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Comparability of SEC data                           Analysis and recommendation for improvement                           ...
   Bas Groenveld                           Paul Hulst   Deloitte XBRL team                      Deloitte XBRLteam   I...
   XBRL claims to create transparency    xbrl.org: “...Consumers of financial data, including investors,    analysts, fin...
   “The mission of the U.S. Securities and Exchange Commission    is to protect investors, maintain fair, orderly, and ef...
Period:                                   4.500    2009 – May 2011                4.000    Forms:                        ...
US GAAP 2009 (core + investment +dei)   Total    All concepts                            13,651    -/- dimensional concept...
Number of US GAAP taxonomy                                     extension                                       120000    c...
Group            Ratio                                          %   Current Ratio                                        ...
   The taxonomy contains very narrowly described concepts.    Resulting in the need for additional concepts if they don’t...
Extending a taxonomy    Means that a filing gives a comprehensive description of a     company,    but also means that i...
Higher value with                                                         standardised digital                            ...
   Align taxonomy design with legislation design.    Prescribe the use of top level concepts     making the most importa...
   Preparation     ◦ Understand the idea behind XBRL and extensions     ◦ Look for and learn from best practices.    Cre...
   SEC provides a unique source of data for analysis.    The value of the XBRL financial reports can be maximised by    ...
We invite you to our booth in the exhibition hall.    Contact us directly:     ◦ Bas Groenveld, bgroenveld@deloitte.com  ...
   (1): http://www.sec.gov/about/whatwedo.shtml16                                                  © Deloitte Innovation ...
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Xbrl Conference Brussels - Bas Groenveld And Paul Hulst - Comparability Of Sec Data Set Analysis And Recommendation

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The US Securities & Exchange Commission (SEC) mandated the use of XBRL for filing quarterly and annual statements (10-K, 10-Q, 20-F, and other forms). According to research by several organizations, around 80% of the XBRL filings was prepared by a third-party. Most of these firms are so-called ‘financial printers’. However, because of the stricter requirements in the second and third year, many organizations are expected to want more control over the filing process to increase quality and to reduce risks.

In this session, Deloitte will share with the audience a detailed analysis result performed on XBRL filings submitted to the SEC. The research looks into the comparability of the concepts used (and not used), in terms of the approach taken (in-house, outsourced, and in-between) and tools used. To illustrate the impact, we will further present the comparability result on some important financial ratios. Then, this session will be concluded with recommendations specifically addressed for SEC, taxonomy owners, and filers (both in-house filers or outsourced filers).

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Transcript of "Xbrl Conference Brussels - Bas Groenveld And Paul Hulst - Comparability Of Sec Data Set Analysis And Recommendation"

