With this Act, Congress created the Securities and Exchange Commission. The Act empowers the SEC with broad authority over all aspects of the securities industry. This includes the power to register, regulate, and oversee brokerage firms, transfer agents, and clearing agencies as well as the nation's securities self regulatory organizations (SROs).
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002, which he characterized as "the most far reaching reforms of American business practices since the time of Franklin Delano Roosevelt." (the 1930’s)
The Act mandated a number of reforms to enhance corporate responsibility, enhance financial disclosures, combat corporate and accounting fraud
Created the "Public Company Accounting Oversight Board," also known as the PCAOB, to oversee the activities of the auditing profession.
First SEC Mention of XBRL XBRL Committee Encouraged by SEC Chairman Arthur Levitt's Recommendation That It be Expanded and Used by Investors and Companies Business Wire , Oct 30, 2000 Business Editors NEW YORK--(BUSINESS WIRE)--Oct. 30, 2000 In remarks last week, Arthur Levitt, Chairman of the Securities Exchange Commission (SEC), acknowledged XBRL and recommended its further development to turn financial statements into meaningful information for investors using this new revolutionary technology. Chairman Levitt's remarks were made at the American Institute of Certified Public Accountants' (AICPA) Fall Council Meeting in Las Vegas, Nevada on October 24, 2000.
Do You Remember Vinyl Records? Had to Play from start to finish Record could be damaged if you attempted to play a specific track.
Vinyl Records And Disclosures Similarly , Financial statements, notes and disclosures today are meant to be read and understood as a whole. Audit opinions are given on the entire set of financials. The paper-based, report centric world lives on.
Then Came Digital Music The technology dramatically changed how we relate to music and gave us more power to select individual cuts suited to musical tastes and preferences
• Federal Deposit Insurance Corporation (FDIC) went live with its XBRL system in 2005, and has since reduced errors from 18,000 to zero, with an estimated savings of $26 million over the next ten years.
• The Dutch Government went live in 2007 and expects to save $345 million annually as a result of implementing XBRL.
• The Australian Tax Office is implementing XBRL and expects to save $780 million (Australian) per year.
Scope and Role of XBRL External Financial Reporting Business Operations Internal Financial Reporting Investment, Lending, Regulation Processes Economic Policymaking Participants Auditors Trading Partners Investors Financial Publishers and Data Aggregators Regulators Software Vendors Management Accountants Companies Central Banks XBRL for G/L Journal Entry Reporting XBRL for Financial Statements XBRL XBRL XBRL XBRL
Who is using XBRL and how are they benefiting?
Kim Wallin, Controller, State of Nevada
In 2007, Wallin begin considering XBRL as a solution to grant reporting, and when the Department of Agriculture asked for help with their reporting, Deloitte was brought in and two of Agriculture's grants were selected for the XBRL pilot.
"The goals were timely and accurate data,“ said Wallin, "stronger internal controls, reduced costs, a standardized system of seamless data exchange, business processes and data elements. XBRL met all of those goals."
Require either more or less disclosure than companies are currently experiencing
Restrict companies to using elements in the taxonomy (data dictionary) only.
Have you ever wondered which specific US GAAP authoritative literature stands behind each item on your company’s SEC disclosures? A US GAAP XBRL Taxonomy has the answer Ever wonder how accounting experts might define each key item on your SEC 10K? A US GAAP XBRL Taxonomy has the answer
Accountants: Industry experts have developed a data dictionary, or taxonomy that covers US GAAP reporting requirements to the SEC
The taxonomy will has labels, definitions, and references to authoritative literature organized in a reporting hierarchy in addition to computer codes in XBRL.
US GAAP Taxonomy Development Effort FAF, XBRL US GAAP, SEC Regulations Codification project Audit check lists Internal and public testing XBRL protocols Taxonomy Release CFO Investor Relations Current Reporting Practice Key concept: Create a Data model Analysts Investors
Description of accounting policies associated with the recognition of gross revenues and gross revenue adjustments, which are components of net revenues in the statement of operations for the period. Standard label in English: Revenue Recognition Accounting Policy, Gross and Net Revenue Disclosure Standard label in XBRL: RevenueRecognitionAccountingPolicyGrossNetRevenueDisclosure Accounting Principles Board Opinions (APB) Number 22, Paragraph 8 Label Definition Authoritative Reference
So.. If a filing contains a label that is further described by a definition and a reference, the computer referencing the item will have all three pieces of information as discoverable meta data
If the definition is off or the reference is wrong, is the tagged data also wrong? What if an investor, reading the XBRL meta data, relies on the XBRL definition or reference? Shouldn’t the entire financial information supply chain care about the triad of accounting?
XML is a wonderful language for describing objects in computer readable formats. XML depends on meta data to describe the contents of its digital message.
XBRL must contain several attributes in order to transform numbers into meaningful business reporting interactive data.
When we move from a paper based reporting world to an interactive data world, the data contained in a finding will not be complete or understandable without accurate meta data accompanying the element reported.
Label – may or may not be close to a company’s financial statement presentation. The common language label could also be different from the XBRL label Definition – Definitions for US GAAP required disclosures will most likely contain language directly from authoritative literature. References – References point to authoritative literature with disclosure requirements or to directional references, Will change to codification in 2010