XBRL – Revolutionary Digital Reporting to Publish Financial Information Michael Ohata Director Reporting Standards Microsoft Corporation

Objectives Outline trend that is changing Financial reporting Identify common business information problems that negatively impact reporting and related control cost & effectiveness Define a business architecture that minimizes the risk Describe how open standards achieve lower cost Use these processes to better understand your business

The Undeniable Trend in Financial Reporting

What is XBRL? Extensible Business Reporting Language Reporting standard “Interactive data” Predefined data tags, like a barcode to facilitate comparison

From this…

…to this data

Vision 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, BI & Reporting Automation Compliance & risk management Reporting Efficiency & Electronic Filing Regulatory automated data aggregation & analysis Business Performance Management

Why Microsoft cares about XBRL Customers tell us about internal reporting pains We believe technology can lower cost of managing business information It’s about market collaboration and providing industry feedback We all have an interest in the solution

Common Business Information Problems

A Typical Business Objective “Increase production and throughput by leveraging the large warehouse engine. Tightly integrate critical business functions and align business processes to enhance flexibility, increase efficiency and productivity.” Does this sound familiar to you?

“Leveraging the warehouse engine”

Externa l Financi al Reporti ng Business Operations Interna l Financi al Report ing Investme nt, Lending, Regulati on Processes Economic Policyma king Participants AuditorsTradingPartners InvestorsFinancialPublishers & Data Aggregators Regulators Software Vendors ManagementAccountants CompaniesCentralBanks Corporate Reporting Process Standard Taxonomy (Definition & Access) Common Business Logic Every step along the way people collect, validate and analyze information repeatedly

Common Business Data Integration Challenges Complex, heterogeneous back office environment Lots of data physically managed And we replicate it for specific applications Common business rules/controls live within wide range of disparate applications We use manual data validation processes that are often circular Poor reuse of data definitions & business rules

Many Internal Controls SubsidiaryERP CRM CRM ERP ERP ERP SubsidiaryERP Consolidation Supplemental information Control Control Control Control Control ControlControlControl Control Control Control Controls located with data or supplemental, manual processes InternalControlDocs ManagementReporting

Internal Reporting When you consider Compliance as continual process, we begin to see more clearly the need for better automation Interna l Financi al Financi al Report ing Report ing Externa l Financi al Reporti ng Business Operations Investme nt, Lending, Regulati on Processes Economic Policyma king

Heroic Analytic Processes… Transaction data Multiple departmental Excel spreadsheets Consolidated spreadsheets for management Beyond business data integration challenges…we often drive our businesses to new performance insight ManagementReporting

Lead to Risk of Manual Error Transaction data Multiple departmental Excel spreadsheets Consolidated spreadsheets for management

Business Architecture that Minimizes Risk

Where Do You Want to Be? Technology Financial Reporting

…Observation from CFO.com Performance management is to performance data what ERP is to transaction data: Relevant information, fully integrated providing a single view tailored to the needs of finance & operating executives. Goal: “Common, standardized databases to establish and maintain a single, unimpeachable version of the truth about company operations and performance” From IT, Compliance, and Performance ManagementIT, Compliance, and Performance Management

Business Performance Management Competitive Analysis Risk Management Auditor tools 404 Monitoring Real-time Connection Services Oriented Architecture A “Web service” is a standard communication protocol that can be used by applications to: Publish information Publish information Enable discovery of information Enable discovery of information communicate over platforms using open Internet standards communicate over platforms using open Internet standards Data Business Operations Acquisition Integration External Reports SEC Filings SEC Disclosure Checklist Dept of Commerce Banks Internal Reports Data Data General Ledger Consolidation Drill down

Enterprise Use of SOA General Ledger consolidations Many subsidiary companies Acquisitions Integrating internal systems Language Lack of a standard chart of accounts Real example (Fortune 100 Company) 72 instances of SAP 14 days to consolidate the books 90 employees in G/L consolidations team to load, edit and validate the subsidiary ledger mapping and loading

SOA & Common Taxonomies Transactional & subsidiary dataControlsControl Control Aggregation,Analysis,Viewing ManagementReporting “Wrap & Map” - Standard data definition XML/XBRL Web Services

How Open Standards Achieve Lower Cost

An Analogy for Standards in Business Integration Cargo Containerization: Data Encapsulation Up until the 1960’s Shipping individual pieces of cargo Loaded, packed, arranged and unloaded separately Significant breakage and pilferage Today, Containerization 90% of world trade moves in containers Shipping costs reduced by 70% More reliable and efficient end-to- end transport Enhanced controls

Web Services Integration Reporting System Sales System ERP Integrated Platform Integrated Platform Leverages All Enterprise Assets Captures New Opportunities & Creates Value from Existing Investments Subsidiary Current Technology Approach

So, Why XBRL? Collaborative market effort – 450 member organizations Open standard based on XML Implemented across applications Crosses all industries Designed for extensibility Includes XBRL GL Standardization Calculation Cash = Currency + Deposits Formulas Cash ≥ 0 Contexts US $ FY2006, Budgeted References GAAP I.2.(a) Instructions Ad Hoc disclosures XBRL Item Label CashCashEquivalentsAnd ShortTermInvestments Validation Presentation 現金及び現金等価物 Presentation Cash & Cash Equivalents Technology standard Only one for financial & business reporting

Summary XBRL is here and now Efficient corporate reporting demands better business information integration Internal control discipline drives continuous monitoring and process automation Break-through performance management is about standardizing information