XBRL Adoption by Tax Administrations

Eric E. Cohen

Chair, XBRL US; Co-founder, XBRL; Chief Architect, XBRL GL

eric.e.cohen@us.pwc.com

What is XBRL?

XBRL

XMLfor business reports

A transfer syntax

An archival format

A standardised way to design XML Standards(Not a specific XML standard)

Specification: syntax and semantics of taxonomies and instances

Optimized for Business Reporting

Supply chains working to develop

A consortium

XBRL GL Fills the GAPS between GAAPS

BUSINESS

Investors

Aggregators

Regulators Creditors LendersTax Website

Transaction Creation

ERP G/L Packages CRM

•Orders•A/P•Delivery

Customers•Orders•A/R•Delivery

2-way2-way

Suppliers

Oneway

Oneway

XBRLBUSINESS REPORTING

(e-)BusinessX12, UN/CEFACT Forum, UBL, HR-XML, ACORD, MISMO,

and other XML INITIATIVES

XBRL GLJournal Taxonomy

DetailAccountingrecognition/classification

Intra system Detail to summary

Why are Tax Authorities Looking at XBRL? EFiling, eGovernment and other efforts

Representing current eFiling in friendlier face

Financial statements and information Same payload useful for many purposes, comparable Note: different jurisdictions and the “books”

Universal audit trail From transactions through the business reporting

supply chain

Other business information XBRL: Summarized, aggregated, filtered, (sorted) XBRL GL: Underlying detail

XML and Other Reusable FormatsAttributes of “standard” formats

XML HTML ASCII Fixed CSV Excel DBF EDI

Variable length fields Yes Yes No Yes Yes Yes No

No field size limitations Yes Yes Yes Yes No No Yes

Extensible Yes * No No * * No

Includes context or field names (“rip and read”)

Yes No No No Yes Yes No

Cross-platform, non-proprietary, “universal”

Yes Yes Yes Yes No No Yes

Validation of files Yes No No No * * No

Groups collaborating on definition and interoperability

Yes No No No No No Yes

Selective digital signatures Yes * No No No No No

Selective encryption Yes * No No No No No

Standard Office import/export Yes Yes Yes Yes Yes Yes No

Not verbose, smaller file sizes * * * * * * *

weakness strengthworkaround

Note: PDF is a very popular document exchange format, but is primarily designed for human, and not computer, consumption. Likewise, TIF, GIF, JPG, BMP and other binary graphics formats.

Note 2: UNICODE is an “update” to ASCII more useful in the international context.

One Framework One format Optimized for business reporting information

Attributes of business reporting information Needs of business reporting information

Lowering preparation/compliance burden Smoother collection of data of all kinds Reduction of things published to reconcile and track More common adoption by software developers

Web Services

XBRL Internationally Developed Royalty-free Optimized for business reporting Entirely XML-family based

XML, XML Namespaces, XML Schema, XLink

Holistic One family, one framework, collaborative, compromise

for greater common good Interoperability - validation, comparison across data

sources

Oxymoron: Customizable Standards

Standardized Customization X - Extensibility

Greater community gets commonality Local community gets flexibility, customization A new world that brings customization and compromise

together Standards Standardized customization “Bread trail” from customization to standards

XBRL Post processed reporting

Financial statements US IFRS German Japan Many other countries

Bank call reports, tax forms, other formats

Detail (XBRL GL) Entries, agents, resources, documents Universal audit trail Who is using the same version of the same accounting system as

1999?

Operations

Database

Ledger

Reporting

Operations

Database

Ledger

Reporting

Operations

Database

Ledger

Reporting

Operations

Database

Ledger

Reporting

Operations

Database

Ledger

Reporting

Operations

Database

Ledger

Reporting

ConsolidatedManagement

GAAPStatutory

< >

KEYCoreSaxonBusinessMulticurrency

Customer, vendor, employee

KEYCoreSaxonBusinessMulticurrency

Invoice, voucher info

Inventory, ValueReporting

Regulator

RegulationsNewsInstructionsFiling formatsReference

Service

CLIENTCLIENT

filing format

Regulator Service Extranet 3rd Parties Regulator

Software developers

Organizer

GuidanceChecklistsPractitioner Aids

TradingPartners

OtherRegulators

TheMarket

Lenders

IntegratedNon-integratedOutsourcesASP

Supp InfoForms

Supp InfoForms

Supp InfoData

Submits

Receives

Division Level

Extract

MergeData

Group LevelDepartment LevelParticipants

Processes

MaintainDefinitions

CollectData

DistributesSupp Info

Forms

Supp InfoData

Dept Detail

ReceivesSend

RequestsPrepareReport

Submits

Query

FindSources

CongressTreasuryTax Policy Analysts

Tax Regulators Involved in XBRL

Australian Tax Office ATO recently joined the XBRL Consortium Considering XBRL 2.1 as the standard for

electronic filings Phased implementation: Activity Statements (12 M filings

annually) Phase I scheduled for the end of 2003 Anticipated benefits: Time and cost savings Enhanced information processing

Canada Revenue Agency Active member of XBRL Canada Presentation to follow (Slide from last meeting attached - was CCRA)

