1. ENHANCED BUSINESS REPORTING (A Technology Driven Solution) FCM Conference Alan Anderson Senior Vice President AICPA

2. Change in Mind-Set Historical Financial Statements Enhanced Business Reporting Lagging indicators… Periodic Historical Cost-basis Financial only Statements Looking backward Leading indicators… On-demand Real-time/future Value-basis Comprehensive Custom reports Looking forward Past FuturePresent

3. Historical Financial Statements Enhanced Business Reporting Lagging indicators… One size fits all (GAAP) Ignores nonfinancial measures Reports results of past decisions Leading indicators… Tied to mission, vision and values Tied to factors critical to success Moves decision criteria to forefront Past FuturePresent Change in Mind-Set

4. Why? The current reporting model is no longer sufficient. –Not timely – its after the fact news. –Not informative enough. –Ignores many factors of performance. So far, calls for change and some action. Now it’s time for coordinated action.

5. Recommendations are Good but ACTION is better! We Must Build Upon the Foundation to Chart the Path for The Future by: Enhancing Business Reporting

6. ENHANCED BUSINESS REPORTING ELEMENTS CONVERGENCE TO “NEAR REAL TIME” SCALABLE

7. ELEMENT MAP Actions Required qualitative characteristics of financial and business information Relevance Timeliness Predictive value Validation of expectations Reliability Measurability Completeness Neutrality Unbiased Comparability Industry peers Period-to-period Understandability Clear Coherent Jargon-free Corporate Accountability S-O Act §404 internal control Environmental, Health & Safety (EHS) e.g. Global Reporting Initiative Social responsibility e.g. AccountAbility 8000 Risk reporting e.g. COSO Enterprise risk management Corporate governance e.g. ISS Corporate Governance Quotient Financial & Non- Financial Measures US GAAP/SEC financial statements Non-financial KPIs – Customer satisfaction – Customer retention – Market share – Product defects – Employee training – Employee satisfaction – Patents held – R&D spending – New product pipeline – Costs per transaction – Industry benchmarking – Revenue per… customer, square foot, ton-mile… Forward-looking information, NOT prospective financial statements Value measurement reporting collaborative (VMRC) Understandable Disclosures SEC plain-English VMRC Information Dissemination XBRL Customizable by users & flexible reporting by CPA – Capital markets – Debt markets – Board of directors – Management – Regulators – Employees – Customers – Suppliers – NGOs Near real-time System Reliability Data assurance Audit of financial statements – Close expectation gap SSAE 10 or ISAE 100 – XBRL data tags – Footnote terminology related to XBRL Systems/process assurance Examination of S-O Act §404 assertion SSAE 10 or ISAE 100 – e.g. SysTrust Process-based – KPIs – Fwd-looking info Hybrid - Data (where suitable criteria exist) or process – EH&S – Social – Risks/ERM – Corporate governance Continuous assurance Continuous audit process using embedded software agents

8. Element Map: Corporate Accountability S-O Act §404 internal control Environmental, Health & Safety (EHS) e.g. Global Reporting Initiative Social responsibility e.g. Accountability 8000 Risk reporting e.g. COSO Enterprise risk management Corporate governance e.g. ISS Corporate Governance Quotient

9. Corporate Accountability Public Trust- 3 Elements PUBLIC TRUST Spirit of Transparency People of Integrity Culture of Accountability “We need to move towards “Principles Based Thinking”, away from more rules” …David Weinstein, EVP Fidelity Investments

10. Element Map: Systems Reliability Data assurance – Audit of financial statements – Close expectation gap SSAE 10 or ISAE 100 – XBRL data tags – Footnote terminology related to XBRL Systems/process assurance Examination of S-O Act §404 assertion SSAE 10 or ISAE 100 – e.g. SysTrust Process-based – KPIs – Fwd-looking info Hybrid - Data (where suitable criteria exist) or process – EH&S – Social – Risks/ERM – Corporate governance Continuous assurance – Continuous audit process using embedded software agents

11. Systems Reliability Systems Reliability For Example- - Shop Floor Human Capital Cost IT

12. Element Map: Financial and Non Financial Measures US GAAP/SEC financial statements Non-financial KPIs – Customer satisfaction – Customer retention – Market share – Product defects – Employee training – Employee satisfaction – Patents held – R&D spending – New product pipeline – Costs per transaction – Industry benchmarking – Revenue per… customer, square foot, ton-mile Forward-looking information, NOT prospective financial statements Value measurement reporting collaborative (VMRC)

13. Financial & Non Financial Measures For Example - - Forecasted Operating Data & Performance Measures Forecasted Financial Data High-Level Data and Performance Measures Financial Statements and Related Disclosures Forecasted by Users OperatingFinancial Linkage

14. Element Map: Information Dissemination XBRL Customizable by users & flexible reporting by CPA – Capital markets – Debt markets – Board of directors – Management – Regulators – Employees – Customers – Suppliers – NGOs Near Real Time

15. Information Dissemination The Common Platform: XBRL The Reporting Supply Chain External Financial Reporting Business Operations Internal Financial Reporting Investment and Lending Analysis Processes Participants Auditors Trading Partners Investors Financial Publishers and Data Aggregators Regulators XBRL for Regulatory Filings XBRL for Audit Schedules XBRL for Credit Filings XBRL for Business Event Reporting Software Vendors Management Accountants Companies What

16. Element Map: Understandable Disclosures SEC plain-English VMRC Much more to be done here!

17. Understandable Disclosures Plain English ? Current Situation: Greek to the Average Person (Difficult to Understand) Transform Future State: Easy to Understand English

18. Understandable Disclosures Spirit of Transparency Corporations have an obligation to provide willingly to shareholders and other stakeholders the information needed to make decisions. The Three-Tier Model of Corporate Transparency Tier One Globally Generally Accepted Accounting Principles Tier Two Industry Based Standards Tier Three Company Specific Info

19. Next Steps in Moving Forward MISSION: To collaborate with investors, creditors, regulators, management, & other stakeholders to improve the quality & transparency of information used for decision-making I: Identification of key stakeholders whose collaborative involvement is critical to successful development & implementation II: Overarching goal of making better information available to investors & creditors, helping them to see organizations through the eyes of management Special Committee on Enhanced Business Reporting

20. Customers of Enhanced Business Reporting Employees Management Auditors Academics Regulators Standard Setters Investors and Creditors CustomersSuppliers Competitors

21. THE END GAME IMPLEMENTATION of enhanced business reporting through collaboration with, commitment from, & support of:  SEC  FASB  Banks and other users  Public Company Accounting Oversight Board (PCAOB)  Large Fund Managers (e.g., Vanguard, TIAA-CREF)  Council of Institutional Investors  FEI  Think Tanks (e.g., Brookings)

22. How is this going to get accomplished? The AICPA has established a Special Committee on Enhanced Business to reporting to Concurrently: – Identify the migration path needed to get it done –Get Companies to Pilot ideas And –Build consensus and support from users

23. Building upon the Foundation Historical Financial Statements Enhanced Business Reporting Lagging indicators… Periodic Historical Cost-basis Financial only Statements Looking backward Leading indicators… On-demand Real-time/future Value-basis Comprehensive Custom reports Looking forward Online, Real-time, Transparent, and Forward-Looking

24. Up Stream Value Chain Down Stream Value Chain Insider Trading Others GL Transactions Exogenous Data Sources Investors External Reporting RegulatorsCreditorsLendersTaxWebsite Performance Measures Monitoring Control and Assurance Reporting standards On Demand -Aggregation/Benchmarking Layer

25. Questions?