The Next Technology Revolution XML XBRL Rhode Island Society of Certified Public Accountants May 17, 2001 Neal Hannon and Saeed Roohani XBRL Educational Resource Center At Bryant College XBRL Education Co-Chair E-Mail: xbrl@bryant.edu Phone: 401.232.6195

Today’s Objectives Overview of XML & XBRL Show you how this technology makes doing E-Business: Faster Cheaper Better Conclusion

Note see next couple of slides, which are hidden to get history of the problem. The point that this makes is: Accounting is accounting and the systems that we carry have been doing that for around twenty years, we want To take accounting to the next level and “think outside the box – using the systems to be proactive an help to Manage business better – The CEO wants timely information that he/she can use (reports, digital dashboard, OLAP) Modified from puzzles appearing in: Pumping Ions, Tom Wujec, Doubleday and Company, Inc., Garden City, New York, 1988, Page 117 The Art of Creative Thinking, Gerard I. Nierberg, Barnes & Noble Books, New York, 1982, Page 72 Creative Thinking in the Decision and Management Sciences, James R. Evans, Southwestern, Cincinnati, 1991, Page 49 Find the best solution to connect the nine points together with no more than four straight lines without lifting your writing instrument.

What assumptions are you making?

If you do not assume that you cannot extend your lines beyond the imaginary square formed by the box the puzzle becomes easier to solve.

was born 144 years ago – 10th April 1857 Henry Dudeney was born 144 years ago – 10th April 1857 . Find out more at: http://www-history.mcs.st-and.ac.uk/history/Mathematicians/Dudeney.html Henry Dudeney learnt to play chess at a young age and became interested in chess problems. From the age of nine he was composing problems and puzzles which he published in a local paper. Although he only had a basic education, he had a particular interest in mathematics and studied mathematics and its history in his spare time. Dudeney worked as a clerk in the Civil Service from the age of 13 but continued to study mathematics and chess. He began to write articles for magazines and joined a group of authors which included Arthur Conan Doyle. He was doing well publishing mathematical puzzles under the pseudonym 'Sphinx'. In 1884 Dudeney married and his wife, who wrote full length novels which proved popular helped made the family very well off financially. Sam Loyd started sending his puzzles to England in 1893 and a correspondence started between him and Dudeney. The two were the main creators of mathematical puzzles and recreations of their day and it was natural that they should exchange ideas. Of the two Dudeney showed the more subtle mathematical skills. He sent a large number of his puzzles to Loyd and became very upset when Loyd began to publish them under his own name. In [4] Newing describes how one of Dudeney's daughters:- ... recalled her father raging and seething with anger to such an extent that she was very frightened and, thereafter, equated Sam Loyd with the devil. Dudeney contributed to the Strand Magazine for over 30 years and his very popular collection of mathematical puzzles Modern Puzzles was published in 1926. After Dudeney's death his wife helped edit a collection of his puzzles Puzzles and Curious Problems (1931) and later on she again helped edit a second collection A Puzzle Mine. References [1] and [2] show that Dudeney's puzzles are still of interest to many mathematicians. In [1] a generalisation of Problem 229 in H E Dudeney's 536 puzzles and curious problems is discussed. In [2] the following problem of Dudeney posed first in 1905 and appearing in Amusements in mathematics (1915) is discussed. Is it possible to seat n people at a round table on (n - 1)(n - 2)/2 occasions so that each person has the same pair of neighbors exactly once. A proof is given in [2] for n even, but the case of n odd still appears to be open. Article by: J J O'Connor and E F Robertson Articles: C J Bouwkamp, On Dudeney's puzzle 229 of blocks and squares, Nieuw Arch. Wisk. (4) 4 (3) (1986), 207-223. M Kobayashi, Kiyasu-Zen'iti and G Nakamura, A solution of Dudeney's round table problem for an even number of people, J. Combin. Theory Ser. A 63 (1) (1993), 26-42. A Newing, The life and work of H E Dudeney, Mathematical Spectrum 21 (1988-89), 37-44. A Newing, Henry Ernest Dudeney Britain's greatest puzzlist, in R K Guy and R E Woodrow (eds), The Lighter Side of Mathematics (Washington, 1994), 294-301. Dudeney is best known for his publications of mathematical problems and pastimes, some of which provoked serious mathematical research

“Everything “that can be invented “has been invented.” Charles H. Duell Commissioner of U.S. Office of Patents, urging President William McKinley to abolish his office, 1899

Don’t assume that the lines must pass through the center of the dots.

