XBRL Implementation: A Field Investigation Diane Janvrin Associate Professor Won No Assistant Professor Information Systems Mid-Year Meeting January 9, 2010

Motivation XBRL (eXtensible Business Reporting Language) Method XBRL Implementation Process Findings Summary Agenda

SEC mandate Obtain understanding of how early mandate participants are implementing XBRL Motivation

XBRL(XML) HTML based financial statements reporting Paper based financial statements reporting Web(HTML) Off Line LAN, Intranet, Internet XBRL based financial statements reporting Provide a standard method for preparing, analyzing, and exchanging financial information. Introduction Financial Reporting System Limited accessibility Not allow data exchange, intelligent search, and adaptive presentation

Cash: Debt: Cash { font-weight: bold } Debt { font-style: italic } Cash: Debt: Cash: Debt: Cash: Debt: Paper Based HTMLXBRL Presentation Content Actual Introduction Financial Reporting System

XBRL Basics Instance document o XML file that contains business reporting information and represents a collection of financial facts and report-specific information using tags from one or more XBRL taxonomies o Element A financial reporting concept, defined in XBRL o Context Entity and report-specific information (reporting period, segment information, and so forth) required by XBRL that allows tagged data to be understood in relation to other information Taxonomy o Electronic dictionary of business reporting elements used to report business information o Standard taxonomy Developed for U.S. companies by XBRL.US o Taxonomy extensions Created by individual companies

XBRL Basics Facts Definition, Content, and Presentation Reporting Cash and Cash Equivalents $35,000 <cust:CashCashEquivalents decimals="0" contextRef="End2004" unitRef=“USD"> XBRL Instance XBRL Taxonomy <element name="CashCashEquivalents" id="cust_CashCashEquivalents" type="xbrli:monetaryItemType" substitutionGroup="xbrli:item" nillable="true" xbrli:balance="debit" xbrli:periodType="instant"/> XSLT Style Sheet Rendering (Presentation) Data (Content) Machine readable format Human readable format Dictionary

HTML or PDF Format XBRL Format With XBRL, each item of a company’s reported information is tagged with a unique code identifier. What Does XBRL Look Like?

How XBRL Works

01/ / / / / / / / / / / / /2008 July 2000 First specification of the XBRL Taxonomy for Financial Statements for the commercial and industrial U.S. companies Charlie Hoffman introduces the potential use of XML for financial reporting. April 2000 XFRML Steering Committee was officially changed to XBRL Steering Committee. October 1999 First meeting of the XFRML Steering Committee. August companies, (besides the AICPA), including ‘Big 5’ joined the project as members of the XFRML Steering Committee. April 2005 SEC XBRL Voluntary Financial Reporting Program (VFRP) December 17, 2008 SEC adopts XBRL mandate. May 30, 2008 XBRL proposed mandating companies furnish statements in XBRL format. January 2006 SEC announces expedited reviews for XBRL filers. April 2002 International Accounting Standards Board (IASB) released a core taxonomy of XBRL for Financial Statements (IASC 2001). April 2004 Revised XBRL Specification 2.1 was released by International Steering Committee of XBRL International. December 2003 XBRL Specification 2.1 was approved and released by International Steering Committee of XBRL International. November 2001 The second specification of the XBRL was released for public comment (see at rg for details). September 2007 XBRL US project team completes tagging of US GAAP (XBRL US GAAP Taxonomies 1.0). EVOLUTION OF XBRL: A Historical Perspective

Mandate Basics SEC rule proposal May 30, 2008 Adopted by SEC on December 17, 2008 Basics of the rule: Required primary financial statements (PFS) and footnotes for all issuers using US GAAP/IFRS for periods ending June 15, 2009 or later Year 1 – all large accelerated filers (worldwide equity float above $5 billion) Year 2 – all other accelerated filers Year 3 – all others First year PFS plus block tag footnotes 2nd year include detailed tag footnotes 30 day grace period for first filing of PFS and detailed footnotes

