1. XBRL for Financial Analysis
Angus Lund, Morgan Stanley Equity Research
17 November 2004

2. Contents XBRL for Financial Analysis Updating Financial Models
Comparing Financial Information
Summary and Conclusions

3. XBRL for Financial Analysis
XBRL will be initially adopted for regulatory reasons
UK Inland Revenue
Financial Services Authority
We believe companies should leverage this investment to make their financial results available in XBRL

4. XBRL: a major advance in financial reporting
HTML or PDF renditions of reports only exploit the ease of distribution that the Internet offers
In practice they are of little more value than a photocopied press release
XBRL will allow accurate, relevant, scalable querying of financial information

5. Use Case: Updating Financial Models
Quick Comments
Immediate response to earnings releases
Time pressure restricts the level of analysis
Detailed Analyses
More detailed analysis of filings
Routine reports should be easier to complete

6. Workflow: Updating Financial Models
Current Workflow
Report published to the web in HTML or PDF format
Analyst manually transcribes numbers into spreadsheet model and…
…analyses results quickly in order to get a comment out
Process with XBRL
Report published in XBRL format
Numbers automatically loaded into spreadsheet by an Excel add-in
Analyst has more time to analyse results with confidence

7. Use Case: Comparing Financial Information
Very detailed comparisons
In-depth analysis of specific areas of company financials
Frequency of reports limited by time to collate
Very broad thematic reports
Key report for investors on market-wide issues
Number of companies included restricted by time

8. Workflow: Comparing Financial Information
Current Workflow
Comparable data are sourced from separate financial reports
Data must be checked to ensure it is complete and comparable
More time is spent on collation and verification than on analysis
Process with XBRL
Query submitted to XBRL data aggregator
Results returned effectively immediately
More time to analyse more companies
Estimate that 80% of the time is spent on data collection rather than analysis

9. Why XBRL will improve financial analysis
Accuracy
Greater confidence in numbers used for analysis
Reliable results in higher quality conclusions
Timeliness
More time to focus on analysis, not process
Shorter “time to market”
More frequent high-quality analysis
Need to retain links back to context
The investment research body RIXML joined forces with XBRL in October 2004
“As financial data reporting becomes more critical, the ability to access this information in research reports grows increasingly important as well.”
To demonstrate its value to investors, we need more companies to report using XBRL
We need comparable data and the software tools to be able to manipulate it

10. Other points to consider
Numbers aren’t everything; context matters too
We need more companies to report using XBRL
We need software tools to be able to manipulate XBRL

11. Stocks with higher corporate governance standards have outperformed
Conclusions
XBRL will improve the relevance and quality of financial analysis
Companies should look at XBRL as a way to improve communication with their stakeholders
Greater transparency results in a lower cost of capital
Stocks with higher corporate governance standards have outperformed 80
100
120
140
160
180
1999
2000
2001
2002
2003
2004
GMI “Top 26”
S&P 500
Source: Governance Metrics International
Financial Analysts will use XBRL
It offers us business benefits in time and efficiency
These will allow us to improve the quality of our research
Companies should look at XBRL as a way to improve communication with their stakeholders
It is not a punitive obligation
GMI’s top 26 companies using its corporate governance ratings outperformed the S&P 500 Index for each of the last one, three and five year periods by 4.9%, 8.3% and 10%, respectively, as of August 31, 2004.
Source: GovernanceMetrics International,