Don’t assume that the line must be thin.

Just to prove I can do it with two lines.

Don’t assume that the paper must be flat.

If you rip the paper into nine segments, you can stack them and poke your point through all at once.

Don’t assume that you cannot crease the paper.

Don’t assume that the lines cannot extend beyond the edge of the paper.

Don’t assume that you cannot rip the paper.

Is There A Problem? From Evansville Courier and Press

Let’s move up the Value Chain Transactions Data Information Knowledge Decisions Transactions Data Information Knowledge Decisions Transactions Data Information Knowledge Decisions Transactions Data Information Knowledge Decisions

Hg Content—without Context Searching for the word “Mercury” on the Web can provide search results such as-- Hg

47, 000+ hits, No Help

Evolution to Web Services Program the Web Technology Innovation Browse the Web Web Services Web Pages Text Files Automation FTP, E-Mail, Gopher Presentation Connectivity TCP/IP HTML XML

XML XML stands for: eXtensible Markup Language Universally accepted method of exchanging information

eXtensible Markup Language ……is a meta markup language the World Wide Web Consortium (W3C) considers a universal standard for describing both structured data and the behavior of applications that process the language.

What Is XML? “XML is a platform-independent, self-describing, expandable, standard data exchange format

XML is Platform Independent Windows Unix Macintosh Mainframe Linux

XML is Self-Describing Example: <DATE>July 26, 1998</DATE> Describes the information, not the presentation Format neutral

XML is Expandable Whereas HTML has a fixed set of tags <H1>, <B>, <PRE> XML lets you create your own tags <sugary-substance> <Shakespearean-character> <cash-equivalent>

How does it work? XML gives meaning to information through the use of tags <Customer> <Name>Saeed Roohani</Name> <Company>Bryant College<Company> <Title>Chair, Accounting</Title> <Age>29</Age> </Customer> Caution.. …Just because something is <tagged>.. Does not mean it is accurate?

Industry Specific Vocabularies Company Specific Vocabulary The XML Puzzle Industry Specific Vocabularies XML Document Company Specific Vocabulary Core Schema Transformation Tools

How XML Works How XML Works Improves the way companies -- and applications -- share information Enjoys strong industry and vendor support

What is ‘XML’? What XML is Not XML is a Tool Not a religion. Not the solution to all world problems. Not a solution for all electronic commerce problems. Not a solution to all legal-technology problems. XML is a Tool XML is a Really Cool (Powerful) Tool! Like all tools, XML can be used wisely and unwisely.

Why is XML so Important? Portable Vendor neutral Readable data format More flexible and easier to use than EDI All major software products are becoming “XML” enabled Defacto standards for data exchange Enabling new levels of interoperability

XML Widely expected to reduce cost of publishing to the Net by as much as 50%. And by next year … Gartner Group prediction 70% of all B2B transactions executed on the Web will be done using XML.

Who defines the tags? Tags are defined by industry consortiums Each industry’s standard tags are commonly referred to as a taxonomy

<RECORD-LABEL> “Content in Context” (Industry-specific) Auto Industry <CAR-MODEL> Chemical Industry <SYMBOL> Publishing or Mythology <GOD> Music Industry <RECORD-LABEL> Aerospace <PROGRAM> Astronomy <PLANET>

Who’s Building Taxonomies?

Defines Tags

XBRL International is gaining strength XBRL activities occurring in— United States Canada Australia China & Hong Kong Japan Malaysia New Zealand Singapore Taiwan Germany India Ireland Netherlands Nordic Federation (Denmark, Norway, Sweden) South Africa Spain Switzerland United Kingdom And on a global level through the— International Accounting Standards Council International Press Telecommunications Council International Standards Organization

XBRL International is gaining strength On a Global level through the— International Accounting Standards Council International Press Telecommunications Council International Standards Organization On a Country Level: United States Canada Australia China & Hong Kong Japan Malaysia New Zealand Singapore Taiwan Germany India Ireland Netherlands Nordic Federation (Denmark, Norway, Sweden) South Africa Spain Switzerland United Kingdom

How we are organized – US Jurisdictional Working Group Chair Communications Christy Reichhelm (Microsoft) Domain Sergio de la Fe (KPMG) Education Neal Hannon (IMA, Bryant College) Jenia Gorfunkel (S&P) Liaison Zach Coffin (KPMG) Liv Watson (Edgar Online Inc) Specification David Vun Kannon (KPMG) Luther Hampton (e-Numerate) Strategy Louis Matherne (AICPA) Mike Willis (PwC) Tools Eric E. Cohen (PwC) Web site Geni Whitehouse (Navision) Process Mike Willis (PWC) Object Gary Gannon

