XBRL Application in China: Listed Companies Information Disclosure Using XBRL MA Donghao Assistant Chief Executive Officer Shenzhen Stock Exchange

Agenda Market at a Glance Information Disclosure: current practice The Problems Project Summary Objectives Taxonomies Framework Implementation approaches The Benefits Future development

Market at a glance Two national stock exchanges in China: Shenzhen and Shanghai. Listed securities: Cash market only, products: common stock, treasury bills, bond and funds. Market Regulator: CSRC.

Mandatory information disclosures Prospectus Offering circular Periodic reports  Annual Report, Half-year Report and Quarterly Report Timely reports  Notice on material issues,  Notice on M&A,  Notice on clarification, etc. Medias of disclosure: 4 appointed newspapers and 2 appointed websites

Disclosure process

Disclosure process: periodic reports Filing  Shenzhen:  E-Filing software->structured data  Report in PDF (prepared manually)  Shanghai: Report only in PDF (prepared manually) Registration: computer-assisted Announcement  Newspaper: paper-based document exchange  Website: Summary in HTML, full-text in PDF

Disclosure process: timely reports Filing  Fax to Company Management Department of the Exchange Approval  Paper-based, feedback by fax  Check for: conformity to CSRC/ Exchange rules, procedural correctness, consistency. Announcement: paper-based exchange of report  Newspaper  Websites

Disclosure reporting supply chain Listed companies CSRC The Exchanges Appointed papers, websites Information vendors Software vendors Investors

The Problems Low data quality Inconsistency High market cost

Project Summary Initiated by the CSRC, with active support from both exchanges. Using XBRL for information disclosure, with periodic report as a start. Developed as a national standard, currently released for public comment, scheduled to be released officially at the end of 2003 Pilot deployment early 2004 for quarterly report

Objectives An extensible standard framework An open standard Better disclosure data quality

Information disclosure taxonomy features Based on XBRL 2.0 Specifications. Built for current CSRC disclosure requirements, but with provision for future development Developed our own PFS Not yet extend from Core IAS Taxonomy

Taxonomy features: continued Periodic report first Form-based approach Item names in Chinese

Framework

Implementation approaches Minimal impact to current infrastructure Implement XBRL for periodic/timely reporting filing  Upgrade companies filing software  Publish XBRL instance document Integrate back end accounting systems and/or regulatory packages with XBRL

Disclosure process using XBRL

The Benefits Market transparency Better quality vs. lower price Flexibility to changes in disclosure rules

The Benefits The Exchanges Information vendors All stakeholders Listed companies

Open issues XBRL applicability with non-financial report Inadequate domain experts involvement Lack of experienced XBRL experts No public forum