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Quality vs. and Control: You Don’t Have to Choose Mike Willis, PwC Raul Varela, Rivet Software Wednesday, December 5, 2012 3:00 4:00 pm EST

Quality and Control

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Page 1: Quality and Control

Quality vs. and Control:

You Don’t Have to Choose

Mike Willis, PwC

Raul Varela, Rivet Software

Wednesday, December 5, 2012

3:00 – 4:00 pm EST

Page 2: Quality and Control

DISCUSSION AGENDA

Intro

Quality

Consequences of poor quality

Taking control / streamlining 'last mile‘

Differentiating features of Disclosure Management

Q&A

Page 3: Quality and Control

POLL QUESTION

To ensure the quality of my XBRL filing, I: (check all that apply)

• Work with an auditing firm

• Use an automated review tool

• Will review hard copies by hand

• Trust my vendor

Page 4: Quality and Control

PwC

Common Errors & Risks

XBRL Common errors that create liability: Incorrect accounting values (amounts are ‘backwards’) Missing disclosures Incorrect or inaccurate accounting concepts Inconsistent or inaccurate descriptions Missing or untimely filing Incorrect or missing calculations

Regulatory and Litigation Risks: Investor Liability Regulatory Actions: - Delayed registration statements - Loss of short form eligibility - Amended filings - Comment Letters - Noncompliance with regulatory requirements Reputational

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NOTE:

Common observations outlined by the Staff at the SEC which can be found on their webpage located here, http://www.sec.gov/spotlight/xbrl/staff-review-observations.shtml.

Page 5: Quality and Control

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Penalties for Inaccuracies (India)

"A random scrutiny of XBRL filing …reveals significant variations in disclosures in published results…” "Such XBRL filings, apart from being misleading, also dilute the effectiveness of XBRL for stakeholders' usage relating to the companies," it said.

"It is unfortunate that professionals have certified the authenticity of such incorrect data, for which they are liable to be penalised.”

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Page 6: Quality and Control

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SIFMA AMF Letter to SEC Requesting Expansion of XBRL Mandate

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PwC

SIFMA Corporate Actions Forum December 10th, 2012

SIFMA Sponsored

US SEC

BlueMatrix

United Technologies

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Page 8: Quality and Control

PwC

XBRL – NOT just the US SEC Adoption accelerating around the World

© Gilles Maguet

Page 9: Quality and Control

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Standard Business Reporting (‘SBR’) Redefining “Convergence”

• Process vs. Principles Convergence

• 25%+ regulatory burden reduction via convergence of disparate territory agencies compliance processes

• SBR Program burden reduction occurring in countries around the world

• Harmonisation/reduction of reported disclosures using IFRS Taxonomy

• Relevant to both public and private companies

• Regulators & business sharing a common language

• Significant implications for territory compliance processes

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Page 10: Quality and Control

PwC

General Benefits of Disclosure Management

• Disclosure Management benefits include:

- Effectiveness and efficiency in the financial close last mile of report assembly and review processes via reduction of manual effort through automation

◦ Report assembly

◦ Report review

◦ Spreadsheet aggregation and analysis

- Enhanced controls

◦ Over edit process and related turn-around time

◦ Automating manual controls

- Enhanced ability to benchmark, analyze and access data

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Page 11: Quality and Control

POLL QUESTION

How big of a concern is loss of control, with regards to turnaround

times, publishing information, etc., to you?

• A great concern

• A concern, but not a priority

• Not really a concern

• Not a concern at all

Page 12: Quality and Control

PwC

Stat

Report Stat

Report

Reports

Consolidation

Processes

Spreadsheet

Aggregation

Business Segment

Systems Feeding

Consolidation

Accounting Records

Reports are created via

a series of access and

rekeying efforts

manually replicating

information contained in

the company accounting

records.

In a typical company

process, there are ‘no’ to

‘very limited’ explicit

connections between

reported disclosures and

company accounting

records.

Board

Report Proxy Press

Release XBRL

Exhibit Form

10K

Typical Reporting Process Last Mile (Manual)

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Page 13: Quality and Control

PwC

Stat

Report Stat

Report

Reports

Consolidation

Processes

Spreadsheet

Aggregation

Business Segment

Systems Feeding

Consolidation

Mapping relationships between

company report writer systems

and the company report are

explicit and access, reuse and

some validation processes are

automated within the built-in

application. These explicit

relationships exist between

source system accounting

records and company report.

