Enhanced analysis of financial reportsEnhanced analysis of financial reports Can facilitate the acquistion and integration of related financial information within a company’s financial reportsCan facilitate the acquistion and integration of related financial information within a company’s financial reports Communication of financial performance more effectively to analysts and investorsCommunication of financial performance more effectively to analysts and investors –Tags give data an identity and context that can be understood by various software applications that allow the data to interface with databases, financial reporting systems and spreadsheets

What is XBRL? Taxonomies Taxonomies –A Standard description and classification system for business reporting and financial data –Tags consist of specific financial data (eg, line items in financial statements) and words or labels (eg, headers in the notes to financial statements) –Taxonomy may, therefore, include a tag for the balance sheet line item “inventory” as well as tags for components (“raw materials”, etc.) disclosed in the notes

What XBRL is not NOT a set of accounting standards NOT a set of accounting standards NOT a detailed chart of accounts NOT a detailed chart of accounts NOT a GAAP translator NOT a GAAP translator

Who is interested in XBRL? Preparers – Financial Executives Preparers – Financial Executives Standard setters Standard setters Regulators Regulators Users Users

Financial Executives Have a critical responsibility to communicate operational results to stakeholders Have a critical responsibility to communicate operational results to stakeholders Growing demand for efficient delivery in an interactive medium Growing demand for efficient delivery in an interactive medium Better decision making Better decision making Internal control environment enhanced through less retyping, more system integration, etc. Internal control environment enhanced through less retyping, more system integration, etc.

Standard Setters FASB established an XBRL fellow position in 2003 FASB created the XBRL fellowship to investigate ways XBRL and related technologies can be used to improve corporate financial reporting and to develop policy recommendations on XBRL's role in FASB's standards-setting activities. IASB also a supporter of XBRL – in fact, it seems to be getting more traction internationally

Regulators SEC announced in July 2004 an initiative to assess the benefits of tagged data and its potential for improving the timeliness, accuracy and analysis SEC announced in July 2004 an initiative to assess the benefits of tagged data and its potential for improving the timeliness, accuracy and analysis

Users Reduces research costs Reduces research costs Enables improved modeling and comparison Enables improved modeling and comparison

SEC Voluntary XBRL Proposal 2 documents issued Monday (9/27/04) 2 documents issued Monday (9/27/04) Proposed Rule that would establish Voluntary XBRL reporting Proposed Rule that would establish Voluntary XBRL reporting Concept Release on XBRL Concept Release on XBRL

SEC Proposed Rule – Voluntary Reporting Establish a voluntary program allowing registrants to file supplemental financial information using XBRL Establish a voluntary program allowing registrants to file supplemental financial information using XBRL Filed via an exhibit to specified SEC filings Filed via an exhibit to specified SEC filings Would begin with 2004 calendar year-end reporting Would begin with 2004 calendar year-end reporting Comment deadline is 30 days after publication in Federal Register Comment deadline is 30 days after publication in Federal Register

SEC Proposed Rule – Voluntary Reporting SEC would like to study: SEC would like to study: –Search capability of EDGAR database –Capability to perform financial comparisons amongst registrants –Ability to perform financial analysis (ratios, etc.) –Impact on staff’s ability to review filings more timely and efficiently –Use of tagged data for risk assessment –Compatibility of XBRL with other Commission requirements

SEC Concept Release on XBRL Seeking public comment on: Seeking public comment on: –Benefits of tagging data to improve reporting quality and efficiency –Implications of tagging data for filers, investors, the Commission and other market participants –Adequacy and efficacy of XBRL as a format for reporting financial information –Comment deadline is 45 days after publication in Federal Register

SEC Concept Release on XBRL Essential Elements of Data Tagging Essential Elements of Data Tagging –Technology to administer the tags –Standard definitions to describe the tages –A means of presenting and analyzing the tagged data – software, etc.

