The Future of Financial Reporting
Greater Philadelphia Chapter IMA
Continuing Professional Education (CPE) Conference
Temp...
Failed Predictions
“The phonograph is of no commercial use”
- (Thomas Edison, 1880)

“Everything that has been invented ha...
Liv A. Watson
• IMA Member since 2006
• Active leaderships roles
in local Evansville, IN.
Chapter
• Active leaderships rol...
About Liv Apneseth Watson
Director Of International Business Development
Today Agenda
• TRENDS AFFECTING THE REPORTING PROCESS
OF THE FUTURE
• THE SOCIAL REPORTING REVOLUTION
• WHERE WILL THE JOU...
TRENDS AFFECTING THE REPORTING
PROCESS OF THE FUTURE
CORPORATE REPORTING
Critical for investor confidence
An essential element of corporate
governance
Influences decisions and...
The Future

Michio Kaku
“predicts that computer
power will increase to the
point where computers, like
electricity, paper,...
Future of Humanity: Planetary Civilization
Kaku ranks the civilization of the future,
with classifications based on energy...
Information
Will Be
Available via
a Ubiquitous
Internet
Computing
Power Will Be
Cheaper;
Internet Will
Become a
Broader
Platform
KEY TAKEAWAYS
Mass
Collaboration
and Peer
Production
Online Models
Will Abound;
Machine
Readable
Information a
Must
Web Services Will Drive More Innovation
THE SOCIAL REPORTING REVOLUTION
“YOU CANNOT
MANAGE WHAT
YOU CAN'T
(OR DON'T)
MEASURE"
K1
Slide 17
K1

this graphic does not make sense to me. it doesnt correlate well with the text. Can we get rid of this and ma...
The Evolution of
Corporate Reporting
INTEGRATED

ENVIRONMENTAL
REPORTING
REPORTING
GRC
REPORTING
SUSTAINABILITY
COMPLIANCE...
INTEGRATED
REPORTING
STAKEHOLDER
ECOSYSTEM

Infomediaries

Investment
Community

EXTERNAL
STAKEHOLDERS

Subsidiaries

Inve...
GOOGLE SEARCH
Environmental Reporting: 65 Million
Compliance Reporting: 60 million
Financial Reporting: 38 Million
Managem...
“We’ve overspent our
financial, environmental,
social and governance
‘capital,’ and now the debt’s
come due.
Integrated Re...
INTEGRATED REPORTING
“This is a very
important initiative
that draws together
the key actors across
financial,
environment...
INTEGRATED REPORTING
Evolution
Journey
Challenges
Missing Links
Story
Opportunities
Economic value
WHY PRACTICE
INTEGRATED REPORTING
Shows commitment to being
sustainable
Helps integrate sustainability into
strategy and o...
WHY PRACTICE
INTEGRATED REPORTING
Improves relationship with
investment community
Enhances access to capital
Strengthens r...
CSR
REPORTING
TRENDS
CSR
REPORTING
TRENDS
CSR
REPORTING
TRENDS
CSR
REPORTING
TRENDS
CSR REPORTS WITH FORMAL ASSURANCE STATEMENT
Country

CSR
REPORTING
TRENDS

France
Spain
Italy
UK
Denmark
Netherlands
Austr...
CHALLENGES TO INTEGRATED REPORTING

“Closing the non-financial books” on time
Required level of inter-functional
coordinat...
MISSING LINKS
Standardization
Comparability
Materiality
Complexity
Stakeholder engagement
Assurance
Trust
OPPORTUNITIES
Tell your story your way
(re)Build trust
Grow economic value
Restore the balance
Improve transparency
Manage...
LEADING
REPORTERS
HOW TO SPEED ADOPTION?
Missing links need to be
connected
Companies must take
responsibility to act
Innovation by many
con...
INVESTMENT COMMUNITY SUPPORT GROWING

Thursday, November 18th, 2010
Statement Calls for Policies to Unlock the Vast Potent...
CHAOS OF FRAMEWORKS
SOLUTION MUST BE GLOBAL
“Sector, country-specific and
proprietary frameworks for
reporting on sustainability are at
odds w...
Soft versus Hard CSR Laws
Rio 20 – 2012
Brazil, Denmark, France, and South Africa have created a self-named group called “Friends of Paragraph 47”