XBRL Impact "The explosive growth of the Internet is not only changing the way companies conduct their business, it also promises to forever alter the way they communicate business performance.” - CFO Magazine, February 2000

XBRL Documents XBRL for Financial Statements XBRL for General Ledger XBRL for Journal Entry Reporting XBRL for Credit Reporting XBRL for Performance Press Releases XBRL for Risk Reporting XBRL for Regulatory Filings XBRL for Tax Filings XBRL for Assurance Schedules XBRL for Authoritative Literature XBRL for “Business” Reporting

Who’s Embracing XML now? Software developers Using XML as the core technology for new products Database developers Building XML support into their products. Industry groups Deciding how information should be shared. Organizations Investigating how to tie their inter and intra company processes together. XML is so simple, non-programmers can put their arms around it and embrace it, much to the disdain of the programming community

XBRL Support “I would like to see you develop valuation models that result in consistent, comparable and fair values of assets and liabilities. I would like to see you hone specific, but plain English definitions for the types of information you believe should be included in public disclosure. I would like to see you take your XBRL project a step further, providing account classifications for companies in common industries. In short, I challenge you to turn all of this data into meaningful information for investors.” - Arthur Levitt, Chairman, U.S. Securities & Exchange Commission October 24, 2000, at the Fall Council of the AICPA (Las Vegas, Nevada)

XML for Financial Reporting Enables a dramatic improvement in the processing of financial reports XBRL documents can be— Prepared efficiently Exchanged reliably Published more easily Analyzed quickly Retrieved by investors simply to enable smarter investments Standard-based electronic language for financial information, reporting & analysis. XBRL

Benefits XBRL is: NOT a new accounting standards but enhances the distribution and usability of existing financial statement information Enabler and an extension for relational database functionality for all financial statement information

Problems XBRL Addresses Ineffective communication to investors Inefficient aggregation and analysis Inefficient creation of financial statements 1. When financial reports are hard to interpret, to analyze and to compare, investors perceive greater investment risk and become more reliant on secondary (perhaps unreliable) sources. 2. Investors, auditors, tax preparers, regulators, and all users of financial information re-enter data. Why? 3. Using formats like Word, HTML, Acrobat, etc. means using tools generalized for any document.

Why XBRL ? Enable business reporting that leverages the Internet & XML Effective access and analysis of business reports Improve corporate communications with stakeholders

Process Benefits: Lowering Financial Reporting Cost Who benefits Process Benefits: Lowering Financial Reporting Cost Today’s external reporting processes Rework and delay Ad hoc and non repeatable No path forward Printed Financials Regulatory Filings Web Site Accounting System Explanatory Text Tax Return Third Party Information Trade Filings

Process Benefits: Lowering Financial Reporting Cost Who benefits Process Benefits: Lowering Financial Reporting Cost Common interchange format and storage is good information management practice Reduces redundancies & discrepancies Repeatable processes using tools A platform for continuous reporting Printed Financials XBRL Documents Regulatory Filings Web Site Accounting System Explanatory Text Tax Return Third Party Information Trade Filings

XBRL: Interoperability & Multiple Uses G/L Package ERP US GAAP Financial Statement In English XBRL US GAAP Financial Statement In Dutch XBRL Custom Developed Systems US GAAP Financial Statement to the Web US GAAP Financial Statement to Print US GAAP Financial Statement to Cell Phone Other Sources of Information XBRL Other Sources of Information Other Sources of Information

XBRL: Interoperability & Multiple Uses G/L Package ERP US GAAP Financial Statement XBRL XBRL Investors & Creditors News Agencies And Others Government EDGAR Filing XBRL Custom Developed Systems Tax Filing Bank Filing Press Release Other Sources of Information XBRL Other Sources of Information Other Sources of Information

Once Every Event is tagged in XBRL… G/L Package ERP IAS Financial Statement in German XBRL XBRL Investors & Creditors News Agencies And Others Government US GAAP Financial Statement In English XBRL Custom Developed Systems French Tax Filing Canadian Banking Filing EDGAR 10k line item via Cell Phone Other Sources of Information XBRL Other Sources of Information Other Sources of Information

