kpmgReforming Regulatory

ReportingJohn Turner

Leader KPMG Global XBRL Services Team

john.turner@kpmg.co.uk

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Topic Outline Walking the tight rope Reaching common understanding Evolution of regulatory reporting Why XBRL?

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Walking the tightrope Regulation, and government as a whole, cannot

exist without information from private corporations Lots of information No really Lots and lots of information This is variously estimated as around 0.6% of

GDP…. > 8 Billion hours per annum in the US alone Regulators must balance their legitimate

information needs against this “provider burden”.

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An ongoing balancing act… Viewed as a whole,

regulators appear to move between favouring industry and favouring government in terms of their data collections.

Both extremes are undesirable for all concerned

Reasons are complex, but include regulatory policy taking its lead from altering community expectations

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Topic Outline Walking the tight rope Reaching common understanding Evolution of regulatory reporting Why XBRL?

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Six principles for regulatory reporting requirements…

Timely

To be useful, information needs to be available within a reasonably short period from the time of measurement. The “rear view mirror” view of any qualitative measure is only useful where information is current—and its currency rapidly fades.

Accurate

Information should be free of data anomalies and errors and tested for manipulations. Reasonable

Regulators should seek to minimize provider burden (the amount of effort imposed on the regulated community by the scope of the data collection).

Relevant

The definitions and interrelationships between data definitions need to be up to date and as tightly linked to information used for the running of the business as possible.

Efficient

The cost of collecting the information needs to be proportionate to the value of the data collected. Transforming

Legitimate governmental information needs change markedly over time. Sometimes information collections are allowed to go stale as a result of a policy that favours the private sector. Stale information is resented, and eventually ignored by users, or, perhaps worse, is assumed to remain relevant by agency analysts, who quickly become out of touch with industry developments.

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Reaching common understanding…

Headline People turn to XBRL to help

exchange information between systems.

The sub-text In order to exchange information you

need to understand it. Understanding metadata turns out to

be tough. XBRL can help provide a consistent

view of all the information that is used around the enterprise (or across enterprises)

This is a way to componentise business activity without replacing systems

                                                                             Facilitates system-to-system data integrity

XB

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Supported bydevelopment tools in

use by firms

Supported byaccounting packages in

use by firms

Facilitates datadefinition

Facilitates validationdefinition

Can leverage publicaccounting framework

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Topic Outline Walking the tight rope Reaching common understanding Evolution of regulatory reporting Why XBRL?

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Evolving processes for data collection…

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Paper Bound = Unusable data The process of designing

and deploying paper-based data collections is, of course, pretty simple.

The actual use of paper-based data is problematic!

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“Program Bound” = Continuous Programming

In this mode, the process of implementing the decisions made about regulatory reporting requirements involve:

Providing the Excel and Word (eg: paper) versions of the information requirements to the systems development team.

These requirements get coded (by hand) into electronic forms.

This goes backwards and forwards between the business and technology groups until the forms are right.

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Adaptive = Improvement by the Business

An “Adaptive” system is designed with a view to the need to make changes as being one of the key features of the business environment.

By building requirements in a format that are human readable as well as understandable by a the system, the business experts get very fine-grain control over the creation of the form.

It also imposes new levels of discipline over the creation of the regulatory reporting requirements, with business experts able to share the requirements with a range of stakeholders (internally and externally) in a very precise way.

Used in: Mortgage Firms KPIs

Concept: Reserves

Labels:

"Reserves"

References:

Handbook Reference: Sup 16 Ann 19G MLAR1

Section Reference: C1-2 (3)

Accounting Reference:Companies Act 1985: Part VIII Distribution of Profits and AssetsLimits of company's power of distribution

Text:Audited Reserves are audited accumulated profitsretained by the firm (after deduction of tax, dividends andproprietors' or partners' drawings) and other reservescreated by appropriations of share premiums and similarrealised appropriations. Reserves also include gifts of capital,for example from a parent company. For partnerships, auditedreserves include partners' current accounts according to themost recent financial statement.

Used in: Sup 16 Ann 19G C1

System References

System: Upfront Data Warehouse

Column: FSAABS002765

DataType: Monetary

Nillable: True

Created: 2004-03-19

Participates in

Reports:

Mortgage Firm KPIs

Mortgage Firm Balance Sheet

Validation Rules:

VR98033 - Revenue Movement

VR98033 - Revenue Transfers

Owner: Andy Watson

Data Challenge Date: 12 Dec 2003

Data Challenge Packet: HSF_DC_2003.doc

Consultation: CP197

Derivations and Calculations

Total Eligible Capital

Growth in free reserves

Schema: http://www.fsa.gov.uk/xbrl/2004-05-09_HSF.xsd

"Audited Reserves"

Used in: Mortgage Firms Balance Sheet

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Topic Outline Walking the tight rope Reaching common understanding Evolution of regulatory reporting Why XBRL?

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Six principles for regulatory reporting requirements… revisited

TimelyAccurateReasonableRelevantEfficientTransforming