eXtensible Business Reporting Language “XBRL”

SEC Filings Using XBRL

“A CFO’s Perspective”“A CFO’s Perspective”

Greg Adams, CFO & COOGreg Adams, CFO & COO

EDGAR Online, Inc.

SEC Filings Using XBRL:

Corporate Pressures SEC’s Voluntary Filing ProgramFinancial Reporting Process & XBRLSample Form 8-K Filing Benefits of XBRL to Information Consumers

Financial Executives

Have a critical responsibility to communicate operational results to stakeholders

Are facing a growing demand for efficient delivery in an interactive medium

Need better tools for faster decision making

Want their internal control environment enhanced through less retyping, more system integration, etc.

Dwindling Coverage

Number of stocks followed by some Wall Street firms at the end of 2000 and 2003

Firm 2000 2003 Merrill Lynch 3,500 2,469 CSFB 3,077 2,373 Smith Barney 3,000 2,300 J.P. Morgan Chase 2,400 2,260 Goldman Sachs2,315 1,950 Morgan Stanley 2,150 1,925 Lehman Brothers 1,650 1,605

Source: WSJ Research; Includes both U.S. and abroad.

18% reduction

SEC Voluntary Reporting Program

“The annual report of the 21st 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 21st Century Annual Report

XBRL Value Proposition

Transparency and the U.S. Securities and Exchange Commission (SEC)

ShareholderView to

Business Events

Accounting Practices

Control Practices

People Practices

The SEC is driving for reporting transparency. In many organizations, each step along the path to the final external reports clouds the view of information back to the original business event (inconsistent account definitions, incomplete GL reconciliation's, management adjustments, top side entries, etc.)

BusinessEvents

Mgmt Reports

BusinessEvents

BusinessEvents

BusinessEvents

BusinessEvents

BusinessEvents

External Reports

Financial Systems

Financial Systems

How linked to XBRL initiative?

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 combination

Improves transparency without additional disclosures

Newfound discovery capabilities

Can benefit nonprofessional users

[Release Nos. 33-8496, 34-50453, 35-27894, 39-2498, IC-26622; File Number S7-35-04]

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 1940. 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.

Effective Date: March 16, 2005 “The voluntary program is intended to help us evaluate the usefulness of data tagging and XBRL to registrants, investors, the Commission and the marketplace”.…

SEC commenced the voluntary program for receiving financial information on EDGAR using XBRL in early April 2005 Approved Taxonomies (classification systems) for commercial and industrial

companies, banking and savings institutions, and insurance companies.

In August 2005, SEC Extends Voluntary Program to Investment Companies The expansion will allow mutual funds to file exhibits to their annual report to

shareholders (N-CSR) and quarterly statement of portfolio holdings (N-Q) in XBRL

SEC believes “tagged data will improved the quality of information and speed of its availability” Will help the Commission determine whether these improvements will

empower individual investors to get information faster and more conveniently and to choose more wisely by making better-informed comparisons.

XBRL Voluntary Filing and FAQs

SEC Voluntary Reporting Program

Allows companies to “furnish” XBRL tagged financial statements

Added Rule 401 to Regulation S-T allowing filers to furnish supplemental information using XBRL

Allows for company flexibility in filing financial statements, with or without footnotes and MD&A

Can submit XBRL tagged document either with the official filing or as an amendment, however, there is no submission deadline

Must correlate to a standard GAAP Taxonomy

Relief for liability if error is not materially misleading or false

XBRL Reports filed with the SEC

SEC Proposed Rule – Voluntary Reporting

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

Financial Reporting Process

Accounting/Finance

Investors/Analysts

Forms8-K

10-K10-Q

Sales

ERP

Legacy

HTML “View”

Word Summary

ExcelFinancials

Metrics, KPI’s

Regulatory Filing

Convert to ASCII/Text

Data “Cleansed”

XBRLDocuments

XBRL-enabled Software: Easing the Burden

Extend the taxonomy if Extend the taxonomy if necessarynecessary

Preparing XBRL Instance Documents

Create an instance document Create an instance document and validate calculationsand validate calculations

Publish Instance Document Publish Instance Document

& Taxonomy& Taxonomy

Compare & map Compare & map 10K/10Q to GAAP 10K/10Q to GAAP

TaxonomyTaxonomy

Assess Scope of Assess Scope of Reporting & Download Reporting & Download

TaxonomyTaxonomy

Review & Review & Validate Validate Instance Instance

DocumentDocument

Identify a team: Accountant & Identify a team: Accountant & Developer (XMLDeveloper (XML))

Output looks like this…..

More Importantly XBRL Output looks like this…..

Sample Form 8-K

edgr-20050228.xsdedgr-2005028_cal.xmledgr-2005028_lab.xmledgr-2005028_pre.xmlEDGR_2004_10K.xml

XBRL Sample Form 8-K Filing

EDGAR Online Facts….

Effort on Voluntary Filing Program 160+ Hours for first effort Over 200 discrete tagged items Over 30 Taxonomy extensions Instance document was reviewed 3X by three different people Used in-house conversion software to extend and tag plus 2

different tools to validate Did not include auditors for review

Created I-Metrix Excel Add-in

Was one of the first companies to make XBRL tagged financials available in Excel (I-Metrix)

Internal Considerations

Managing and maintaining XBRL taxonomies for internal/external reporting will require an ongoing effort

Implementing will impact the internal business rules governing data and the people who use/process it

Confusion over XBRL as an internal and/or external reporting solution

Enabled software – many vendors have enabled software, but others are in development

Existing business process will have to be re-examined as part of implementation for efficiencies and risk considerations

XBRL Taxonomy and Instance Document Applications

Benefits - How linked to XBRL initiative?

Timeliness

Capital markets rely on timely and reliable information for the allocation of capital resources

Comparability is enhanced across countries Access information more quickly Faster processing Accelerated filing deadlines can be easier to accomplish

Benefits - How linked to XBRL initiative?

Section 404/internal controls (SOX)

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

Benefits - How linked to XBRL initiative?

Fair value accounting A lot of concern regarding the reliability (verifiability) of determining

appropriate fair value – if assumption disclosures were tagged – management’s choices would be more transparent to users and easily compared with others

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 facilitating technology

Benefits - How linked to XBRL initiative?

International 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

Summary : Benefits of XBRL for Preparers

Lower cost of producing information Better tools for faster decision making More timely accurate data XBRL provides an immediate ROI for benchmarking

Have a critical responsibility to communicate operational results to stakeholders Expanded communication “reach” Tell your own story to stakeholders (precise & clear)

Better control environment – extension of SOX 404 Utilized during risk assessment and planning phase Facilitate the comparability and granularity of financial

disclosure – comp analysis Accelerated adoption of reporting model changes

Questions?