Accounting Records

Disclosure Management

Report Writer

Report Writer process controls

are critical and may include:

application access controls;

control over mappings (both

incoming and outgoing); log of

changes; report versioning

controls and audit trail; others.

New Relationships

Board

Report Proxy Press

Release XBRL

Exhibit Form

10K

Disclosure Management – Streamlining the Last Mile

Page 14: Quality and Control

A REAL LIFE EXAMPLE

$1.85B market cap

Oil and Gas Equipment and Services company

Use Crossfire Disclosure Management solution to file

XBRL and EDGAR HTML from a single source.

They utilize an Oracle Financials Data Adapter which

pulls data from their General Ledger system directly into

Crossfire.

They have gained a great deal of efficiency in

streamlining their reporting process.

Page 15: Quality and Control

PwC

• Automated Spreadsheet Assembly

• Automated Report Assembly

• Automated Report Validation

• Automated Narrative Text Generation

• Contextual Review Process

• Automated XBRL Reports

• Automated Benchmarking

• Explicit References

• Collaborative Review Processes

• Virtual Service Center

Disclosure Management: Streamlining the Last Mile

• 25% to 50% cost and time enhancements • Control

Common Process & Control Enhancements

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Page 16: Quality and Control

PwC

Implementation Considerations

• Social process vs. ‘webmaster’

• Assembly automation enabling ‘flow through’ of source content updates

• Automation of analysis and validation rules

• Automation of content development

• Contextual review of disclosures

• Collaborative review of draft reports

• Multiple report presentation alternatives

• Transparency of supporting transaction level information

• Comparative analysis of peer disclosures

• Automated reference links

• Range of reports and professionals impacted

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Page 17: Quality and Control

POLL QUESTION

Do you believe there is value in XBRL?

• Yes, I currently utilize XBRL for business intelligence

• Yes, I currently utilize XBRL to improve my own filings

• Not yet, but I can see how there will be value in the future

• No, and there never will be

Page 18: Quality and Control

PwC

Structured IR Content Enables automation of information relationships

Structured content enables automation of content development and relationships with broad range of relevant supporting content.

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Page 19: Quality and Control

PEER COMPARISONS

$1.7B market cap

REIT

Use Crossfire for Interactive Reporting and another

vendor for SEC filing

The company takes the filed XBRL information from the

SEC of their 17 closest competitors and compares the

results side by side with their results

Every time one of the 17 competitors files a new Q or K -

the peer comparison is automatically updated.

Page 20: Quality and Control

PwC

ROI Considerations

+ License cost of software, dependent on factors including vendor, nature of implementation and number of seats.

+ Implementation costs, using software license cost as an estimate

+ Training time/costs, dependent on implementation approach

- Outsourcing costs for XBRL tagging and related time for "pencils-down" allotments

- Final format document costs including EDGARization fees/ typesetting fees/other printer costs (hard dollar costs for current expenses that could be removed)

- Process enhancement costs (see listing of process enhancements areas)

- Time/cost reduction multiplied by the number of reports assembled manually

- Estimate a time line for increase in the number of reports processed through the Disclosure Management application (not just relevant to quarterly/annual reports)

= Net Benefit/Cost (ROI)

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Page 21: Quality and Control

PwC

Differentiating DM Application Features

• Nature (client server vs. SAAS) – ability to connect to source systems

• Connectivity with full range of information sources (interoperability / consumption)

• Rules management (validation and analytical risk assessments)

• Collaborative workflows and controls (Administration across broadest range of professionals)

• Presentation management (disclosures reusable across broad range of reports)

• Reference management (disclosure relationships w/ policies, models, risks)

• Report Analytical assessments (collaborative nature of risk assessment rules management)

• Support (timely international support and range of languages)

• Technical compliance (with broadest range of technical standards – e.g. iXBRL)

• Taxonomy management (automated vs. manual; multiple vs. single)

• Mapping (wizards that support peer benchmarking / company specific extensions)

• Taxonomy support (timely support for range of taxonomies – e.g. Solvency II)

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This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, [insert legal name of the PwC firm], its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2012. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

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Q&A

Questions?