XBRL for Internal Reporting XBRL International Conference Boston April 27, 2005 Neal J. Hannon Director, XBRL Software Development Allocation Solutions, Inc. Barney School of Business, University of Hartford Internal Reporting Processes Business Operations Interna l Financi al Report ing Externa l Financi al Reporti ng Investme nt, Lending, Regulati on Economic Policyma king Nature of Internal Reporting Purposes Planning Control Decision making More detailed More frequent More varied; less standardized More difficult to justify upfront costs of consistency More pressures now Internal controls - SOx 404 PCAOB 3, Section 5.c SOx 409 Credit: Eric Cohen While many corporations have succeeded in addressing the reporting issue of the 1990s, they must focus on the 21st century reporting issues. They need more leading indicators to enable them to anticipate challenges. Robert Kugel, Ventana's VP & Research director, financial performance management Building Blocks Journal entries Account, amount, date, description Parties/agents Customers, vendors, employees Source documents Document number, dates, file location Resources Inventory, services, fixed assets, KPI Mappings to and between Accounts, Classifications, XBRL reporting taxonomies Data-Centric Model Premise: Improvements in computer processing, storing and reporting power are now permitting a more direct look into the lifeblood of the enterprise, data. Data in an XML-enabled environment is no longer constrained by computer platform or the functional software that created it. Adding meta-data provides not only mobility for data, but provides the basis for continuous reporting and continuous data assurance. Data-Centric Approach To Enterprise Reporting Business Reporting Governance Monthly reporting BAM External Auditing Exception reporting Sarbanes-Oxley Compliance KPI’s Application Integration Layer Business Data Internal Auditing Various formats, Structures, Platforms Budgets Scorecarding XML, Web Services, X-link EII, XBRL-GL Forensic Accounting SEC Reporting Continuous Audit Desk-top Management Board Audit Committee Real-Time Reporting Phases of Development: XBRL Reporting Phase III Open, Dynamic Real-Time Reporting, Continuous Auditing, Real Time Analysis from stakeholders both inside and outside Phase II Feeding XBRL-GL data to business Internal and external reporting, SEC filing, Sarbanes-Oxley compliance, KPI’s, Scorecards, internal audit Phase I - Today Using XBRL for SEC filing; XBRL-GL for internal Data gathering (Wacoal); Data Analysis (Edgar-Online) Government reporting (APARA, FDIC, etc.) Phases of Development: XBRL Reporting Phase I - Today Using XBRL for SEC filing; XBRL-GL for internal Data gathering (Wacoal); Data Analysis (Edgar-Online) Government reporting (APARA, FDIC, etc.) Wacoal: XBRL GL Auto Journalizing System XiRUTE Copyright 2004 Hitachi From Edgar-Online: Phases of Development: XBRL Reporting Phase II Feeding XBRL-GL data to business Internal reporting, SEC filing, Sarbanes-Oxley compliance, KPI’s, Scorecards, internal audit Impact on Control Environment Today Taxonomy Driven 1. Automated 1. Manual 2. Persistent 2. Periodic 3. Embedded in data process 3. Physically connected to flows - Optimized Internal data store 4. Integrated within enterprise 4. Segregated in each business processes/cost effective unit/redundant costs 5. Proactive/timely 5. Reactive/untimely 6. Visible/transparent 6. Opaque/ deep in organizational processes 7. More Secure 7. Less secure The outcome is to move controls further up the quality curve. Credit: Walter Hamscher XBRL-GL Can Help Here And Here Automated Control Monitoring Current Management Reporting – Insurance example Transaction data Multiple departmental Excel spreadsheets Consolidated spreadsheets for management ACORD XBRL GL SQL Senior Management ACORD XBRL GL SQL ACORD XBRL GL 2000 elements = 6500 spreadsheets (this is not a typo) W. Hamscher Current Management Reporting Transaction Data Multiple Departmental Excel Spreadsheets Consolidated spreadsheets for management ACORD XBRL GL SQL Senior Management ACORD XBRL GL SQL ACORD XBRL GL W. Hamscher Current Management Reporting trols Subsidiary ERP’s Controls trols Controls Control located with data or in supplemental manual processes Controls Controls trols Controls Controls rols Controls Senior Management Controls Controls Controls Supplemental information aggregation Services architecture leveraging taxonomies Transaction and or subsidiary Data Controls ‘Wrap & Map’ Viewing and aggregation for department & management ACORD XBRL GL Controls ACORD XBRL GL Controls ACORD XBRL GL XBRL Web Services Senior Management Controls Controls Controls W. Hamscher Phases of Development: XBRL Reporting Phase III Open, Dynamic Real-Time Reporting, Continuous Auditing, Real Time Analysis from stakeholders both inside and outside XML derivative transactions Traditional data item Explanatory labels (tags) •Identity, units, source, etc. • Control labels • E-signatures, sequence numbers, invisible markers, • Control signals Financial-related Web Services in the future (the universal data bus) Accounting bots and services ERP Other Assurance Services Selective Layered Reporting Financial Analytic Services Audit Servic e Fraud detection Service Stale, erroneous, and opaque information Ultimate drill down to the transaction levels of all related parties !!!! Business report a living thing dependent on intrinsic business process rhythms In case of doubt give data not models or aggregates Disclose the time-series bases of aggregates and estimates Credit: Miklos Vasarhelyi Neal J. Hannon Director of XBRL Software Development for Allocation Solutions, Inc. XBRL Editor: Strategic Finance Magazine University of Hartford Email: neal.hannon@allocationsolutions.com Hannon@hartford.edu Phone: 401-769-3802 or 860-768-5810