1. kpmg Reforming Regulatory Reporting John Turner Leader KPMG Global XBRL Services Team john.turner@kpmg.co.uk

2. kpmg Topic Outline  Walking the tight rope  Reaching common understanding  Evolution of regulatory reporting  Why XBRL?

3. kpmg Walking the tightrope  Regulation, and government as a whole, cannot exist without information from private corporations  Lots of information  No really  Lots and lots of information  This is variously estimated as around 0.6% of GDP….  > 8 Billion hours per annum in the US alone  Regulators must balance their legitimate information needs against this “provider burden”.

4. kpmg An ongoing balancing act…  Viewed as a whole, regulators appear to move between favouring industry and favouring government in terms of their data collections.  Both extremes are undesirable for all concerned  Reasons are complex, but include regulatory policy taking its lead from altering community expectations

5. kpmg Topic Outline  Walking the tight rope  Reaching common understanding  Evolution of regulatory reporting  Why XBRL?

6. kpmg Six principles for regulatory reporting requirements…  Timely To be useful, information needs to be available within a reasonably short period from the time of measurement. The “rear view mirror” view of any qualitative measure is only useful where information is current—and its currency rapidly fades.  Accurate Information should be free of data anomalies and errors and tested for manipulations.  Reasonable Regulators should seek to minimize provider burden (the amount of effort imposed on the regulated community by the scope of the data collection).  Relevant The definitions and interrelationships between data definitions need to be up to date and as tightly linked to information used for the running of the business as possible.  Efficient The cost of collecting the information needs to be proportionate to the value of the data collected.  Transforming Legitimate governmental information needs change markedly over time. Sometimes information collections are allowed to go stale as a result of a policy that favours the private sector. Stale information is resented, and eventually ignored by users, or, perhaps worse, is assumed to remain relevant by agency analysts, who quickly become out of touch with industry developments.

7. kpmg Reaching common understanding…  Headline  People turn to XBRL to help exchange information between systems.  The sub-text  In order to exchange information you need to understand it.  Understanding metadata turns out to be tough.  XBRL can help provide a consistent view of all the information that is used around the enterprise (or across enterprises)  This is a way to componentise business activity without replacing systems

8. kpmg Topic Outline  Walking the tight rope  Reaching common understanding  Evolution of regulatory reporting  Why XBRL?

9. kpmg Evolving processes for data collection…

10. kpmg Paper Bound = Unusable data  The process of designing and deploying paper- based data collections is, of course, pretty simple.  The actual use of paper- based data is problematic!

11. kpmg “Program Bound” = Continuous Programming  In this mode, the process of implementing the decisions made about regulatory reporting requirements involve:  Providing the Excel and Word (eg: paper) versions of the information requirements to the systems development team.  These requirements get coded (by hand) into electronic forms.  This goes backwards and forwards between the business and technology groups until the forms are right.

12. kpmg Adaptive = Improvement by the Business  An “Adaptive” system is designed with a view to the need to make changes as being one of the key features of the business environment.  By building requirements in a format that are human readable as well as understandable by a the system, the business experts get very fine-grain control over the creation of the form.  It also imposes new levels of discipline over the creation of the regulatory reporting requirements, with business experts able to share the requirements with a range of stakeholders (internally and externally) in a very precise way.

13. kpmg Topic Outline  Walking the tight rope  Reaching common understanding  Evolution of regulatory reporting  Why XBRL?

14. kpmg Six principles for regulatory reporting requirements… revisited Timely Accurate Reasonable Relevant Efficient Transforming