[Release Nos , , , , IC-26622; File Number S ] XBRL VOLUNTARY FINANCIAL REPORTING PROGRAM ON THE EDGAR SYSTEM AGENCY: Securities and Exchange Commission. ACTION: Proposed rule. SUMMARY: We are proposing rule amendments to enable registrants to submit voluntarily supplemental tagged financial information using the eXtensible Business Reporting Language (XBRL) format as exhibits to specified EDGAR filings under the Securities Exchange Act of 1934 and the Investment Company Act of Registrants choosing to participate in the voluntary program, expected to begin in early 2005, also would continue to file their financial information in HTML or ASCII format, as currently required. The voluntary program is intended to help us evaluate the usefulness of data tagging in general, and XBRL in particular, to registrants, investors, the Commission and the marketplace generally. A companion concept release also being issued today provides additional information on tagged data and solicits comment on the development of data tagging. BACKGROUND: All registrants who file with the Commission are now generally required to file electronically on the Commission's Electronic Data Gathering, Analysis and Retrieval System ("EDGAR")…… As discussed in the accompanying concept release, we are evaluating whether tagged data in Commission filings would provide a better means to provide and obtain necessary information and, if so, whether we should permit or require XBRL tagged data in Commission filings.22 The Division of Corporation Finance, Office of the Chief Accountant, Division of Investment Management, and Office of Information Technology have formed a task force to assess the implications of tagged data for filers, investors, the Commission and other market participants.23 In order to test and evaluate data tagging, we propose to allow registrants to supplement their Commission filings by furnishing financial data on EDGAR as an exhibit using eXtensible Business Reporting Language ("XBRL"), beginning with the 2004 calendar year-end reporting season. We currently expect to permit participation by any registrant without pre-approval merely by submitting the exhibit in the required manner. … “we are evaluating whether tagged data in Commission filings would provide a better means to provide and obtain necessary information and, if so, whether we should permit or require XBRL tagged data in Commission filings”.…

XBRL: Cheaper, Better, Faster Reduces the cost of preparing, publishing and analyzing information (CHEAPER) Reduces the cost of preparing, publishing and analyzing information (CHEAPER) Increases efficiency of business decisions, real-time reporting, deeper analysis capability, reduces margin for human error, more accessible and easier to use, enhances comparability (BETTER) Increases efficiency of business decisions, real-time reporting, deeper analysis capability, reduces margin for human error, more accessible and easier to use, enhances comparability (BETTER) Automates the migration of information from systems to financial statements, increases the speed of data use and related decisions, easier to transfer data (FASTER) Automates the migration of information from systems to financial statements, increases the speed of data use and related decisions, easier to transfer data (FASTER)

Key issues in Business & Finance

Current Issues impacting financial reporting Transparency Transparency Timeliness of reporting Timeliness of reporting Section 404/Internal controls Section 404/Internal controls Fair value accounting Fair value accounting Convergence Convergence Principles-based accounting standard setting Principles-based accounting standard setting

How linked to XBRL initiative? Move towards transparency Move towards transparency –If items were tagged and identified more information could be made available for investors and analysts to analyze in the manner that chose to do so Enhances information acquisition, evaluation and combinationEnhances information acquisition, evaluation and combination –Improves transparency without additional disclosures –Newfound discovery capabilities –Can benefit nonprofessional users

“The annual report of the 21 st century will not be annual and it will not be a report: it will be an up to date, informative dialogue” - Alan Benjamin in the 21 st Century Annual Report (2000)

How linked to XBRL initiative? Timeliness Timeliness –Capital markets rely on timely and reliable information for the allocation of capital resources –Access information more quickly –Faster processing –Accelerated filing deadlines can be easier to accomplish

How linked to XBRL? Section 404/internal controls Section 404/internal controls –A reporting format such as XBRL could enable easier documentation of internal controls – less manual intervention and massaging –Can enable the integration of disparate systems to optimize the internal control process –Can be a critical tool for enabling compliance with 404 – monitoring can occur real time

How linked to XBRL? Fair value accounting Fair value accounting –A lot of concern regarding the reliability (verfiability) of determining appropriate fair value – if assumption disclosures were tagged – management’s choices would be more transparent to users and easily compared with others

How linked to XBRL? Convergence Convergence –May be less important in an XBRL environment. Could adapt to country reporting regimes much more easily. –Comparability is enhanced –Complimentary toward objective of a single set of high quality, understandable and enforceable global accounting standards

How linked to XBRL? Principles-based accounting standards Principles-based accounting standards –If information is tagged – much easier to determine judgments made by management – analysts could easily adjust for their own analysis –Comparability is enhanced across companies – makes management’s financial reporting choices more transparent – search faciliting technology

Now is the time for us to fundamentally enhance Business Reporting using XBRL XBRL benefits all members of the financial information supply chain.

