Advances in Business and Financial Reporting

Molly Cotter, CA

Acting Manager, External Financial Reporting, Emera Incorporated

Mike Willis, CPA

Partner, PwC; Founding Chairman XBRL International

Agenda

• Business Reporting – ‘Standardization’

• Where is Extensible Business Reporting Language

(XBRL) required?

• How do you comply? A case study

• How does it impact reporting processes & controls?

• Who is Using XBRL? (and why?)

• Key considerations when going to XBRL

• Questions

2

What is ‘Standardization’ as it relates

to business reporting?

3

Polling question - What software application is most

commonly used by companies for reporting?

(Please select the most appropriate answer)

a) SAP

b) Oracle

c) Hyperion

d) BCP

e) IBM Cognos

f) Microsoft Dynamics

g) Office

4

Standardization - example

• 1974

– Average Grocery Store had 9000 SKUs

– Chewing Gum sale in Ohio changed that forever

• Today, UPC Implications

– $17B Annual Savings in grocery stores alone

– Average Grocery Store over 35,000 SKUs

– Greater controls over assortment, inventory levels and pricing

– Scanning and self check out are routine

– Predictive Marketing firms (3 Fortune 500 companies) monitoring

your purchases and influencing what you buy and when

5

Business Reporting Supply Chain Processes are repeating

6

External

Business

Reporting

Business

Operations

Internal

Business

Reporting

Investment,

Lending,

Regulation

Processes Economic

Policymaking

Participants

Auditors Trading

Partners

Investors

Financial

Publishers

and Data

Aggregators

Regulators

Software Vendors and Service Providers

Management

Accountants

Companies Central

Banks

XBRL

Global Ledger

Framework

XBRL

External Reporting

Participants

XBRL - More Than Tagging Business

Information

– Multi-dimensional

business and financial

data representations

– Flexibility of business

reporting vocabularies

(i.e. taxonomies)

– Mathematical

relationships between

concepts

– Flexibility about how to

present information to

users

Calculations Cash = Currency + Deposits

Presentation Cash & Cash Equivalents

Formulas Cash ≥ 0

References GAAP I.2.(a)

CoA 1100

Definitions

Related to Liquid Assets

Contexts US $X

FY2009

Budgeted

XBRL

<cash>

“200”

Label Cash in Bank

7

Where is XBRL required?

8

XBRL in Canada

• All cross-listed companies using US GAAP have had to

file with the SEC

• All cross-listed companies (about 375) using IFRS

technically required to file with SEC

• But being held up because IFRS Taxonomy not

approved by SEC

• CSA has deferred XBRL for other companies

• Deposit Insurance Corporation of Ontario (DICO)

requires all credit unions to file in XBRL

9

XBRL Projects Adoption accelerating around the world

•

KEY: -SBR = “Standard Business Reporting” - burden reduction effort converging disparate agencies

compliance processes via IFRS XBRL Taxonomy.

- Bold = XBRL Mandate(s) in production

- Black = In development; Voluntary filing

-Underlined = Audit of XBRL Reports Mandated

G20 Outside the G20

Argentina

Australia (SBR)

Brazil (SBR)

Canada (SBR)

China (SBR)

France

Germany

India (SBR)

Indonesia

Italy

Japan (SBR)

Mexico

Russia

Saudi Arabia South Africa

Korea

Turkey

United Kingdom (SBR)

United States European Union

United Arab

Emirates

Belgium (SBR)

Bermuda Denmark

Finland

Hong Kong

Ireland

Israel

Luxembourg Malaysia

Netherlands (SBR)

Poland (SBR)

Romania

Singapore (SBR)

Thailand (SBR)

Taiwan (SBR)

Spain Sweden

Switzerland

Others

10

Taxonomies – Expanding Applications

• US GAAP

• IFRS

• Basel II

• Solvency II

• XBRL Global Ledger

• GRC-XML

• Global Reporting Initiative

• World Intellectual Capital Initiative

• Carbon Disclosure Project Taxonomy

11

Financial information required to be tagged

by US SEC XBRL Mandate

• Commenced in 2009 with a 3 year transition period

• Face of financial statements (all periods presented)