Corp. T

ax T

2

VA

T

GS

T

Em

ployersT

ax

Excise

Individ.Tax

T4

XML Exchange/Transformation

CCRASTF

OtherGov’ts

Other Levels of Gov’ts

OtherGov’t Depts

XM

L E

xcha

nge/

Tra

nsfo

rmat

ion

XM

L E

xcha

nge/

Tra

nsfo

rmat

ion

CCRA Taxonomies

TBD

TBD

CCRA XBRL Taxonomy

XBRL Chart of Accounts

(GAAP)Instance Document

snapshot

T2 BenefitsGST Others

BI/DS

Externally Internally Externally

New and Legacy Systems

Canadian Value Proposition

German Tax Agency (Oberfinanzdirektion München)

Workgroup "XBRL Taxonomie Steuern" (Taxonomy for Tax Filing) XBRL Deutschland e.V. workgroup establishing XBRL as a standard

for electronic tax filing in Germany. The workgroup's agenda comprises:

Development of a taxonomy (or expansion of the existing taxonomy GermanAP) in order to render all pertinent data

Processing and operating (data delivery workflow, assurance, certifying data quality)

Information exchange with international workgroups and other jurisdictions focusing on this issue

Back end processing still an issue Staffing

Staffed by Oberfinanzdirektion München (tax authority), DATEV, and software providers.

Date of last update: May 27, 2003 - see http://www.ofd.bayern.de/ofdmuenchen/

Japan - National Tax Agency

What: Portion of Electronic Tax Filing, i.e. Financial Statements Crucial Project for XBRL Japan NTA will nominate/endorse any XML-based FS submission if it proves to work Currently only XBRL is on NTA’s radar screen. Large Scale Project

Impact on virtually all companies

When: NTA plans to make tools available in November 2003, to go live in March, 2004 (corporate tax filing for the year 2003).

How: Based on the latest XBRL Specification Based on XBRL Japan’s “sample” Taxonomy

Effect: XBRL-enabled accounting software products emerging. When actually started, it will accelerate adoption at large scale.

Updated news as of Dec-03 as follows:

Their “e-tax” project is positioned as a part of implementation of e-government plan (“e-Japan”) using digital signature. Adoption of XBRL is admitted as a one of acceptable formats for the financial statements attached to filing information.

The financial statements received in XBRL format are to be printed in paper to validate the contents. Direct linking to the agency’s internal system is considered difficult at this point.

This system is giving clear priorities on interface to taxpayers. Implementation of STP in NTA is left unfulfilled.

Filers create tax returns in XML format in this system, and adoption of XBRL is admitted for some documents in accompanying materials (corporate financial statements, business summary report, etc.)

Verification of numerical consistency and accuracy, between tax returns in XML and attached financial statements in XBRL, is not available yet in a systematic way. The NTA should perform those procedures in manual fashion in the meanwhile.

The reason of selecting Nagoya as the first jurisdiction to launch e-tax system: 1) it has 10% of the nation wide tax revenue and 2) it has well-assorted kinds of taxpayers.

NTA has a system to perform complex validation, analysis and statistical work, called “KSK system” (a back office system).

Software application for creating tax return will be distributed to taxpayers in a CD-ROM. NTA can issue certificates of tax payment (electronic certificate of tax payment) to taxpayers, however NTA

cannot show those certificates to a third party since law prohibits it. Certificates are only seeable within local government agency.

When a taxpayer presents a tax return to the NTA, he also prepares a copy of the return. The NTA affixes a reception stamp on the copy for the taxpayer; however, it only proves that the NTA has received his/her return, not that the copy is identical to the submitted return. On the e-tax system, the NTA returns e-mail that says they received a return.

< Upcoming schedule > February 2, 2004 – e-tax filing for income tax and consumption tax filing (for personal business) will be

available for the taxpayers in the jurisdiction of Nagoya Regional Taxation Bureau (including the prefecture of Gifu, Shizuoka, Aichi and Mie).

March 22, 2004 – other than the tax filing listed above, e-tax filing for corporate tax, consumption tax (corporate), tax payment for all tax items and some of the submission process for tax applications and notifications will be available for the taxpayers in the jurisdiction of Nagoya Regional Taxation Bureau.

June 1, 2004 – all e-tax procedures started in Nagoya jurisdiction will be available throughout the country. From September 2004 – e-tax filings for other submission processes for tax applications and notifications will

be available for the taxpayers nationwide.