...
http://www.sseinitiative.org/publications/
http://www.responsibleresearch.com/Responsible_Research___Sustainable_Stock_Exchanges_2010.pdf
• 75 Banks
Agreements, standards and recommendations
SEC Adopts Rule for Disclosing Use of Conflict Minerals
Washington, D.C., Aug. 22, 2012
• The Securities and Exchange Comm...
The minerals involved in this trade – cassiterite (tin ore), coltan (tantalum ore),
wolframite (tungsten ore) and gold – a...
http://hausercenter.org/iri/about/global-csr-disclosure-requirements
CSR Reporting Challenges
CONTENT &
STRATEGY

PROCESS

Linkage: financial & non
financial performance

Collaboration

Mater...
CSR Reporting Pain Points
#

Excel works poorly
with Word

1

#

2

No supply/value
chain collaboration
or version control...
WHERE WILL THE
JOURNEY TAKE YOU?
The Information Overload Challenge
“ in this networked world, there is a need for
greater flow of knowledge across boundar...
XBRL is the
electronic
language for
business
information
exchange
XBRL a 2007 Breakthrough Idea!
Here Comes XBRL
Looking at XBRL in Different Ways
• A freely available, market-driven, open, global
standard for exchanging business infor...
Looking at XBRL in Different Ways
• XBRL is a means of modeling the meaning of
business information in a form
comprehendib...
Adding Meaning to Electronic Data
Standardization

Presentation
Presentation
Presentation
Presentation
Presentation
Compta...
Intelligent Machine Readable Data
“Adoption of new technologies never occurs as
quickly as we expect – but the impact is far greater
than we realize.”

- Cr...
The Benefits
GRI and XBRL
The goal of this document is to

provide guidance to people
who use the GRI
Taxonomy to either report
sustain...
Different types of users of the GRI XBRL taxonomy
• Reporters:
– Organizations who disclose their sustainability performan...
GRI’s XBRL Voluntary Filing Program
• GRI Taxonomy 2012 / G3. and G3.1.
• GRI Taxonomy enables organizations to tag their
...
Greenhouse gas emissions and global warming are amongst the most material and
commonplace sustainability challenges addres...
Why Disclose CDP data?
KEY TAKEAWAYS
Corporate reporting is evolving
Many new data sets are non-financial
CSR is leading into integrated reportin...
Liv A. Watson
Director, New Markets
liv.watson@webfilings.com

Author or contributing author to the following books:

Liv ...
The future of financial reporting by liv watson and brad monterio
The future of financial reporting by liv watson and brad monterio
The future of financial reporting by liv watson and brad monterio
The future of financial reporting by liv watson and brad monterio
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The future of financial reporting by liv watson and brad monterio