• Financial statement footnote transitional provisions:

- Year 1 - “Block” tagging of footnotes and financial statement schedules

is permitted

- Year 2 and beyond – Footnote/schedule tagging must include:

• Each significant accounting policy, wherever located (level ii)

• Each table within a footnote (level iii)

• Each quantitative amount within a footnote with selective carve out (level iv)

• Tagging of additional narrative footnote disclosures is permitted but

not required

• Tagging of MD&A is specifically prohibited at this time

12

SEC Staff Observations on XBRL

submissions

• SEC Staff Observations (from Dec 13, 2011 and June 15, 2011)

• Format of the Statements

• Negative Values

• Extending

• Completeness of tagging

• Modeling of Level 4 tagging

• Units, Data types, “footnotes” and other metadata

components

• Calculation linkbases

• Regulation S-X Article 12

13

A CASE STUDY BY EMERA INCORPORATED

How do you comply?

14

http://xbrl.us/Learn/Pages/catalog2.aspx

Implementation Options

Implementation options Some potential vendors

“Bolt-On” – Outsourcing Bowne, RR Donnelley, Merrill, EDGARizerX, BusinessWire, Accelus, etc.

“Bolt-On” – In-house Rivet Software Crossfire, Fujitsu, Corefilings, Accelus, etc.

“Built-in” – Report writer/consolidation

Caseware, IBM Cognos FSR, Trintech Unity, SAP Disclosure Management, Oracle Disclosure Management, Tagetik, Rivet Software Crossfire, Webfilings, etc.

“Embedded” – Ledgers & Sub-ledgers Altova (MapForce), Stylus (Studio), Fujitsu (XWand), Hitachi, Rivet Software, all ERP vendors, etc.

15

Emera Case Study

• Initial year – ‘block text’ tagging

• Outsourced to a third party printer

• Pros:

– Expertise and Risk Mitigation

– Capacity Management

• Cons:

– Company Knowledge

– Loss of the opportunity to develop in-house expertise

16

How does it impact reporting

processes & controls?

17

Typical Manual Assembly/Review

Processes

ERP

Consolidation

Supplemental Data

F/S in Word ERP

ERP

F/S in HTML

F/S in XBRL

Outsourced and Bolt-on approaches

1. Linear Document Review

2. Distributed Document Review

3. Manual Assembly via two processes

4. Manual Spreadsheet Aggregation

5. Manual Queries of sub-ledgers

Review and Check Review and

Check

4

1 2

3

5

Regulator

Common Manual ‘Bolt-on’ approach adds cost/time

18

Built-in Enables Enhanced Processes

ERP

Consolidation

Supplemental Data

ERP

ERP

Regulator

1. Contextual Review

2. Collaborative Review

3. Automated Assembly via a

single process

4. Automated Aggregation

5. Automated Queries of sub-ledgers

4 5

Report

Writer

F/S in XBRL,

Word, PDF

3 1 2

25% to 50%+ cost/time enhancements

Applying standards earlier enables streamlined processes

19

US Registrants Using ‘Built-In’

Solutions

7 13 17 27 72 103 128 180

533

1005

2108

Companies

Data from XBRL Cloud (https://edgardashboard.xbrlcloud.com/edgar-dashboard/dashboard.do)

20

Polling question - Disclosure Management

applications target which company common

process area:

(Please select the most appropriate answer)

a) Consolidation of disclosures found in company financial

statements

b) Disclosures relevant to Business Intelligence

Dashboards

c) Manual assembly and review processes

d) Management of information relevant to sustainability

reporting

e) Internal audit reporting assessments

21

ROI Considerations

Costs:

+ License cost of software, dependent on factors including vendor, nature of

implementation and number of seats.