XBRL Working Model: Planned Specifications XBRL for G/L Journal Entry Reporting XBRL for Financial Statements XBRL for EDGAR Filings Business Operations Internal Financial Reporting External Financial Reporting Investment and Lending Analysis Processes XBRL for Business Event Reporting XBRL for Tax Filings Companies Financial Publishers and Data Aggregators Investors Participants Trading Partners Management Accountants Auditors Regulators Software Vendors

XBRL: not a Transaction Protocol What it is XBRL: not a Transaction Protocol XBRL is merely a format to serialize complex, structured financial data: e.g., statements, G/Ls. Therefore, it cannot replace OFX, ebXML, ANSI X.12 Trans Set 821, OMG G/L Spec, ... Future message sets in those protocols could include XBRL tagged data if they need to send financial statements in the message body. XBRL provides a framework and an AICPA approved vocabulary that can be extended to many other reporting frameworks.

XBRL: not an accounting standard Means of communicating Current GAAP Current practice Flexible standard Future standards Future general practice

XBRL Impact "Coming down the road are standards like XML and XBRL that take data handling a major step forward from HTML, the current web standard. With these new standards, plus those for accounting, it will be possible to scan a universe of corporate data across the web and extract, say, the chairman's report for all companies with a certain market cap, EBITDA, and gearing. …

XBRL: A Fragment of a Raw Data Raw Data in Spreadsheet… Company Financial Statement Line Item Label Year Value Coca Cola Co. Balance Sheet CurrentAssets.CashandCashEquivalents 1999 1611 1998 1648 Same Raw Data in XML (XBRL) Format <group> <group type="CurrentAssets.CashandCashEquivalents"> <item period="1999">$1,611 </item> <item period="1998">$1,648 </item> </group>

What software ‘sees’ is the differentiator and drives benefits (here is an example)

Importance of Reporting “ …[W]hat excites the CEO is the ability to know what the business is doing at any given point in time, react quickly to market shifts and competitive threats and remain in tight control while empowering employees to make informed decisions more quickly. ” Year End Earnings Release Call August 10, 1999 John Chambers Cisco CEO

Best Practice “ The Virtual Close … has, in my opinion, just as much impact on a company’s future success or lack thereof as the well-published e-commerce area. ” John Chambers Cisco CEO Year End Earnings Release Call August 10, 1999

XBRL Impact “ … If Europe moves quickly to take up these standards, it could give them an attractive lead in the race to accessible and comparative key data that would stimulate investor interest. It would undoubtedly spawn a plethora of research tools that would be useful to both private and professional investors.” - Investors Chronicle, August 9, 2000

XBRL and the Emergence of ‘e-Standards’ E-Standards are fundamental HTML is the standard that enabled the web’s first ‘Big Step’ XML is the web’s next ‘Big Step’ Over 200 XML-Based Specifications and Protocols exist, including— RosettaNet – computer company supply chain and trading webs OBI - Open Buying on the Internet - retail e-commerce FpML - Financial Products (Derivatives, Swaps, FX) ACORD XML - Insurance industry information exchange standards derived from EDI. UN/CEFAC = EBXML XBRL is uniquely focused on financial reporting

Standard .orgs (reporting vs ‘e’) Accounting / Auditing Reporting ‘e-Business’ ASB IASC FASB IFAC SEC Territory Institutes W3C OASIS;UN/CEFACT (ebxml) xml.org RosettaNet ACORD OASIS - Organization for the Advancement of Structured Information Standards. CPAs participate / lead in these What about these?

The range of what is under development today………... “Horizontals” (Infrastructure) there are others….. HR XBRL is uniquely focused on business reporting CRM Etc. ACORD FpML CHEMX RosettaNet ANX “Verticals” (Industry Supply Chains) there are others…….

XBRL Adds Reporting to E-Commerce Investors Aggregators Regulators Creditors Lenders Tax Website One way BUSINESS ERP G/L Packages CRM 2-way Transaction Creation Suppliers Customers Orders A/P Delivery Orders A/R Delivery

XBRL Adds Reporting to E-Commerce BUSINESS Investors Aggregators Regulators Creditors Lenders Tax Website Transaction Creation ERP G/L Packages CRM Orders A/P Delivery Customers A/R 2-way Suppliers One way XBRL BUSINESS REPORTING (e-)Commerce OTHER XML INITIATIVES

