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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
DISCUSSION AGENDA
Intro
Quality
Consequences of poor quality
Taking control / streamlining 'last mile‘
Differentiating features of Disclosure Management
Q&A
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
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
4
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.
PwC
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.”
5
PwC
SIFMA AMF Letter to SEC Requesting Expansion of XBRL Mandate
6
PwC
SIFMA Corporate Actions Forum December 10th, 2012
SIFMA Sponsored
US SEC
BlueMatrix
United Technologies
7
PwC
XBRL – NOT just the US SEC Adoption accelerating around the World
© Gilles Maguet
PwC
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
9
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
10
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
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)
12
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
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.
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
15
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
16
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
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.
18
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.
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)
20
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)
21
22
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.
Q&A
Questions?