XBRL – Revolutionary Digital Reporting to Publish Financial Information

XBRL – Revolutionary Digital Reporting to Publish Financial Information

Michael OhataMichael OhataDirector Reporting StandardsDirector Reporting StandardsMicrosoft CorporationMicrosoft Corporation

ObjectivesObjectivesOutline trend that is changing Financial Outline trend that is changing Financial reportingreportingIdentify common business information Identify common business information problems that negatively impact reporting problems that negatively impact reporting and related control cost & effectivenessand related control cost & effectivenessDefine a business architecture that Define a business architecture that minimizes the riskminimizes the riskDescribe how open standards achieve Describe how open standards achieve lower costlower costUse these processes to better understand Use these processes to better understand your businessyour business

The Undeniable Trend in The Undeniable Trend in Financial ReportingFinancial Reporting

What is XBRL?What is XBRL?

Extensible Business Reporting Extensible Business Reporting LanguageLanguage

Reporting standardReporting standard

““Interactive data”Interactive data”

Predefined data tags, like a barcode Predefined data tags, like a barcode to facilitate comparisonto facilitate comparison

From this…From this…

……to this datato this data

Vision for Interactive DataVision for Interactive Data

It should be easy to call up information about any company you choose. You should be able to download it and use it in the personal software of your choice. And you then should be able to easily analyze and compare the data with the same information from other companies. We want to make the numbers derived from financial statements vastly more accurate. And we want to allow companies to communicate with investors on a constant basis.

Chairman Christopher Cox to American Enterprise Institute, May 30, 2006

Market Context: Compliance, Market Context: Compliance, BIBI& Reporting Automation& Reporting Automation

Compliance & risk management

Reporting Efficiency &Reporting Efficiency &Electronic FilingElectronic Filing

Regulatory automated data aggregation &

analysis

Business Performance Management

Why Microsoft cares about Why Microsoft cares about XBRLXBRL

Customers tell us about internal Customers tell us about internal reporting painsreporting pains

We believe technology can lower cost We believe technology can lower cost of managing business informationof managing business information

It’s about market collaboration and It’s about market collaboration and providing industry feedbackproviding industry feedback

We all have an interest in the solutionWe all have an interest in the solution

Common Business Common Business Information ProblemsInformation Problems

A Typical Business A Typical Business ObjectiveObjective

““Increase production and Increase production and throughput by leveraging the throughput by leveraging the large warehouse engine. Tightly large warehouse engine. Tightly integrate critical business integrate critical business functions and align business functions and align business processes to enhance flexibility, processes to enhance flexibility, increase efficiency and increase efficiency and productivity.”productivity.”

Does this sound familiar to you?Does this sound familiar to you?

““Leveraging the Leveraging the warehouse engine”warehouse engine”

External Financial Reporting

BusinessOperations

Internal Financial

Reporting

Investment,Lending,

RegulationProcesses

Economic Policymakin

g

Participants

AuditorsAuditorsTradingTradingPartnersPartners

InvestorsInvestors

FinancialFinancialPublishersPublishers

& Data& DataAggregatorsAggregators

RegulatorsRegulators

Software VendorsSoftware Vendors

ManagementManagementAccountantsAccountants

CompaniesCompanies CentralCentralBanksBanks

Corporate Reporting Corporate Reporting ProcessProcess

Standard Taxonomy(Definition &

Access)

Common Business Logic

Every step along the way people collect, validate Every step along the way people collect, validate and analyze information repeatedlyand analyze information repeatedly

Common Business Data Common Business Data Integration ChallengesIntegration Challenges

Complex, heterogeneous back office Complex, heterogeneous back office environmentenvironment

Lots of data physically managedLots of data physically managed

And we replicate it for specific applicationsAnd we replicate it for specific applications

Common business rules/controls live within Common business rules/controls live within wide range of disparate applicationswide range of disparate applications

We use manual data validation processes We use manual data validation processes that are often circularthat are often circular

Poor reuse of data definitions & business Poor reuse of data definitions & business rules rules

Many Internal ControlsMany Internal Controls

SubsidiarySubsidiaryERPERP

CRMCRM

CRMCRM

ERPERP

ERPERP

ERPERP

SubsidiarySubsidiaryERPERP

ConsolidationConsolidation

Supplemental information

ControlControl

ControlControl

ControlControl

ControlControl

ControlControl

ControlControl

ControlControl

ControlControl

ControlControl

ControlControl

ControlControl

Controls located Controls located with data or with data or

supplemental, supplemental, manual processesmanual processes

InternalInternalControlControl

DocsDocs

ManagementManagementReportingReporting

Internal ReportingInternal Reporting

When you consider Compliance as When you consider Compliance as continual process, we begin to see continual process, we begin to see more clearly the need for better more clearly the need for better automationautomation

InternalInternal FinancialFinancial ReportingReporting

External Financial Reporting

BusinessOperations

Investment,Lending,

RegulationProcesses

Economic

Policymaking

Heroic Analytic Heroic Analytic Processes…Processes…Transaction

dataMultiple

departmental Excel

spreadsheets

Consolidated spreadsheets for

management

Beyond business data integration challenges…Beyond business data integration challenges…we often drive our businesses to new we often drive our businesses to new performance insightperformance insight

ManagementManagementReportingReporting

Lead to Risk of Manual Lead to Risk of Manual ErrorError

Transaction data

Multiple departmental

Excel spreadsheets

Consolidated spreadsheets for

management

Business Architecture that Business Architecture that Minimizes RiskMinimizes Risk

Where Do You Want to Where Do You Want to Be?Be?