Key XBRL Components XBRL / XML Specification (XBRL.org) XBRL - What Key XBRL Components XBRL / XML Specification (XBRL.org) Global architecture/technology XBRL hierarchical vocabulary (jurisdiction/industry) Dictionary of terms by jurisdiction/industry sector Style Sheets (preparer) XBRL enabled tools (market)

Key to our Success Market driven model Start simple, be inclusive Broad supply chain participation Members support XBRL Members do not compete on the “framework” Build structure & systems to support open community & market development

Steps in Technology Acceptance Simplification/Tools Taxonomy Visionaries

Financial Institutions—and their Users SMALL BUSINESS provides FINANCIAL INSTITUTION with their information in XBRL and receives loan approval in less than a day instead of two days—or two weeks. Average Time for Loan Processing—1.75 days <10% 90% + time spent on Mechanics Value-added Analysis and Decision-making? Mechanics With XBRL? More Time for Analysis => Better Analysis => Less Risk Company uses XBRL to standardize financial info that supports the assessment of their portfolio of risk (that arises from dynamic pricing, M&A, etc.) Or Mechanics Analysis Mechanics Analysis Mechanics Analysis Mechanics Analysis Process more loans in the same amount of time

XBRL Working Model: Supply Chain & Beneficiaries Today XBRL for Financial Statements Internal External Investment Processes Business Processes Financial Financial and Lending Operations Reporting Reporting Analysis Financial Publishers Companies Investors Participants Participants and Data Aggregators Trading Management Auditors Regulators Partners Accountants Software Vendors

Benefits to Today's Users 1. Reduce cost of analyzing and reporting financial information 2. Increase speed and efficiency of business decisions Enhance the distribution and access of existing financial statement information More readily exchanged Increase and enhance analysis

Benefits 1. Reduce cost of analyzing and reporting financial information 2. Increase the speed and efficiency of business decisions 3. Enhance the distribution and usability of existing financial statement information

Example: Cost Reduction International Subsidiaries: Large multi-national corporation uses XBRL to quickly roll–up, analyze and publish the financial statements of numerous subsidiaries— in different countries with different languages using different GAAP on different computer systems

Benefits 2. Increase the speed and efficiency of business decisions 1. Reduce cost of analyzing and reporting financial information 2. Increase the speed and efficiency of business decisions 3. Enhance the distribution and usability of existing financial statement information

Example: Efficient Decisions Major mutual fund company feeds XBRL-ized information to customers to differentiate their funds as more objective and reliable investments An investor uses XBRL to compare the financials for a range of companies— Belonging to different revenue levels Located within an industry sector Along multiple analytical criteria Company uses XBRL to standardize financial info that supports the assessment of their portfolio of risk (that arises from dynamic pricing, M&A, etc.)

Benefits 1. Reduce cost of analyzing and reporting financial information 2. Increase the speed and efficiency of business decisions 3. Enhance the distribution and usability of existing financial statement information

Example: Credit Loan Approval: Credit Approval: Line of Credit: Small Business provides Bank with their financial information in XBRL and receives loan approval in 1 minute instead of 2 days Credit Approval: Company approves customer credit request with automated assessment processes facilitated by XBRL Line of Credit: Company provides capital markets with financial information in XBRL and receives expedited line of credit Company uses XBRL to standardize financial info that supports the assessment of their portfolio of risk (that arises from dynamic pricing, M&A, etc.)

XBRL Taxonomies Under Development App to fin rep XBRL Taxonomies Under Development Commercial and Industrial Companies, US GAAP - Published Federal Departments, US Mutual Funds, US Financial Institutions, US Commercial and Industrial, IASC Commercial and Industrial, German GAAP Bank Call Reports - FDIC

Design Solution/Business Plan How Do You Get There? Needs Assessment Design Solution/Business Plan Training & Education Implementation

XML Shortcomings? Not a replacement for integration and middleware tools Lots of Hype, not a solution for everything There are many different standards among industries Standards still evolving But, you can’t wait while the standards evolve….

XBRL Development & Adoption

Additional Education Sources www.xbrl.org - Student Competition web.bryant.edu/xbrl www.ebxml.org www.w3.org; www.xml.org www.rosettanet.org www.ibm.com/developer/xml www.microsoft.com/industry/biztalk

Final Thought…….. Change is not what it used to be….. Change has become a process; it’s become a permanent part of the external environment

Summary FASTER BETTER CHEAPER Our profession will have to follow technology and record business activity in an real-time mode.

Concluding Remarks….. Embrace Change or Die!

To download slides………. http://web.bryant.edu/~xbrl/riscpa.ppt