  1. 1. The Future of Financial Reporting Greater Philadelphia Chapter IMA Continuing Professional Education (CPE) Conference Temple University Friday, December 7, 2012 12:30 pm – 2:10 pm Presented by: Liv Apneseth Watson Director of International Business Development WebFilings
  2. 2. Failed Predictions “The phonograph is of no commercial use” - (Thomas Edison, 1880) “Everything that has been invented has been invented” - ( Charles Duel, Director US Patent Office, 1899) “Who the hell wants to hear actors talking?” - (Harvey Warner, 1927) “I think there is a world market for about five computers” (Thomas J Watson, Chairman, IBM, 1943) “There is no reason for any individual to have a computer in their home” - (Ken Oloson, President of Digital Equipment Corp., 1977) “640k ought to be enough for anyone” - (Bill Gates, 1981)
  3. 3. Liv A. Watson • IMA Member since 2006 • Active leaderships roles in local Evansville, IN. Chapter • Active leaderships role in Lincoln Trail Council • Active leadership roles in IMA National Board of Directors and several of committees. Director Of International Business Development
  4. 4. About Liv Apneseth Watson Director Of International Business Development
  5. 5. Today Agenda • TRENDS AFFECTING THE REPORTING PROCESS OF THE FUTURE • THE SOCIAL REPORTING REVOLUTION • WHERE WILL THE JOURNEY TAKE YOU?
  6. 6. TRENDS AFFECTING THE REPORTING PROCESS OF THE FUTURE
  7. 7. CORPORATE REPORTING Critical for investor confidence An essential element of corporate governance Influences decisions and behavior of management Influences decisions and behavior of shareholders and other stakeholders Affects resource allocation (financial, natural and human resources) in society Influences perceptions of the company’s customers, vendors, and employees Shapes how a company sees itself and its role in society Source: Prof. Robert Eccles, Harvard Business School
  8. 8. The Future Michio Kaku “predicts that computer power will increase to the point where computers, like electricity, paper, and water, "disappear into the fabric of our lives, and computer chips will be planted in the walls of buildings."
  9. 9. Future of Humanity: Planetary Civilization Kaku ranks the civilization of the future, with classifications based on energy consumption, entropy, and information processing. Michio Kaku is an American theoretical physicist
  10. 10. Information Will Be Available via a Ubiquitous Internet
  11. 11. Computing Power Will Be Cheaper; Internet Will Become a Broader Platform
  12. 12. KEY TAKEAWAYS
  13. 13. Mass Collaboration and Peer Production Online Models Will Abound; Machine Readable Information a Must
  14. 14. Web Services Will Drive More Innovation
  15. 15. THE SOCIAL REPORTING REVOLUTION
  16. 16. “YOU CANNOT MANAGE WHAT YOU CAN'T (OR DON'T) MEASURE" K1
  17. 17. Slide 17 K1 this graphic does not make sense to me. it doesnt correlate well with the text. Can we get rid of this and make the text bigger? Korie.Downs, 11/9/2012
  18. 18. The Evolution of Corporate Reporting INTEGRATED ENVIRONMENTAL REPORTING REPORTING GRC REPORTING SUSTAINABILITY COMPLIANCE REPORTING CSR REPORTING REPORTING MANAGEMENT FINANCIAL REPORTING STATEMENTS
  19. 19. INTEGRATED REPORTING STAKEHOLDER ECOSYSTEM Infomediaries Investment Community EXTERNAL STAKEHOLDERS Subsidiaries Investment Community Institutional Investors Retail Investors Infomediaries Media Social Media Data Aggregators Financial Publishers Overseers INTERNAL STAKEHOLDERS Overseers Regulators Lawmakers Policy Makers Central Banks NGOs Community Groups Associations Service Providers External Auditors External Legal Professional Services Technology Vendors Trading Partners INTERNAL STAKEHOLDERS Management Employees/Staff Board/Governance Service Providers ©2011 Brad Monterio and Liv Watson
  20. 20. GOOGLE SEARCH Environmental Reporting: 65 Million Compliance Reporting: 60 million Financial Reporting: 38 Million Management Reporting: 32 million CSR Reporting: 21 million Integrated Reporting: 7 million Sustainability Reporting: 3 Million GRC Reporting: 2 million
  21. 21. “We’ve overspent our financial, environmental, social and governance ‘capital,’ and now the debt’s come due. Integrated Reporting is the starting point to help us repay that debt.” Brad J. Monterio
  22. 22. INTEGRATED REPORTING “This is a very important initiative that draws together the key actors across financial, environmental and social reporting. The concept of integrated reporting is coming of age.” Hans Hoogervorst, Chairman, IASB “Integrated Reporting demonstrates the linkages between an organization’s strategy, governance and financial performance and the social, environmental and economic context within which it operates. By reinforcing these connections, Integrated Reporting can help business to take more sustainable decisions and enable investors and other stakeholders to understand how an organization is really performing.” The IIRC (www.theIIRC.org)
  23. 23. INTEGRATED REPORTING Evolution Journey Challenges Missing Links Story Opportunities Economic value
