Ash Deshmukh Associate Professor of Accounting and IS Pennsylvania State University - Erie. 1 Copyright 2005 Ashutosh Deshmukh, PhD

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1 Ash Deshmukh Associate Professor of Accounting and IS Pennsylvania State University - Erie 1

2 Outline XBRL Background What is XBRL? Structure of XBRL Example What you can do with XBRL now? Conclusion 2

3 History of X Markup Languages SGML XML Handout XBRL and X Languages in Business What is a markup? Why it is important? 3

4 What is XBRL? XBRL uses accepted financial reporting standards, and allows automatic exchange and reliable extraction of financial statements across all software and technologies. Financial reporting includes annual reports, SEC filings, reports from companies to investors, regulators, investors, and financial analysts, general ledger information, and audit schedules. 4

5 XBRL IS Characteristics XML based standard format for financial reporting XBRL facilitates drill down of information XBRL is extensible, users can increase its applicability XBRL can be used transfer a single item of financial data or a financial database XBRL standards are in the public domain XBRL is NOT XBRL does not set new accounting standards XBRL does not create a generic chart of accounts XBRL does not translate GAAP XBRL is not a privately owned standard XBRL does not capture data at the transaction level 5

6 Timeline for XBRL Year Developments Charlie Hoffman (CPA, Knight, Vale & Gregory, Washington, US) proposed using XML for financial reporting AICPA conducted a pilot study to build a prototype called XFRML (extensible Financial Reporting Modeling Language) AICPA forms a steering committee XBRL.org, about a dozen companies join the effort XFRML became XBRL Specification 2.0 for XBRL released Draft of taxonomy for IASC (International Accounting Standards Committee) released Several International Symposiums held More than 170 organizations have joined the effort under the umbrella of XBRL International XBRL Specification 2.1 approved 6

7 Structure of XBRL XBRL Markups, XBRL Documents, and XBRL Schemas XBRL Transformation and Processing Technologies XBRL Tools and Software 7

8 XBRL Instance Document Handout 8

9 XBRL Instance Document and Taxonomy XML XML Schema XLink XML Namespace XPath XSLT XBRL Specifications XBRL Instance Documents XBRL Taxonomies W3C XML Recommendations 9

10 XBRL Taxonomy International Accounting Standards IASC Country 1 Jurisdictions Country 2 Country n US GAAP Canadian (CICA) UK (ICAEW) Hong Kong (HKSA) Industry 1 Industry 2 Industry n Airline Agriculture Banks Construction Not-for-profit Governmental Firm 1 Firm 2 Firm n Firm Specific Terms Voluntary Disclosures 10

11 XBRL Taxonomies International Accounting Standards Country Specific GAAP Industry Specific Items Firm Specific Items Financial Data Compliant accounting software Third-party software XBRL Instance Document XBRL Instance Document XSL Files Stylesheets Financial Statements and Reports PDF Files HTML Files Word Files Text Files 11

12 XBRL Tools and Software Taxonomy Related Tools Document Instance Related Tools Programmatic Tools XBRL Repositories 12

13 Audit and Control Issues How will XBRL financial statements be used? They carry all the same challenges that paper based reports contain but add the extra dimension of divisibility. Will companies and auditors give assurance on XBRL instance documents as a whole? What about a small piece of the whole, such as earnings per share calculation? How do you know if appropriate taxonomy is being used? How do you know if the taxonomy is correct, especially if it is internally developed? How do you know XBRL instance documents are properly marked up? How do you ensure the integrity of tagged data? How do you assure accuracy and integrity of stylesheets to ensure proper output? What are the appropriate auditing and sampling procedures to audit these control issues? 13

14 What can you do now? Incorporate XBRL into your website Regulatory filings Add it to your earnings releases Visit Pioneer / Under the hood problem What do you need? Accounting software support MS Office 2003 Accounting / IS interface 14

15 Problems Upfront Investment Richness and variations in financial reporting Developing, maintaining, and validating taxonomies Changes in XML specifications Complexity of XBRL Skill sets 15

16 Conclusion Promises and Perils Problems and Prospects Hype and Reality 16