Method Examine actual implementation process for early filers Qualitative technique using structured interview guide Interviewed nine accountants in five companies in diverse industries Examined initial XBRL furnishings under the SEC mandate

XBRL Implementation Process Plan implementation Tag financial items and create taxonomy extensions Validate, review, and render instance document and taxonomy extensions Audit and issue XBRL-related documents

XBRL Implementation Process

Findings regarding Plan Implementation Main objective of XBRL implementation was regulatory compliance Most respondents supported XBRL but one questioned its value Implementation team included both accounting and information technology personnel Three companies purchased bolt-on software; two used third party service providers Respondents selected XBRL software based on ease-of-use, cost, and technical support Respondents found many XBRL software packages difficult and time consuming to use Respondents who purchased bolt-on software had technology infrastructure issues One respondent who used third party service provider has one year contract for XBRL services and three year contract for SEC filing services.

Findings from Tag Financial Items and Create Taxonomy Extensions Phase Tag Financial Items All respondents used bolt-on rather than integrated approach to tag financial items. All respondents initially tagged statements using 2008 taxonomy and then re-tagged statements once 2009 taxonomy was available. All respondents chose to block tag footnotes for Two respondents indicated serious concerns with ability to detail tag financial statement footnotes. One strongly argued that given current state of software and lack of SEC direction, SEC should delay detailed footnote tagging requirements.

Findings from Tag Financial Items and Create Taxonomy Extensions Phase Create Taxonomy Extensions Most respondents tended to minimize number of taxonomy extensions used due to either desire to match with existing standard taxonomy or perceptions regarding difficulty of creating taxonomy extensions. Two companies who purchased XBRL software asked software consultants to create taxonomy extensions. Several respondents indicated that they found technical aspects of creating taxonomy extensions challenging. Two respondent companies created several extension elements that were not used in their XBRL-related documents.

Findings from Validate, Review, and Render Instance Document and Taxonomy Extensions Phase Validate Instance Document and Taxonomy Extensions Several respondents noted validation process was frustrating and error messages generated were difficult to understand Inconsistencies in validation error messages between software products Software products did not use error messages suggested by SEC Review Instance Document and Taxonomy Extensions All companies reviewed instance document internally Two companies also asked financial printer to review instance document

Findings from Validate, Review, and Render Instance Document and Taxonomy Extensions Phase Render Instance Document and Taxonomy Extensions Although not required, all respondents viewed documents using rendering software to protect company reputation Two respondents reported frustrations with rendering views used by XBRL software Respondents reported frustrations with SEC delays in updating its rendering software to reflect 2009 taxonomy

Findings from Audit and Issue XBRL- Related Documents Phase Audit XBRL-Related Documents Auditors were not interested in auditing XBRL-related documents Only one respondent suggested that audit procedures may differ since with XBRL tags, materiality may be based on values in individual financial items rather than entire statement Issue XBRL-Related Documents Most companies worked with financial printers to issue XBRL-related documents Financial printers use their own software rather than software used by financial preparer to produce XBRL-related documents provided to SEC and placed on company websites

Challenges Ahead Tagging and taxonomy extension process is very time consuming Software needs to be improved and service providers need additional XBRL knowledge Delays in taxonomy updates are frustrating and system needs to be developed to ‘instantly’ update software with new taxonomies Respondents are concerned that XBRL may cause delays in SEC filings Software needs to be improved before detailed footnote tagging can occur

Summary Examining XBRL implementation process is important and timely due to SEC mandate. Significant hurdles exist to XBRL implementation including –Software issues –Delays in taxonomy updates –Complex taxonomy extension process –Upcoming detailed tagging of footnotes Compliance is main XBRL implementation motivation Currently, no integration into supply-chain reporting systems Lack of internal controls Validation process is difficult due to inconsistent error messages Companies are concerned about rendering due to company reputation concerns