Netherlands Dutch Tax and Customs Administration

Mandate for eFiling by 1/2005 Corporate tax: >90% in XML Portal access for 100% of corporate tax users

Today Corporate tax: 1% today in XML Personal tax, based on simple XML: 90% Customs: 80% using an EDI model

Options Offline filing based on standard eMedia Jul-2004 Online web-based forms starting Feb-2004

Considering XBRL Government initiative to reduce compliance burden XBRL can be catalyst for reducing costs

UK Inland Revenue Electronic filing processes Persuasive business case Office of e-envoy 2004 optional filings All compliance software vendors in place

Also evaluating role within audit and VAT

Other XBRL International Members Irish Revenue Inland Revenue Authority of Singapore Inland Revenue Department of New Zealand

Encouraging development and adoption Collaborating on financial statement and other

taxonomy development Collaborating on common issues regarding

security, audit and other issues - WIN-WIN-WIN

Information

TAX FORMTAX INSTRUCTIONS

FINANCIAL STATEMENT

Corporate Data feedsdirect access or extractsPaper

Support

Operational Data

Streamlined Processing

ExternalFinancialReporting

BusinessOperations

InternalFinancialReporting

Investmentand Lending

AnalysisProcessesProcesses

ParticipantsParticipants

AuditorsTradingPartners

Investors

FinancialPublishersand Data

Aggregators

Regulators/Stock exchanges

XBRL G/LCommon Audit Trail XBRL for

Regulatory Filings

XBRL for Financial Statements

XBRL for AuditSchedules

XBRL forTax Filings

XBRL for BusinessEvent Reporting

Software Vendors

CFO’s

Companies

The architecture of XBRL

Entity Segment Scenario

PeriodUnit Precision

Context

CWA

Labels

Reference

Definition

Presentation

Calculation

Taxonomy

InstanceDocument

Fact

Formulae

Concept

Why XBRL?

XBRL adds to XML: Multi dimensional data

contexts

Mathematical relationships between concepts

Flexibility about how to present items to users

Aliases and other definition relationships

Links to authoritative literature and guidance

Financial reporting vocabularies (taxonomies)

Reporting apps need these even when using XML.

XBRLItem

XBRLItem

CalculationsCash = Currency + Deposits

CalculationsCash = Currency + Deposits

PresentationCash & Cash Equivalents

PresentationCash & Cash Equivalents

FormulasCash ≥ 0

FormulasCash ≥ 0

ReferencesGAAS I.2.(a)

USSGL 1100.00

ReferencesGAAS I.2.(a)

USSGL 1100.00

DefinitionsAKA Liquid Assets

DefinitionsAKA Liquid Assets

ContextsUSD

FY2003Budgeted

ContextsUSD

FY2003Budgeted

How XBRL Compares to Proprietary XMLAttributes of formats XBRL Proprietary

XML

Uses W3C standards for XML and related technologies

Yes Yes

Holistic framework (can, of course, have non-XBRL framework)

Yes *

Documented and proven agreement on syntax and semantics of schema design and instance design

Yes No

Groups collaborating on definition and interoperability

Yes No

Agreed upon tools for extensibility Yes *

Software vendor community developing tools that help with specifics of syntax

Yes *

Reuse of IP Yes *

weakness strengthworkaround

Why XBRL Linkbases Over “Standard” XML SchemaAttributes of formats XBRL Schema

alone

A single hierarchy using complexTypes makes it easy to see that hierarchy with standard tools like XML Spy

* Yes

Human readable labels provided in various languages and for specific purposes as part of deliverable

Yes No

Guidance on hierarchy and presentation order for applications

Yes No

Guidance on hierarchy and (sub-)totals for applications Yes No

Standardized rules for extensibility of all of the hierarchies Yes No

Standard tools for identifying relationships across taxonomies, such as “Same-as” relationships

Yes No

Standard tools for relating concepts to underlying authoritative literature and explanatory guidance

Yes No

Prescribes and limits XML Schema for business reporting Yes No

weakness strengthworkaround

Why XBRL for XML Reporting Standard? Community developed concepts with communication of

meaning, support, requirements

Advantages to development community, users

Greater picture

More than just efficiencies as point-to-point, single use filing

Greater integration with internal systems

Filing Definition, validation (PRE-validation)

Extensibility

Internal and then external sharing

XML is “self-defining?”

Sure, this looks simple:

XML Without Agreement …

… is just SYNTAX But how “self-defining” is this?

To a computer (XML parser), they are the same.

The tags (element names) provide no semantic knowledge to the program.

NEED TO COMMUNICATE MEANING - across languages - enter XBRL!

Some Options Ignore/disallow XBRL altogether XBRL as an option for filers

Required statutory accounts in local XBRL format as payload XBRL based standards for one or more tax filings

Mandate that XBRL be used for some or all reporting XBRL as an INTERNAL efficiency tool

Compliance, audit, reporting to outsiders share common language, tools

Cooperate and collaborate for more global XBRL adoption and usage

Reduce everyone’s costs

Representative XBRL-enabled Products Shipping

Oracle FSG PeopleSoft SAP mySAP financials Hyperion Microsoft Business Solutions Navision, Axapta Creative Solutions (et al.)

Caseware

About to ship Microsoft Office 2003 Add-in

XBRL Outreach XBRL in general

Interoperability pledge Other efforts

XBRL GL XBRL GL and audit/continuous audit community XBRL GL and electronic efforts

XBRL and Tax XML

We have common needs, interests and all fit in the Business Reporting Supply Chain Not just technical needs Future development issues - including security/DigiSig

XBRL Issues XBRL is NOT point-to-point, proprietary schemas

Ease of development and fast implementation Familiarity

XBRL GL is MORE than tax authority needs Familiarity with Schemas and complexType

relationships XBRL Specification 2.1 and complexTypes

Incentives Others