TechnologTechnologyy

Financial Financial ReportingReporting

……Observation from Observation from CFO.comCFO.comPerformance management is to performance Performance management is to performance data what ERP is to transaction data: data what ERP is to transaction data: Relevant information, fully integrated Relevant information, fully integrated providing a single view tailored to the needs providing a single view tailored to the needs of finance & operating executives.of finance & operating executives.

Goal: “Common, standardized databases to Goal: “Common, standardized databases to establish and maintain a single, unimpeachable establish and maintain a single, unimpeachable

version of the truth about company operations and version of the truth about company operations and performance”performance”

From IT, Compliance, and Performance Management

Business Business Performance Performance ManagementManagement

Competitive Competitive AnalysisAnalysis

Risk ManagementRisk Management

Auditor toolsAuditor tools

404 Monitoring404 Monitoring

Real-time Real-time ConnectionConnection

Services Oriented Services Oriented ArchitectureArchitectureA “Web service” is a standard A “Web service” is a standard

communication protocol that can communication protocol that can be used by applications to: be used by applications to:

Publish informationPublish information Enable discovery of information Enable discovery of information communicate over platforms communicate over platforms

using open Internet standardsusing open Internet standards

Data

Business Business OperationsOperations

Acquisition Acquisition IntegratioIntegrationn

ExternaExternal l

ReportsReports

SEC SEC FilingsFilings

SEC SEC DisclosurDisclosure e ChecklistChecklist

Dept of Dept of CommercCommercee

BanksBanks

Internal Internal ReportsReports

DataData

Data

General General Ledger Ledger

ConsolidationConsolidation

General General Ledger Ledger

ConsolidationConsolidation

Drill Drill downdown

Enterprise Use of SOAEnterprise Use of SOA

General Ledger consolidationsGeneral Ledger consolidationsMany subsidiary companiesMany subsidiary companies

AcquisitionsAcquisitions

Integrating internal systemsIntegrating internal systemsLanguageLanguage

Lack of a standard chart of accountsLack of a standard chart of accounts

Real example (Fortune 100 Company)Real example (Fortune 100 Company)72 instances of SAP72 instances of SAP

14 days to consolidate the books14 days to consolidate the books

90 employees in G/L consolidations team to load, edit 90 employees in G/L consolidations team to load, edit and validate the subsidiary ledger mapping and loadingand validate the subsidiary ledger mapping and loading

SOA & Common SOA & Common TaxonomiesTaxonomies

Transactional & subsidiary data

ControlsControls

ControlControl

ControlControl

AggregatioAggregation,n,

Analysis,Analysis,ViewingViewing

ManagementManagementReportingReporting

“Wrap & Map” - Standard data

definition XML/XBRLXML/XBRL

Web Services

How Open Standards How Open Standards Achieve Lower CostAchieve Lower Cost

An Analogy for Standards in An Analogy for Standards in Business IntegrationBusiness IntegrationCargo Containerization: Data Cargo Containerization: Data EncapsulationEncapsulationUp until the 1960’sUp until the 1960’s

Shipping individual pieces of Shipping individual pieces of cargocargo

Loaded, packed, arranged and Loaded, packed, arranged and unloaded separatelyunloaded separately

Significant breakage and Significant breakage and pilferagepilferage

Today, ContainerizationToday, Containerization90% of world trade moves in 90% of world trade moves in containerscontainers

Shipping costs reduced by 70%Shipping costs reduced by 70%

More reliable and efficient end-More reliable and efficient end-to-end transportto-end transport

Enhanced controlsEnhanced controls

Web ServicesWeb ServicesIntegrationIntegration

Reporting Reporting SystemSystem

Sales SystemSales System

ERPERP

Integrated PlatformIntegrated Platform

Leverages All Leverages All Enterprise Enterprise

AssetsAssets

Captures New Captures New Opportunities Opportunities

& Creates & Creates Value from Value from

Existing Existing InvestmentsInvestments

SubsidiarySubsidiary

Current Technology Current Technology ApproachApproach

So, Why XBRL?So, Why XBRL?

Collaborative market effort Collaborative market effort – 450 member – 450 member organizationsorganizations

Open standard based on Open standard based on XMLXML

Implemented across Implemented across applicationsapplications

Crosses all industriesCrosses all industries

Designed for extensibilityDesigned for extensibility

Includes XBRL GLIncludes XBRL GL

Standardization

CalculationCash = Currency + Deposits

CalculationCash = Currency + Deposits

FormulasCash ≥ 0

FormulasCash ≥ 0

ContextsUS $

FY2006, Budgeted

ContextsUS $

FY2006, Budgeted

ReferencesGAAP I.2.(a) Instructions

Ad Hoc disclosures

ReferencesGAAP I.2.(a) Instructions

Ad Hoc disclosures

XBRLItem

XBRLItem

LabelCashCashEquivalentsAnd

ShortTermInvestments

LabelCashCashEquivalentsAnd

ShortTermInvestments

Validation

Presentation現金及び現金等価物

Presentation現金及び現金等価物

PresentationCash & Cash Equivalents

PresentationCash & Cash Equivalents

Technology standard Only one for financial & business reporting

SummarySummary

XBRL is here and nowXBRL is here and now

Efficient corporate reporting Efficient corporate reporting demands better business information demands better business information integrationintegration

Internal control discipline drives Internal control discipline drives continuous monitoring and process continuous monitoring and process automationautomation

Break-through performance Break-through performance management is about standardizing management is about standardizing information information