How XBRL Will Enhance the Credibility of Financial Statements

Presented by Graham Ward President, IFAC

The Corporate Reporting Supply Chain

Management Directors Auditors Information Distributors Analysts Investors & Regulators Lawyers/Bankers

Economics of Credibility

  Public values timely, accurate, complete user friendly data Value = Reduction of uncertainty times $$$ at risk  Increased transparency and greater usability of corporate reporting information improves credibility  Increased credibility leads to further investment and economic development

Information Cost and Value Equation

 Value = Reduction of uncertainty times $$$ at risk  Cost = Produce + Structure + Distribute + Consume XBRL provides a powerful ROI as it puts information in the hands of consumers at lower costs (both production and consumption)

The Current Environment

 Accelerating drive to enhance business reporting  Increasing demands for more timely information  Market requires increased transparency

XBRL - The Path to Progress

 Lowers the cost of information production AND consumption  Facilitates exchange of data  Streamlines communications  Expedites information delivery  Enhances transparency of reported information

XBRL Supports the Public Interest

 XBRL – a tool which allows investors to better protect themselves  Level playing field for all investors  Enhanced investor processing of information  Easier investor analysis  More informed market  Better decisions

The Corporate Reporting Supply Chain

Effect on Internal Management Processes

 More timely, accurate, data for decisions  Enhanced analytical capabilities  Better control environment  Accelerated adoption of reporting models  Reduced costs for producing reports  Enhanced flexibility of information for analysis

The Corporate Reporting Supply Chain

Effect on External Management Processes

 Reduces cost of producing reports in all formats  Flexibility to meet individual circumstances  Greater control over reported information  Enhanced compliance capabilities  Tell your own story (precise & clear)

The Corporate Reporting Supply Chain

Effect on External Auditors

 More timely, accurate, and complete data for analysis  More effective analysis of data for anomalies    More frequent assessments Enables more efficient research More effective way of identifying reporting changes and/or relationship with other standards

The Corporate Reporting Supply Chain

Effect on Regulators

 Enhanced validation of reported information  Greater flexibility for changes in reporting requirements  Enables more complete analysis  Meet regulator demand for more frequent and detailed reporting

The Corporate Reporting Supply Chain

Effect on Stock Exchanges and Credit Agencies

 Better information for better analysis & decisions  Easier analysis of reported and credit information  More transparency and increased trading  More useful information across borders

The Corporate Reporting Supply Chain

Effect on Stock Exchanges

 More timely collection of data  Reduced costs of compliance

Challenges to Auditors

 Development of relevant assurance & attest standards for reports formatted in XBRL   Leverage tools which exploit XBRL (and other relevant Internet standards)  Development of an enhanced business reporting framework Cost effective assessment of corporate reporting process controls environment

Challenges to Auditors

 Assessment of management assertions  Assessment of plaintiff risk associated with enhanced analytical capabilities  Process associated with electronic signatures  Assessment of assurance services around more frequent to continuous reporting

Benefits Outweigh Risks

 Cost-efficiencies for all in the financial reporting supply chain  Greater ability to extract and manipulate relevant data  Reduction in errors  Increased transparency of reported information

Current Progress

 Prominent companies and organizations use XBRL for publishing business information  Software vendors are delivering XBRL enabled application to the market around the world  Regulatory bodies in Australia, China, Denmark, Germany, Japan, Korea, Netherlands, UK and US are implementing XBRL  Governments in Singapore and New Zealand are expected to endorse XBRL

The Corporate Reporting Supply Chain Processes

Business Operations Internal Financi al Reporti ng External Financia l Reportin g Investme nt, Lending, Regulatio n Economic Policymak ing

Participants

Trading Partners Companies Financial Publishers and Data Aggregators Investors Central Banks Management Accountants Auditors Software Vendors Regulators

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Tomorrow’s World

A more efficient / effective supply chain for the capital markets  Timely, accurate, user-friendly data valued by public  Increased usability of reported information  Credible reporting process  More efficient capital allocation  More efficient investment and greater economic development

How XBRL Will Enhance the Credibility of Financial Statements

Presented by Graham Ward President, IFAC