Improving the quality and timeliness of internal reports Walter Hamscher (walter@hamscher.com)...

Improving the quality and timeliness of internal reports

Walter Hamscher (walter@hamscher.com)

Chair, XBRL International Steering Committee

Consultant to PricewaterhouseCoopers

The business reporting supply-chain

ExternalFinancialReporting

BusinessOperations

InternalFinancialReporting

Investment,Lending, andRegulation

Processes

Participants

AuditorsTradingPartners

Investors

FinancialPublishersand Data

Aggregators

Regulators

Software Vendors

ManagementAccountants

Companies

You are hereYou are here

Improving the quality and timeliness of internal reporting using XBRL The Goal The Obstacles What XBRL Offers Why XBRL Now Next Steps

Goal 1: Consistent, uniform data produced efficiently

Supp InfoFormsForms

FormData

Submits

Receives

Division Level

Extract

MergeData

Group LevelDepartment LevelParticipants

Processes

MaintainDefinitions

CollectData

DistributesForms

FormDataDivisionDetail

ReceivesSend

RequestsPrepareReport

Submits

Query

FindSources

Goal 2: Repurpose consistent data as needed

Supp InfoFormsForms

FormData

Submits

Receives

Division Level

Extract

MergeData

Group LevelDepartment Level Participants

Processes

MaintainDefinitions

CollectData

DistributesForms

FormData

Dept Detail

ReceivesSend

RequestsPrepareReport

Submits

Query

FindSources

AnalyzeData

Regulator, Partner…

Net

Improving the quality and timeliness of internal reporting using XBRL The Goal The Obstacles What XBRL Offers Why XBRL Now Next Steps

Reporting challenges Timeliness and quality of

source data and estimates

Inconsistent terminology

Changing collection requirements

Implementation cost & resistance to change

Variant of Pareto’s 80-20 postulate:

80% of effort in reporting goes into dealing with the 20% of the data that is not already well-structured and organized in a stable, widely used format

Solutions offered by a standard language Timeliness and quality of

source data and estimates

Inconsistent terminology

Changing collection requirements

Implementation cost and resistance to collaboration

Minimize data re-keying and copy-and-paste using a universal format

Single definitions shared within an organization by all software applications

Software able to use new and changing data definitions immediately

Open, royalty free, independent standard and consortium

Process efficiencies are hard to achieve

Different Data Dictionaries: Field names, field order

System 1: AccountNo, Amount, Date

System 2: MonetaryAmount, PostDate, AccountNumber

System 3: PostingDate, Account#, Value

System 4: Date, Journal, Account, Amount

Similar Data

Account, Amount, Date

Different Representations for the same concepts in common data field

Journal: PJ, Payroll Journal, Payroll

Date: 12-31-03, 20031231, 12/31/03

Different

Data Formats

CSV

ASCII

WKS

XLS

Improving the quality and timeliness of internal reporting using XBRL The Goal The Obstacles What XBRL Offers Why XBRL Now Next Steps

What is XBRL?Implications Maps to existing data in

legacy systems or newer ERP systems operating today

Uses standards to leverage investments in financial management systems

Bridges today’s environment to future architectures such as .NET

Enables a financial reporting environment in which results can be shown in a shorter payback period.

Technical Details XBRL = eXtensible Business

Reporting Language

Freely available extension of XML (root language)

NOT a new accounting standard, ERP, or software package

– Already adopted by SAP, Oracle, PeopleSoft, Microsoft Office, Microsoft Business Solutions, and over 20 other products

Leverages existing technology and can adapt to ANY reporting/ accounting system

How XBRL differs from XML

XBRL adds to XML: Multi dimensional financial

data representations

Financial reporting vocabularies (taxonomies)

Aliases and other definition relationships

Mathematical relationships between concepts

Flexibility about how to present items to users

Structure for authoritative policies and guidance

Reporting apps need these even when using XML

CalculationsCash = Currency + Deposits

CalculationsCash = Currency + Deposits

PresentationCash & Cash Equivalents

PresentationCash & Cash Equivalents

FormulasCash ≥ 0

FormulasCash ≥ 0

ReferencesGAAP I.2.(a)

CoA 1100

ReferencesGAAP I.2.(a)

CoA 1100

DefinitionsAKA Liquid Assets Definitions

AKA Liquid Assets

ContextsUS $

FY2003Budgeted

ContextsUS $

FY2003Budgeted

XBRLItem

“200”

XBRLItem

“200”

What XML Offers

Supp InfoFormsForms

FormData

Submits

Receives

Division Level

Extract

MergeData

Group LevelDepartment Level Participants

Processes

MaintainDefinitions

CollectData

DistributesForms

FormDataDivisionDetail

ReceivesSend

RequestsPrepareReport

Submits

Query

FindSources

Co.Specific

Definitions

Co.Specific

Definitions

Distributes

.What XBRL Offers

Supp InfoFormsForms

FormData

Submits

Receives

Division Level

Extract

MergeData

Group LevelDepartment Level Participants

Processes

MaintainDefinitions

CollectData

DistributesForms

FormDataDivisionDetail

ReceivesSend

RequestsPrepareReport

Submits

Query

FindSources

Std.Data

Vocabulary

Co.Specific

Definitions

Std.Data

Vocabulary

Co.Specific

Definitions

Distributes

AnalyzeData

Regulators, Partners, Outsourcers

Net

.

