Taylor Hawes
GM Controller, Finance
Microsoft Corporation
In partnership with

Social
Vanessa Williams first black women to win Miss America pageant
Sally Ride first women in space on space shuttle challenger
Gulon Bluford first African American in space
Martin Luther King day becomes a holiday
Hooters was opened in Clearwater, Florida
“Thriller” album of the year
The “computer” is Time magazine “Man of the Year”
Technology
More then 10 million computers are in use in the United States
Motorola starts testing cell phones in Chicago
Audio music cassettes outsell LP records
CDs (compact discs, not certificates of deposit) go on sale
Apple's Lisa, the first microcomputer with a graphical user interface
Lotus 123 was launched
Microsoft Windows was announced
TCP/IP becomes standard for Internet communication between computers
Internet domains get names instead of hard-to-remember numbers

Michael Jackson is still famous…not for his music
Personal computer are a commodity, power approaches “super computers of 1983”
CD’s are now being replaced by iPods/MP3 players
The Air Force trains their pilots using computer simulated games
Global cell phone usage will approach 1.4 billion in 2004
94 million or 27% of all households have a cellular phone
889 million or 13.9% of the population have access to the internet worldwide
Asia is number one with 302 million users compared to North
America’s 221 million
We watch TV from fiber or satellite with over 100 channels
Video on demand becoming a reality
Access based communication and graphical browser created adoption of the internet
Today, ubiquity of connectivity and web services will create solution customized to “YOU”

Complying with Sarbanes-Oxley Act,
Section 404
Reducing time in the close process
Investing in XBRL and the SEC Voluntary
Filing Program

Total Revenue
Operating income
Pre-tax Income
# of Segments
# of Locations
# of Employees
$39.7 billion
$14.5 billion
$12.2 billion
7
~130
66,000
For fiscal year ended June 30, 2005

Revenue
COGS and
Operations
Information Technology
Sales and
Marketing
Services
R&D / Some Org
Specific S&M
Sales and Marketing Services
IW
Information
Worker
Client
Server
& Tools
MED
Mobile and
Embedded
Devices
MBS
Microsoft
Business
Solutions
OpEx
HE
Home and
Entertainment
MSN
Corporate Shared Services
(Corp Services [A/P&Procurement; Real Estate/Facilities], HR/Payroll, LCA)
Non-Op
Treasury
Tax
Tax and Internal Audit
Corporate
Accounting and
Control
Corporate Accounting/Global Platforms & Operations
Strategy, Planning & Analysis

Fiscal year 2004 was our beta version…
Audit competencies: We trained 600 new
“internal auditors”
Business process rigor
We grappled with definition of key controls
We struggled with level of documentation
We had to lead IT with our domain knowledge

We ensured project management discipline
Placed controls and compliance managers in field positions
Reduced number of key controls through better definition
We evaluated and conducted remediation long before year-end

Key Controls 30% reduction
Processes 2% reduction
Locations
Applications in Scope
Combined Processes by Locations
No change
13% reduction
14% reduction
$ Coverage (Balance Sheet and P&L) 7% reduction
Hours invested 36% reduction
People Involved 25% reduction
External spend 50% reduction

communications
People are tired, be ready for backlash to any changes from PMO, even if it simplifies work for field
Continue refinement and focus on reduction of key controls
Time savings not as great as we expected
Documentation and testing took approx 75%
FY 2004 spend
Synchronization of IT and business is critical

Strive for preventative and automated key controls
Apply competencies and discipline to 302
Consolidate finance operations where possible, reduce key controls
Reliance on other forms of monitoring we already conduct (think XBRL)

15
10
5
0
Average Number of Days to Close Monthly or
Quarterly
(Controllers' Leadership Roundtable Research)
4.3
10.4
20
15
10
5
0
Top Quartile Remaining Responding Companies
30%
0-3 Days
Ideal Number of Days to Close
(Controllers' Leadership Roundtable Research)
45%
4-6 Days
16%
6%
3%
7-10 Days 11-15 Days More Than 15
Days
75% surveyed believe 6 days or fewer is optimal; 75% are at 10 days or higher
Expected Close Process FTE Requirements
(Controllers' Leadership Roundtable Research)
40%
30%
20%
10%
0%
2%
26%
31%
23%
2% 2%
Decrease Remain
Flat
Increase
0-10%
Increase
11-25%
Increase
26-50%
Increase
51% or >
14%
Don't
Know
Expected Costs of Finance Functional
Performance
(Controllers' Leadership Roundtable Research)
30%
25%
20%
15%
10%
5%
0%
1%
19% 19%
28%
15%
2%
16%
Decrease Remain
Flat
Increase
0-10%
Increase
11-25%
Increase
26-50%
Increase
51% or >
Don't
Know
Over 50% believe costs will increase; over 25% believe in the double digits

Close and reporting processes are related but managed separately
Everyone (reporting team, auditors) needs better access to the information
Users toggle between multiple tools, multiple documents
Users need support documentation, validation
Workflow must support collaboration

We’ve tied close & reporting activities together
Enabled collaborative workspace environment
Shared calendar
Issue Management
Supporting documents
Review
Sign-off
Operate a paperless close
MD&A written in the close process
Online F/S distribution, completion of SEC checklist, w/version control and real-time auditor access

Collaborative workspace environment: All tasks, workflow, document management and so forth in common location

Detailed disclosure task list – all supporting documentation attached, to ease review and confirm key control activities

All disclosures internally checked for accuracy against the support retained in site. We incorporate links from the document to the underlying support the QC version.

