XBRL Ficpa May 29 2009

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XBRL Basics and Update for Florida Accounting and Business Expo Orlando

XBRL Basics and Update for Florida Accounting and Business Expo Orlando

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  • XBRL is an XML-based standard for financial and business reporting over the Internet. This Case Study and XBRL demonstration will illustrate how this and other emerging XML financial industry standards, including RIXML and IFX, will facilitate efficient exchanges of information critical to essential communication infrastructures. The attendees will have an opportunity to review XBRL financial service data interchange formats followed by a discussion about how XBRL can help banks and financial services companies to: - Effectively collect and update financial information on borrowers; - Accelerate the credit risk assessment process and manage customer relationships; - Integrate investment information about companies and the market from multiple sources; - Manage and distribute transaction data on loan portfolio performance, sales, and purchases; - Automate business reporting to funding sources and other business partners; - Communicate institutions' financial performance more effectively to investors; - Consolidate and report data (report on the work done with the FFEIC regulators in the U.S.); - Implement and adapt to external changes in reporting and disclosure requirements, such as the new Basel Capital Acco

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  • 1. Neal Hannon Senior Consultant, XBRL Strategies The Gilbane Group [email_address] FICPA Annual Accounting and Business Show Orlando May 27 2009 FICPA XBRL Entering The Digital Age
  • 2. XBRL: Entering The Digital Age
  • 3. Point #1 XBRL is Accounting chopped into structured pieces
  • 4. Evolution of Accounting
    • Structure and nature of manual accounting
    • Translating accounting into software
    Digesting and assimilating hundreds of accounting packages into a standardized way of representing business data to a computer
  • 5. Evolution of Accounting
    • Structure and nature of manual accounting
    • Translating accounting into software
    Digesting and assimilating hundreds of accounting packages into a standardized way of representing business data to a computer
  • 6. The Franciscan Roots of Modern Accounting
    •   First surviving accounting textbook:
    •       
    • “ The Summa” written by Fra. Luca Pacioli in 1494
    •        (included illustrations by L. Da Vinci)
      • A best seller in its day
      • Publicized the Method of Venice
      • Helped to spread literacy in the middle class
    •  
    •  
    • Luca Pacioli—the “Father of Accounting”
    • A mathematician and merchant
    • Became a Franciscan friar
    • Franciscans came out of, and ministered to, merchant class
    • Did not invent double-entry accounting but spread the knowledge
  • 7.
    • The Method of Venice
    • (Double-entry Accounting) 
    • A binary (0,1) method for recording economic events
    • Invention of the “Debit” and “Credit” concepts from the Italian terminology
    • Allowed for much easier addition and subtraction before calculators were invented
    •  
    • Debit
    • Comes from the Italian “debito”
    • which comes from the Latin “debita” and “debeo”
    • which means:
    •        OWED TO the proprietor
    •        or an asset of the proprietor
    •  
    •  
    • Credit
    • Comes from the Italian “credito”
    • which comes from the Latin “credo”
    • which means:
      • Trust or belief (in the proprietor)   
      • or OWED BY the proprietor  
  • 8.
    • From the 13th century to the present:
    • Double-entry accounting spread throughout the world
    • Accountants in each country adapted accounting practices to suit their:
        • Cultures
        • Laws & regulations
        • Capital market structures
        • Environments
    • National differences in accounting rules and practices render financial statements of companies based in different countries UNCOMPARABLE
  • 9. Securities Act of 1933
    • Often referred to as the "truth in securities" law, the Securities Act of 1933 has two basic objectives:
      • require that investors receive financial and other significant information concerning securities being offered for public sale; and
      • prohibit deceit, misrepresentations, and other fraud in the sale of securities.
  • 10. Securities Exchange Act of 1934
    • 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).
  • 11. Sarbanes-Oxley Act of 2002
    • 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.
  • 12.  
  • 13. 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.
  • 14. Former Chief Accountant Lynn Turner:
    • “ I support XBRL. I wrote the comment for chairman Levitt’s speech. But please tell everyone you talk to about XBRL that you must
    • Get the Accounting Right!”
  • 15. Additional regulation coming?
  • 16. Accounting Goes Digital
  • 17. Do You Remember Vinyl Records? Had to Play from start to finish Record could be damaged if you attempted to play a specific track.
  • 18. 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.
  • 19. 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
    • Individual Tracks Separated
    • Choose Your Own Order for Play
    • Start and Stop
  • 20. What can digital data do?
  • 21.  
  • 22.  
  • 23. George Martin and the Beatles
    • The task
      • Collect, identify, classify the entire set of music created by the Beatles
      • Using master tapes, break out the riffs
      • Re-configure music into digital sound bytes
    • The results
      • New Music.. The Beatles Love Album
  • 24. George Martin and the Beatles
    • The task
      • Collect, identify, classify the entire set of music created by the Beatles
      • Using master tapes, break out the riffs
      • Re-configure music into digital sound bytes
    • The results
      • New Music.. The Beatles Love Album
  • 25. The SEC and Interactive Data
    • The task
      • Collect, identify, classify the entire set of GAAP created by US Authoritative Sources of GAAP
      • Using financial statement hierarchy, break out the elements into an XBRL taxonomy
      • Re-configure accounting into digital bytes
    • The results
      • New Filings.. The SEC Interactive Data initiative in XBRL
  • 26. Digital data fundamentally changes the paper-based reporting paradigm
  • 27.
    • Who is using XBRL and how are they
    • benefiting?
    • • 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.
  • 28. XBRL Not just for the SEC
  • 29. 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
  • 30. 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.
  • 31. "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."
  • 32. XBRL Does NOT
    • Change management’s accounting decisions.
    • Require either more or less disclosure than companies are currently experiencing
    • Restrict companies to using elements in the taxonomy (data dictionary) only.
  • 33. 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
  • 34. XBRL BASICS
    • 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.
  • 35. 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
  • 36. XBRL The Accounting’s inside
  • 37. 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
  • 38. Will the Meta Data Count?
    • 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
        • Label
        • Definition
        • Reference
    • 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?
  • 39. Will the Meta Data Count?
    • 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.
  • 40. Principles
    • GAAP accommodates variation in applied accounting methods as long as the methods generally conform to GAAP’s set of principles…..
    This drives computers crazy!
  • 41. The XBRL “Principles” Problem
    • How do you tag a principle?
    • Computers need consistency
      • Like transactions reported the same way
  • 42. XBRL Accounting Triad
    • Labels
    • Definitions
    • References
    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
  • 43. Accounting Action Points
    • Start thinking data, not reports
    • Look for ways to simplify data collection and re-use with XBRL
    • If you work with public companies, practice XBRL now before the mandate
  • 44. Key Considerations
    • Taxonomies must be well developed
      • Complete and accurate tagging system is key to achieving benefits
      • Be considerate of whether tags faithfully represent financial reporting under GAAP
      • FASB’s Codification project will change taxonomies
      • IFRS- US GAAP Convergence – tags will converge as standards do
    • Future standard-setting and XBRL
      • More accommodative to global comparability issues?
      • Should Taxonomy guidance issued with new standards?
  • 45. Neal Hannon Senior Consultant, XBRL Strategies The Gilbane Group [email_address] FICPA Annual Accounting Show and Business Expo Orlando May 27 2009 FICPA Thank You