Net

Internal reporting demonstration

Change shape of data, not site user activities Reduce manual intervention for data quality

2. XBRL Asset

Request

2. XBRL Asset

Request

1. Today’sAsset Summary

Request

1. Today’sAsset Summary

Request

3. Today’s AssetReport

3. Today’s AssetReport

5. XBRL Asset

Summary

5. XBRL Asset

Summary

4. XBRLConversion

4. XBRLConversion

SiteUser

Amherst

AnalystBoston

Change shape of data, not site user activities Reduce manual intervention for data quality

2. Select from

Taxonomy

2. Select from

Taxonomy3. Today’s

Payables Reports

3. Today’s Payables

Reports

7. PayablesSummaries

7. PayablesSummaries

4. XBRLConversio

n

4. XBRLConversio

n

5. PayablesDetails

5. PayablesDetails

1. Today’s Payables

Request

1. Today’s Payables

Request

6. XBRLConversio

n

6. XBRLConversio

n

Another internal reporting demonstration

SiteUser

Amherst

AnalystBoston

Basel New Accord (Basel II)1. Capital Requirements

Standardized Approach Internal Rating - Foundation Internal Rating - Advanced

2. Supervisory Review

3. Market Discipline Core disclosures Possible supplemental

disclosures

For each portfolio,

Number of borrowers, and

Distribution of borrowers across rating grades for the last 1, 2 and 3 years

Distribution of rating migrations for the last 1, 2 and 3 years

In the advanced approach, distribution of rating migrations weighted with (a) nominal exposure and (b) EAD, both after 1,2 and 3 years.

For each portfolio,

Number of borrowers, and

Distribution of borrowers across rating grades for the last 1, 2 and 3 years

Distribution of rating migrations for the last 1, 2 and 3 years

In the advanced approach, distribution of rating migrations weighted with (a) nominal exposure and (b) EAD, both after 1,2 and 3 years.

*

Basel II reporting process

Disparate Business units (legal entities)

Group level information consolidation

Reporting to themarket Regulators Analysts

Rating Agencies …Investors

Basel II impact on internal reporting

Disparate Business units (legal entities)

Group level information consolidation

Reporting to themarket

XBRL

XBRLXBRL

XBRL

Regulators AnalystsRating

Agencies …Investors

Improving the quality and timeliness of internal reporting using XBRL The Goal The Obstacles What XBRL Offers Why XBRL Now Next Steps

Representative XBRL-enabled products Shipping

SAP mySAP financials Microsoft Business Solutions Axtapa Oracle FSG Creative Solutions (et al.)

Announced Microsoft Office 2003 Add-in Hyperion Financials PeopleSoft Enterprise Financial Management

Custom CaseWare Financials Hitachi GEMPlanet

Live applications APRA (2001) EDGAR Online (2001) DATEV/Bundesbank (3Q 2002) Wacoal (4Q 2002) – Internal Reporting OneSource (1Q 2003) Tokyo Stock Exchange (1Q 2003) Sumitomo Mitsui Banking Corp. (1Q 2003) Danish Commerce & Companies (2Q 2003) Dutch Water Authority (3Q 2003) – Internal Reporting UK Inland Revenue (4Q 2003) KOSDAQ – Korea (4Q 2003) National Tax Agency of Japan (1Q 2004) US FDIC (3Q 2004)

Morgan Stanley, Reuters, Microsoft NASDAQ-MSFT-PricewaterhouseCoopers Pilot

Improving the quality and timeliness of internal reporting using XBRL The Goal The Obstacles What XBRL Offers Why XBRL Now Next Steps

Putting a dollar value on straight-through reporting with XBRL: Sample case Committee report – known as-is

226 person-hours 2 ½ elapsed weeks

Committee report – estimated to-be Automating extraction and aggregation, eliminate rework 32 person-hours Less than 1 week

200 person-hours times # of committee reports $_, _ _ _, _ _ _ ?

Improving the quality and timeliness of internal reporting using XBRL The Goal

Consistent, uniform data information produced efficiently

The Obstacles Inconsistent information models; 80-20 rule of business reporting

What XBRL Offers A standardized reporting XML vocabulary that can be deployed at

all levels of an organization to accelerate process improvements

Why XBRL Now XBRL contrasted with coding directly in XML XBRL software in the marketplace and adoption

Next Steps Examine your hidden costs of inefficient internal reporting

What you will learn in this session XBRL-enabled reporting – Tools

Cuthbertson - CaseWare Furusho - Fujitsu Hoffman - UBmatrix Mueller - Corel Wallis – Hyperion Solutions Zwiebach - Oracle

Technical directions for XBRL International - Technologies Cohen - PricewaterhouseCoopers vun Kannon - KPMG

Live applications – Solutions Sambuichi - Hitachi Snijders - Semansys

Are XBRL and your organization ready for each other? Pryde – KPMG; Panel with E&Y and Microsoft

Improving the quality and timeliness of internal reports

Walter Hamscher (walter@hamscher.com)

Chair, XBRL International Steering Committee

Consultant to PricewaterhouseCoopers