Pros and Cons Comparison By Justin Bost Olivia Bischoff

Overview What is it? Terms to know History Advantages Disadvantages / Concerns North Carolina State University Study Conclusion

What is it? New computer language – Format – New form of “interactive data” Revolutionary to financial reporting New requirement for SEC filings – Phase In began as of June 2009

Terms to know Taxonomy – Tag attached to data – Thousands and growing Element – Data with taxonomies attached Instance document – Made up of elements (i.e. financial reports)

History Internet – File Transfer Protocol (ftp) – Hypertext Markup Language (html) View of internet – Extensible Markup Language (xml) Interactive data – Extensible Business Reporting Language (xbrl) Business specific interactive data

History Charles Hoffman – Creator – CPA – Little technical knowledge Client in 1998 – Wanted to transfer product pricing Prototype by October 1999

Advantages Data only needs to be entered once by preparers – Then can be extracted and analyzed automatically – Cost savings for users Quick and easy data exchange over internet View/compare several companies and time periods

Advantages Can tag accounting and regulatory rules Aids principle-based accounting Standard taxonomies provide comparability Adds transparency to financial statements

Concerns Raised 84 Comment Letters: – Lengthy setup and training – Additional costs to preparers – Usefulness to investors – Availability of guidance on XBRL

North Carolina State University Study Examined voluntary filings of 22 companies Errors found: – Missing elements and amounts – Sign flips – Duplication of elements and amounts – Incorrect amounts – Incorrectly tagged items

North Carolina State University Study Reasons for Errors: – Newness of tagging process – Improperly trained employees – Limitations of 2006 software Conclusion – Low level of accuracy is a threat to preparer and user acceptance – Audit assurance should be required

Conclusion Advantages far outweigh the costs Auditor assurance should be required to prevent material errors from reducing the benefits of XBRL