  24. 24. WHY PRACTICE INTEGRATED REPORTING Shows commitment to being sustainable Helps integrate sustainability into strategy and operations for a better managed company Commitment to sustainability is good for shareholders Improves engagement with other stakeholders, especially employees and customers Improves reporting transparency Simplifies external reporting Positions company as leader and innovator
  25. 25. WHY PRACTICE INTEGRATED REPORTING Improves relationship with investment community Enhances access to capital Strengthens relationships within communities through stakeholder engagement Improves reputation and strengthens brand Meets compliance/regulatory needs
  26. 26. CSR REPORTING TRENDS
  27. 27. CSR REPORTING TRENDS
  28. 28. CSR REPORTING TRENDS
  29. 29. CSR REPORTING TRENDS
  30. 30. CSR REPORTS WITH FORMAL ASSURANCE STATEMENT Country CSR REPORTING TRENDS France Spain Italy UK Denmark Netherlands Australia South Africa Sweden Finland Norway Japan Canada USA 2002 (%) 2005 (%) 2008 (%) 14 27 66 53 45 38 42 100 15 29 20 26 10 2 40 44 70 53 31 40 43 22 5 19 33 31 10 3 73 70 61 55 46 44 42 36 33 30 30 24 19 14 Source: KPMG International Survey of Corporate Responsibility Reporting 2008, p. 56-58
  31. 31. CHALLENGES TO INTEGRATED REPORTING “Closing the non-financial books” on time Required level of inter-functional coordination Deciding on appropriate level of detail Deciding what’s material or not Lack of agreed-upon standards and audit (vs. assurance) methodologies Poor understanding of the relationship between financial and non-financial performance Getting the attention of investors for nonfinancial information
  32. 32. MISSING LINKS Standardization Comparability Materiality Complexity Stakeholder engagement Assurance Trust
  33. 33. OPPORTUNITIES Tell your story your way (re)Build trust Grow economic value Restore the balance Improve transparency Manage entire supply chain Mitigate reputation risk Save money Build long term value Attract capital
  34. 34. LEADING REPORTERS
  35. 35. HOW TO SPEED ADOPTION? Missing links need to be connected Companies must take responsibility to act Innovation by many constituencies is necessary Support from investment community vital Standards essential – XBRL is part of it; must be global Legislation and regulation will ultimately be required Support from civil society will encourage others to act
  36. 36. INVESTMENT COMMUNITY SUPPORT GROWING Thursday, November 18th, 2010 Statement Calls for Policies to Unlock the Vast Potential of LowCarbon Markets and Avoid Economic Devastation Caused by Climate Change (London) – The world’s largest global investors have a powerful message for climate negotiators in Cancún and all national governments: Take action now in the fight against global warming or risk economic disruptions far more severe than the recent financial crisis. The statement was signed by more than 250 investors from Europe, United States, Asia, Australia, Brazil and South Africa, with collective assets totaling over US$ 15 trillion—more than one-quarter of global capitalisation. Signatories included the global giants Allianz Global Investors and HSBC Global Asset Management, as well as many of the largest European pension funds and a dozen US public pension funds and state treasurers. It is the largest-ever group of investors to call for government action on climate change.
  37. 37. CHAOS OF FRAMEWORKS
  38. 38. SOLUTION MUST BE GLOBAL “Sector, country-specific and proprietary frameworks for reporting on sustainability are at odds with what the market needs today. Solutions need to be global, uniform, consistent, comparable with current needs and extensible to meet current and future needs; they need to help the market understand an organization‘s sustainability practices, no matter in which country or industry sector they operate.” - Liv A. Watson & Brad J. Monterio
  39. 39. Soft versus Hard CSR Laws
  40. 40. Rio 20 – 2012 Brazil, Denmark, France, and South Africa have created a self-named group called “Friends of Paragraph 47” Extra-financial information Grenelle II law ISAE 3000 and the AA1000. Ad Hoc Data
  41. 41. http://www.sseinitiative.org/publications/
  42. 42. http://www.responsibleresearch.com/Responsible_Research___Sustainable_Stock_Exchanges_2010.pdf
  43. 43. • 75 Banks
  44. 44. Agreements, standards and recommendations
  45. 45. SEC Adopts Rule for Disclosing Use of Conflict Minerals Washington, D.C., Aug. 22, 2012 • The Securities and Exchange Commission today adopted a rule mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act to require companies to publicly disclose their use of conflict minerals that originated in the Democratic Republic of the Congo (DRC) or an adjoining country. • The minerals are “necessary to the functionality or production” of a product manufactured or contracted to be manufactured by the company. • Congress enacted Section 1502 of the Act because of concerns that the exploitation and trade of conflict minerals by armed groups is helping to finance conflict in the DRC region and is contributing to an emergency humanitarian crisis. Section 1502 of the Act amends the Securities and Exchange Act of 1934 to add Section 13(p). • Companies will file their first specialized disclosure report on May 31, 2014 (for the 2013 calendar year) and annually on May 31 every year thereafter. • The final rule requires a company to provide the disclosure on a new form to be filed with the SEC (Form SD). http://www.sec.gov/news/press/2012/2012-163.htm