What needs to change? Manual processes for moving business information through to reporting Manual processes for moving business information through to reporting Need for greater accuracy, efficiency and timeliness Need for greater accuracy, efficiency and timeliness Lack of focus on reusability of external reporting Lack of focus on reusability of external reporting Deeper analysis hindered Deeper analysis hindered Transparency is only as good as the content (information) provided Transparency is only as good as the content (information) provided Opacity level remains high Opacity level remains high Uninformed decisions are the status quo Uninformed decisions are the status quo We all need to change…for the better of the capital markets

ERP Mgmt Reports InvestorsBanksSECIRS ERP CRM Reporting InternalControlDocs External Reports Suppliers XML & Web Services Consolidation Common structure Auditable trail Keys to financial & business information Information service providers Industry-based supply chain (XML + XBRL) XBRL XBRL Back Office Integrated with XBRL Financial statement consumers Internal control system ‘glue’ Accounts Policies Issues Mgmt … Real-time auditing Monitoring Common Standard Achieving standards & regulatory compliance

Internal Considerations Awareness and implementations of XBRL is limited, but growing Awareness and implementations of XBRL is limited, but growing Confusion over XBRL as an internal and/or external reporting solution Confusion over XBRL as an internal and/or external reporting solution Enabled software – many vendors have enabled software, but others are in development Enabled software – many vendors have enabled software, but others are in development Implementing will impact the internal business rules governing data and the people who use/process it Implementing will impact the internal business rules governing data and the people who use/process it Existing business process will have to be re-examined as part of implementation for efficiencies and risk considerations Existing business process will have to be re-examined as part of implementation for efficiencies and risk considerations Managing and maintaining XBRL taxonomies for internal/external reporting will require an ongoing effort Managing and maintaining XBRL taxonomies for internal/external reporting will require an ongoing effort

External Considerations Approach to collaboration Approach to collaboration Information requirements (vs. Forms approach to date) Information requirements (vs. Forms approach to date) Structured filings Structured filings Common vocabularies (taxonomies) Common vocabularies (taxonomies) Development strategy (collaborative) Development strategy (collaborative) Extensions, tools, archiving Extensions, tools, archiving Diverse e-filing methods Diverse e-filing methods Crisp transitions Crisp transitions Communications Communications Other - Legal record; signatures; security; etc. Other - Legal record; signatures; security; etc.

Increased disclosure and transparency requirements Increased disclosure and transparency requirements Need for programmable, efficient and reliable processing – not manual Need for programmable, efficient and reliable processing – not manual Companies & auditors seek solutions that automate and reduce the cost of compliance & reporting Companies & auditors seek solutions that automate and reduce the cost of compliance & reporting Industry expects effective throughput that improves analysis & comprehension of company financial statements Industry expects effective throughput that improves analysis & comprehension of company financial statements Regulators need similar efficiencies to better understand disclosures, compliance and “results” Regulators need similar efficiencies to better understand disclosures, compliance and “results” We are at the turning point!

Key enablers: Standards, technology & connectivity Key enablers: Standards, technology & connectivity XBRL embodies both accounting and technology standard: US Financial Reporting Taxonomy XBRL embodies both accounting and technology standard: US Financial Reporting Taxonomy SEC concept release builds momentum for XBRL adoption SEC concept release builds momentum for XBRL adoption Software vendors will soon deliver XBRL-enabled applications Software vendors will soon deliver XBRL-enabled applications Service providers are converting historical financials into XBRL stores Service providers are converting historical financials into XBRL stores XML and other technologies are ubiquitous XML and other technologies are ubiquitous Widely available inexpensive connectivity Widely available inexpensive connectivity We are at the turning point!

A Call to Action SEC Program SEC Program Identify participation candidates Identify participation candidates Work with FEI CCR & CFIT Committees to determine positions, tagging requirements and filing methodology (create sub bullets w/specific committees) Work with FEI CCR & CFIT Committees to determine positions, tagging requirements and filing methodology (create sub bullets w/specific committees) Establish a coordinated project plan, identify participant companies, coordinate resources and communicate progress Establish a coordinated project plan, identify participant companies, coordinate resources and communicate progress Market Adoption Market Adoption Evolve the business cases for companies to improve their reporting supply chain with XBRL Evolve the business cases for companies to improve their reporting supply chain with XBRL Establish a technical sub-committee within XBRL to drive market enablement Establish a technical sub-committee within XBRL to drive market enablement Evolve MD&A taxonomy to reflect “Interpretive Guidance” that will address SEC issues Evolve MD&A taxonomy to reflect “Interpretive Guidance” that will address SEC issues Corporate Reporting Standards Corporate Reporting Standards Leading the discussion on who is responsible for corporate reporting standards Leading the discussion on who is responsible for corporate reporting standards Create a methodology to update standards & policies Create a methodology to update standards & policies

Questions?