Reduced consolidated close by 5 days on average
We file Form 10-Q at same time as Earnings Release
Reduced time-to-file between 7-10 days on average
Future plans: Reduce by one additional week
With 52 individuals involved, this saves 8K hours a year
Reduced auditor involvement through intuitive processes
Fewer than 5 support questions on 10-K
Minimal SOX controls documentation requests
No custom tool development, all off-the-shelf

“Why are regulators so excited about technology?”

Bar code was developed in 1949
First used commercially in 1966
A standard was needed, UPC (Uniform Product
Code) invented 1973
June 1974, the first U.P.C. scanner was installed at a Marsh's supermarket in Troy, Ohio.
The first product to have a bar code included was a packet of Wrigley's Gum
What is the value of a bar code?
Labor efficiency for:
Store cashiers
Inventory management
Consumption behavior analysis

Stands for - Extensible Business Reporting
Language
Code for items in a financial statement
A reporting standard similar to “UPC”
Each financial fact can be assigned a unique, predefined data tag like a barcode…
Enables “Interactive data”

Technology Standard
 Finance-specific use of XML
 Open standard
 Collaborative market effort – 350 member organizations
 Consortium established in 1999
 Implemented as a regulatory standard
Broad Application
 Crosses all industries
 Designed for extensibility
 Includes XBRL GL
 Taxonomies: IFRS, US GAAP (e.g.
Commercial & Industrial, Banking &
Savings Inst., Insurance, Investment
Management)…
Standardization
Presentation
現金及び現金等価物
Label
CashCashEquivalentsAnd
ShortTermInvestments
References
GAAP I.2.(a) Instructions
Ad Hoc disclosures
XBRL
Item
Calculation
Cash = Currency + Deposits
Formulas
Cash ≥ 0
Contexts
US $
FY2006, Budgeted
Validation

"The reason that everyone is not doing their financial reporting using interactive data is simple: it's a new concept. People will use it when they discover how much time and money it can save them, by automating and speeding up the process. We want it at the SEC because it will make the financial reports much more useful. Companies will want interactive data for the same reason.
The truth is, it's inevitable -- and if the 21st century has shown us anything thus far, it's that technological change occurs extremely quickly.
"As a result, it's not surprising that we're hearing from both filing agents and accounting firms that their clients are suddenly showing greater interest in interactive data. Given its enormous potential, there's no doubt this increased interest in interactive data will soon translate into widespread adoption."
Chairman Christopher Cox
U.S. Securities and Exchange Commission
Quote in January, 2006 Financial Executives Magazine Article
On XBRL

Customers tell us about internal reporting challenges
We believe technology can lower cost of managing business information
Market collaboration and industry feedback: We all have an interest in the solution

Data
Business
Operations
Business
Performance
Management
Acquisition
Integration
Competitive
Analysis
Risk Management
Auditor tools
404 Monitoring
General Ledger
Consolidation
Data
Drill down
Data
Internal Reports
Real-time
Connection
External
Reports
SEC Filings
SEC
Disclosure
Checklist
Dept of
Commerce
Banks

Repeatable, controllable business process
Reducing the complexity for preparers
Resolve deficiencies with US GAAP taxonomy
Rendering & analyzing XBRL documents
Sustainable ownership of US GAAP taxonomy

We started early – 10Q, for quarter ending
December 31, 2004
Included financials WITH notes and management discussion & analysis
Focused on tagging in Excel and Word
Ensured external reporting team provided quality assurance
Financial leadership

Publish Instance Document & Taxonomy
Extend the taxonomy if necessary
Review &
Validate Instance
Document
Create an instance document and validate calculations
Assess Scope of
Reporting & Download
Taxonomy
Compare & map
10K/10Q to GAAP
Taxonomy
Identify a team: Accountant &
Developer (XML)

Developing taxonomy: 75 hours (iterative process)
Creating the XBRL document: 60 hours
Core financial statements: 5 hours
Notes and MD&A: 40
Edits and revisions: 15
Extensions for financial statements: 7
Total extensions for MD&A: 150
Calculation linkbase edits: 300
QA review: 40 hours

175 pages printed on 8.5x11 in paper
4400 lines of XML code
Document “validates” with two tools
2 known calculation errors
Due to incomplete information in overall doc
(Financial Highlights of 2002, 2003)
To date: 213 MSFT elements added to US GAAP taxonomy
Approx 400+ extensions, modifications
Used for 1077 discreet facts

Requires paradigm shift from presentation view to data
Creating that data view represents new task
Tools in the “v1” stage…they should only get better
US GAAP taxonomies need sustained industry management
Process gets easier every quarter

SEC Chairman Cox vision for interactive financial data
Voluntary Filing Program launched, effective Apr 4, 2005
Test effectiveness of tagged data
Improve quality of information available to investors
Request for Information, Oct 4, 2005
How best to develop tools that will make “interactive financial data” a reality
How the Commission can meet the original goals of the VFP
XBRL as an approved filing format is coming
There are a number of challenges that need to be addressed in order to enable broad participation
How do we ensure this is a compelling solution for all companies?

We need your involvement….
Get acclimated with the XBRL filing process today
Assist SEC by participating in the XBRL
Filing Program

© 2004 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.