  46. 46. The minerals involved in this trade – cassiterite (tin ore), coltan (tantalum ore), wolframite (tungsten ore) and gold – are traded into international supply chains and used in the production of consumer goods such as laptops, cell phones and jewellery.
  47. 47. http://hausercenter.org/iri/about/global-csr-disclosure-requirements
  48. 48. CSR Reporting Challenges CONTENT & STRATEGY PROCESS Linkage: financial & non financial performance Collaboration Materiality Version control Level of detail Data aggregation Lack of standards & frameworks Access and control Helps CSR report preparers eliminate or minimize these process challenges Allows company to focus on content & strategy Frees up time to better tell the company “story”
  49. 49. CSR Reporting Pain Points # Excel works poorly with Word 1 # 2 No supply/value chain collaboration or version control # 3 # Managing change is difficult # XBRL Compliance Copyright 2012 WebFilings LLC Company Confidential 5 4 End-game crunch
  50. 50. WHERE WILL THE JOURNEY TAKE YOU?
  51. 51. The Information Overload Challenge “ in this networked world, there is a need for greater flow of knowledge across boundaries. . knowledge needs structure - without structure you cannot retrieve it efficiently and you cannot personalize the internet has facilitated access to information, but complicated the task of identifying relevant knowledge” Source: Quotes from TFPL Taxonomies for Business conference, London 23 October 2000
  52. 52. XBRL is the electronic language for business information exchange
  53. 53. XBRL a 2007 Breakthrough Idea! Here Comes XBRL
  54. 54. Looking at XBRL in Different Ways • A freely available, market-driven, open, global standard for exchanging business information
  55. 55. Looking at XBRL in Different Ways • XBRL is a means of modeling the meaning of business information in a form comprehendible by computer applications XBRL is a formal description of concepts, terms, and relationships within a given knowledge domain.
  56. 56. Adding Meaning to Electronic Data Standardization Presentation Presentation Presentation Presentation Presentation Comptant Comptant 現金及び現金等価物 Деньгиenїх etэквиваленты Гроші & Cashеквіваленти Kas ихEquivalents 现金与现金等价物 Geld &и Geldmiddelen Cash та Geld nahe Mittel Equivalents References Label GAAP I.2.(a) Instructions Ad Hoc disclosures cashCashEquivalentsAndS hortTermInvestments XBRL Item Calculation Cash = Currency + Deposits Validation Formulas Contexts US $ FY2004 Budgeted Cash ≥ 0
  57. 57. Intelligent Machine Readable Data
  58. 58. “Adoption of new technologies never occurs as quickly as we expect – but the impact is far greater than we realize.” - Cringley’s Law
  59. 59. The Benefits
  60. 60. GRI and XBRL The goal of this document is to provide guidance to people who use the GRI Taxonomy to either report sustainability information or wish to receive it. Source: https://www.globalreporting.org/resourcelibrary/GRI-Taxonomy-Implementation-Guide-2012.pdf
  61. 61. Different types of users of the GRI XBRL taxonomy • Reporters: – Organizations who disclose their sustainability performance • Filing agent: – Organizations creating a report on behalf of another organization • Consumers: – Organizations that use information provided by reporters • Extenders: – Organizations that create an XBRL taxonomy reusing the work done by GRI • Regulators and governmental agencies: – Organizations that adopt the GRI Taxonomy to define reporting requirements to be provided by filing organizations • Software vendors: – Organizations that embed the GRI Taxonomy in their solutions
  62. 62. GRI’s XBRL Voluntary Filing Program • GRI Taxonomy 2012 / G3. and G3.1. • GRI Taxonomy enables organizations to tag their sustainability data in reports For More Information Contact: XBRL@GlobalReporting.org
  63. 63. Greenhouse gas emissions and global warming are amongst the most material and commonplace sustainability challenges addressed Paul Simpson, CEO Carbon Disclosure Project
  64. 64. Why Disclose CDP data?
  65. 65. KEY TAKEAWAYS Corporate reporting is evolving Many new data sets are non-financial CSR is leading into integrated reporting XBRL mandates: CDP, GRI and IIRC Structured Data is here to stay!] Innovation
  66. 66. Liv A. Watson Director, New Markets liv.watson@webfilings.com Author or contributing author to the following books: Liv A. Watson www.webfilings.com

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