+ Implementation costs, use software license cost as an estimate

+ Training time/costs, dependent on implementation approach

Benefits:

- 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)

22

Some Relevant Vendors and Tools

“Built-in”

– Altova MapForce

– Caseware

– Corefilings Seahorse

– ExpressFiler

– IBM Cognos FSR

– Oracle Disclosure Manager

– Rivet Crossfire Controller

– SAP Disclosure Management

– Tagetik

– Trintech XFR

– Webfilings

Analytical • Arelle • Corefiling Magnify • Fujitsu Interstage XWand • XBRLCloud Benchmarking • XBRL US Consistency Suite

http://xbrl.us/Learn/Pages/catalog2.aspx and http://xbrl.us/Learn/Pages/ToolsAndServices.aspx

23

Redefining “Convergence”

• Standard Business Reporting

(‘SBR’)

– 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

24

Polling question: What is the primary

objective of Standard Business Reporting

Projects?

(Please select the most appropriate answer)

a) Converge compliance processes

b) Reduce corporate reporting burden

c) Implement IFRS across all agencies

d) Mandate XBRL for reporting

e) Collaborate with other country Finance

Agencies

25

Who is using XBRL? and Why?

26

Consortium of buy-side and sell-

side firms that has established

an open standard for

investment and financial

research.

MicroStrategy Bank Performance iPhone App

XBRL US EDGAR Viewer

BlueMatrix Analyst Suite

Microsoft Investor

Relations SEC Filings

page contains information

and links to

statements filed with the

SEC in XBRL format.

US SEC Expands

Analytical Capabilities

“The U.S. Securities and Exchange Commission is updating the technology it uses to understand operations at the financial firms it regulates and to catch wrongdoing,” - SEC Chairman Mary Schapiro.

Examples of XBRL-enabled analysts

applications

9wsearch.com

27

Why analysts use XBRL

– Traditional data sources (paper, html) are

expensive and time consuming to access.

– Proprietary databases (based on parsing of

traditional data sources) are expensive to produce,

limited in scope, (often excluding footnotes), and

introduce parsing errors.

• Note disclosures are limited to non-existent

– XBRL enhances: speed, accuracy, completeness

and cost effectiveness of access to data.

– Company has limited insights on analyst use of

company disclosures or analytical drivers; social

analytical platforms provide a collaborative model

Lower cost and time to access, reuse, analyze, report and act on financial data.

28

Key considerations when going to XBRL

29

Next Steps

• Develop understanding of new compliance requirements

• Use analytical tools to enhance review effectiveness

• Assess a “Built-in” (Disclosure Management) implementation

• Select application best suited to your company situation

• Consider process & control implementation implications

• Conduct training and change management across broad team

members

• Plan for an evolutionary application to broad range of reports &

processes

• Develop an understanding of SBR & statutory reporting changes

30

Tips & Tricks

• Start early

• Supply chain standardization rather than a compliance

requirement

• Be aware of other country requirements when choosing

your implementation approach

• Consider process benefit implications

31

Other Resources

• Disclosure Management: Streamlining the Last Mile (PwC)

• CFO Briefing – Transition to XBRL (CICA/CPRB)

• United Technologies Corporation – “ROI on XBRL” (FSR implementation)

• eBay - eBay Files 10-K 20 Days Faster (Webfilings implementation)

• SAP – SAP’s Journey: Our Case for XBRL (SAP DM implementation)

• Fujitsu - How XBRL Transformed Fujitsu's Internal Financial Reporting

Platform

• Wacoal – Breathing New Life into Old Systems with XBRL GL

• MACPA – XBRL Project (by Tom Hood – college intern)

• ‘Making Sense of XBRL in the US and the UK’

• FEI Magazine Article: “The Time is Right for Standard Business Reporting”

• FEI Magazine Article: “Benefits of Comprehensive Integrated Reporting”

• CICA XBRL webpage

• XBRL / CICA contact – jerry.trites@cica.ca

32

XBRL Sites

• XBRL CA

• XBRL International

• XBRL US

• Corporate Actions

• Case Studies

• Wikipedia XBRL pages

• US SEC XBRL

• XBRL Global Ledger Project Nunavut

33

Questions?

34