  1. 1. Comparability of SEC data Analysis and recommendation for improvement Bas Groenveld & Paul Hulst Deloitte Innovation, Netherlands 19 May 2011 14:00 – 14:3022nd XBRL International Conference, Brussels
  2. 2.  Bas Groenveld  Paul Hulst Deloitte XBRL team  Deloitte XBRLteam Involved in XBRL  Involved in XBRL since 2005 since 2007 Projects:  Projects: ◦ Taxonomy creation ◦ Taxonomy creation ◦ SEC Filing ◦ e-reporting architectures and ◦ Disclosure management processes ◦ Deloitte annual report in XBRL ◦ Automating instance document creation for statutory reporting and credit reporting ◦ Design of formulas for validation2 © Deloitte Innovation B.V.
  3. 3.  XBRL claims to create transparency xbrl.org: “...Consumers of financial data, including investors, analysts, financial institutions and regulators, can receive, find, compare and analyse data much more rapidly and efficiently if it is in XBRL format. ...” Transparency relies on two aspects of XBRL ◦ Standardisation of data exchange format (instance) ◦ Standardisation of data definitions (taxonomy) Today we present the results of our analyses of SEC data to investigate "transparency“ The SEC data is the best source available today to investigate this.3 © Deloitte Innovation B.V.
  4. 4.  “The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” (1) An efficient market requires that investors are able to compare companies to find the best investment. The investors also need that data to present a comprehensive picture of the company. Value of financial reporting = comparability * comprehensiveness4 © Deloitte Innovation B.V.
  5. 5. Period: 4.500 2009 – May 2011 4.000 Forms: POS AM 3.500 N-Q 10-K, 10-Q, 20-F, 40-F 3.000 S-4 Data: 40-F N-CSR > 7,500 filings 2.500 20-F ~ 1,700 companies 2.000 6-K > 4,800,000 facts 1.500 Other 8-K 485BPOS 1.000 We estimate that the 10-K 10-Q number of facts will rise to 500 more then 80M per year. 0 2005 2006 2007 2008 2009 2010 2011 (YTD) Number of filings5 © Deloitte Innovation B.V.
  6. 6. US GAAP 2009 (core + investment +dei) Total All concepts 13,651 -/- dimensional concepts 1,947 -/- abstracts 2,155 reportable concepts 9,549 used in filings 6,282 not used in filings 3,1776 © Deloitte Innovation B.V.
  7. 7. Number of US GAAP taxonomy extension 120000 concepts and number of extension 6282 us-gaap concepts 23% us gaap Facts for US GAAP taxonomy extension concepts and facts for extension concepts 77%7 © Deloitte Innovation B.V.
  8. 8. Group Ratio % Current Ratio Liquidity Current ratio 80.3 = Current assets / Current liabilities Quick ratio 54.3 can be calculated for 80% of the Net working capital ratio 79.8 filings Current liabilities to inventory ratio 54.3 Cash ratio 79.1 Using multiple ratio’s limits this Operating ratio 14.3 Advertising Expense to Sales Ratio 1.4 further Marketing Expense to Sales Ratio 4.7 + Current ratio Assets Inventory Turnover Ratio 19.9 + Net working capital ratio Fixed Assets Turnover Ratio 2.6 + Return on Equity Ratio Total Assets Ratio 45.8 Assets to Equity Ratio 82.4 + Earnings per Share Profitability Return on Assets Ratio 85.8 can be calculated for 60%. Return on Equity Ratio 78.7 Profit Margin Ratio 39.8 Only 8%: Basic Earnings Power Ratio 23.6 Earnings per Share Ratio (1) 90.5 + Quick ratio Debt Total Debt Ratio 62.7 + Total Assets Ratio Interest Coverage Ratio (2) 1.2 + Return on Assets Ratio Debt/Equity Ratio 53.5 + Return on Equity Ratio Market Payout Ratio 29.3 + Debt/Equity Ratio (1) EPS is a single definition (2) EBIT calculation8 © Deloitte Innovation B.V.
  9. 9.  The taxonomy contains very narrowly described concepts. Resulting in the need for additional concepts if they don’t fit completely. CertainLoansAcquiredInTransferAccountedForAsAvailableForSaleDebtSecuritiesAcquired DuringPeriodContractuallyRequiredPaymentsReceivableAtAcquisition Allowance to define individual measures for the company. ◦ Helps the company to describe very precisely ◦ Limits comparability AccuredLiabilityForPayoutEstimateAndOtherCostsRelatingToPreferredShareholdersWho ExercisedTheirDissenterSRights Errors and misconceptions about extensions9 © Deloitte Innovation B.V.
  10. 10. Extending a taxonomy  Means that a filing gives a comprehensive description of a company,  but also means that it is more difficult to compare companies.  Interesting difference US – EU: US: extensions most European countries use a closed taxonomy with special concepts for disclosure10 © Deloitte Innovation B.V.
  11. 11. Higher value with standardised digital reporting Maximum value with paper- based reporting Increased value Value of through comparability Semantic business standardisation informationfor multiple reports Loss of detail Company specific Standardised 11 © Deloitte Innovation B.V.
  12. 12.  Align taxonomy design with legislation design.  Prescribe the use of top level concepts making the most important information comparable for all filings. Only allow extension at lower levels.  Model recurring extension patterns in the taxonomy Analyse filing behaviour  Build industry extensions with representative bodies creating authoritative structures .  Provide additional guidance on extensions12 © Deloitte Innovation B.V.
  13. 13.  Preparation ◦ Understand the idea behind XBRL and extensions ◦ Look for and learn from best practices.  Creation of filing ◦ Use tools  that support XBRL extension and instance creation  check for EDGAR Filer Manual rules ◦ look up official US GAAP taxonomy concepts before creating extensions. ◦ Match extensions with frequently used extensions from other companies.  Quality control ◦ Make sure the service provider understands your business and accounting, so the right reporting concepts are chosen and appropriate extensions created. ◦ Gain trust on your filing by getting an assurance report.13 © Deloitte Innovation B.V.
  14. 14.  SEC provides a unique source of data for analysis.  The value of the XBRL financial reports can be maximised by carefully choosing the level of extension.  The regulator and the filer both play an important role in this. Questions?14 © Deloitte Innovation B.V.
  15. 15. We invite you to our booth in the exhibition hall.  Contact us directly: ◦ Bas Groenveld, bgroenveld@deloitte.com ◦ Paul Hulst, phulst@deloitte.com  or visit www.xbrlplus.com  Follow us on Twitter: @xbrlplus15 © Deloitte Innovation B.V.
  16. 16.  (1): http://www.sec.gov/about/whatwedo.shtml16 © Deloitte Innovation B.V.
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