Benefits XBRL brings to the analyst market place and tools for Analysts 9 th International XBRL Meeting Auckland, New Zeeland May 11, 2004 2: 30 pm – 2: 55 pm Liv Watson, Vice President of XBRL Strategies XBRL Nordic Country Representative EDGAR Online Inc “When the Business is Information”
Agenda 1 Introduction to the US EDGAR System 2 Big Question 3 4 5 Analytical Tools Microsoft Live Demo - Jon Clemens Conclusion
– Introduction – About the EDGAR System “Electronic Data Gathering, Analysis, and Retrieval” Retrieval Purpose: To facilitate the filing and review of mandated public company disclosures 12 years from inception to completion May 1996 ALL US public companies required to file the majority of their disclosures electronically Public website provides access to EDGAR data Sarbanes-Oxley Act of 2002 accelerates time frame and types of disclosures to be filed electronically
Public Company Financial Information Life Cycle Capital Raising Periodic & Event Reporting Ownership (compliance) IPO’s -1 S Secondaries SBS-2 S -3 Annuals/Quarterlies 10 -K, 10 -Q, 8 -K Def-14 A Institutional + Mutual Fund Holdings 13 F, N 30 -D Insider Trades 144 3, 4, 5 4
The Scope 12, 000 public companies 2, 200 institutions 8, 000 mutual funds 60, 000 insiders 2+ million documents 10, 000 new documents/day 1, 000 pages/day
Corporate Filings Data Today
Information-Intensive Markets "The effect that XBRL will have on the business community will be more significant than the transition from paper and pencil analysis of financial information to the use of electronic spreadsheets, “… "In the next three to five years, XBRL will move from the early adopter phase to become the generally accepted way to report business information. As a result, corporations will simplify the process for issuing business reports, and the public will find it easier to get the information they need to make informed investment decisions. " - Mike Willis, Partner, Pricewaterhouse. Coopers and founding chairman of XBRL International.
XBRL Value Proposition Transparency and the U. S. Securities and Exchange Commission (SEC) Business Events Business Events People Practices Control Practices Financial Systems Mgmt Reports Accounting Practices External Reports Shareholder View to Business Events The SEC is driving for reporting transparency. In many organizations, each step along the path to the final external reports clouds the view of information back to the original business event (inconsistent account definitions, incomplete GL reconciliation's, management adjustments, top side entries, etc. )
Financial Information Supply Chain Today’s External Position Company Financials SEC Filings Public Financials Company Financials Market Data Competitor/Industry Financials Analyst Analytical Models Assurance
Leveraging Technology Today SEC Data Information Proprietary Data Mining Technology Internet Delivery Proprietary Data Formats
Financial Information Intermediary Supply Chain External Position Company Financials SEC Filings Public Financials Company Financials Financial Supply Chain Market Data Analytical Models Competitor/Industry Financials Assurance
Agenda 1 Introduction to the US EDGAR System 2 Big Question 3 4 5 Analytical Tools Microsoft Live Demo - Jon Clemens Conclusion
The Big Question: “Is XBRL a Disruptive Technology to the Financial Intermediary Market? ” • Disruptive technologies: – Products based on disruptive technologies are typically cheaper to produce, simpler, smaller, better performing, and, frequently, more convenient to use. Professor Clayton Christensen of Harvard Business School The Innovator's Dilemma.
Industry Changes with XBRL? Will the availability of XBRL tagged information facilitate the preparation of customized reports? Will the cost of content development increase? Will the costs of data distribution decrease? Is there going to be a shift of the costs of data manipulation to application software developers? By the nature of its “self-explanation” (with tags), will data be more accessible and available? Substantial reductions in data tailoring costs? Reductions or increases of revenues in the industry? Reductions in software tailoring costs and revenues in the software integration industry (e. g. EDS, IBM, Accenture)? More emphasis on analytics? What type? Semantic analysis? Information agents?
Agenda 1 Introduction to the U. S. A. EDGAR System 2 Big Question 3 4 5 Analytical Tools Microsoft Live Demo - Jon Clemens Conclusion
Analytical Scoring Tool of the Future Exploits both qualitative and quantitative data Purpose – electronically examine filing information based on user defined parameters Benefit – spend more time ranking, analyzing, acting – spend less time identifying problems
Sample Data Sets Quantitative Qualitative Financials Insider Text Search News Corporate Governance Institutional Ownership IPO 8 -K Text Search Filings
Quantitative Data – Examples • Current ratio down at least 20% vis a vis last year • Cash flow from operations down at least 10% vis a vis last year • Profit margin is less than the industry average by 30% or more • Revenue deviates by more than 30% of a projected linear regression point
Qualitative Data – Examples • CEO and/or CFO didn’t sign 906 • Percent of outside directors outside desirable limits – On Board – On Audit Committee • Audit Committee weaknesses – Fewer meetings than median company last year – Size of committee below industry median • Filed 8 -K Item 4 (change of accountant) • “Bill and hold” within 10 words of “revenue” or “transaction”
Real Time Scoring Engine Scoring History Retained and Charted Allows Back Testing of Models
New Application Features “Artificial Intelligent Tools” Central Data Repository XBRL # of defaults debt Default Dept High Loan Income 5. Monitor the health of individual banks as well as the health of the industry as a whole Low XBRL as a method to facilitate intelligent agents
Sample Fraudulent Calculations q q q q Goodwill over Sales Restructuring Costs over Revenues Reserves over Total Liabilities Prepaid Expenses over Sales Debt Retirement Profits over Income Cash Reinvestment Ratio Accounts Receivable over Revenues Insider Sales Activity Levels Accounts Receivable over Revenues Volatility Over Time Cumulative Free Cash Flow over Cumulative Net Income Inventory Turnover Average Inventory Deferred Income Tax Assets over Current Assets Capitalized Expenses over Operating Revenues Over-funded Pension Benefits over Employee Expected Rate of Return over Pension Assets Executive Long Term/Short Term Compensation Ratios
Financial Data Summary
Report Findings
Financial Data Summary
Future Trends Data Publishing, Analysis and Reporting Traditional Enterprise-centric Data Provider Audience One-click information consumer Power user that takes training, (or online reader that tackles HTML tables or PDFs) Type of Data Delivered Self-serve, on-demand, within interactive (OLAP) analysis and personalized reporting functionality Preconfigured reports with static charts and graphs Type of Data Delivery Distributed widely across the Internet (Web Services) Proprietary systems and internal enterprise systems/intranets Data Volume Million-record files published online Terabytes protected by complex and from expensive mainframes inexpensive Web servers Scope of Usage Anyone with a browser and connection to the Internet Select enterprise elites
Live Microsoft XBRL Demo Jon Clemens Microsoft Corporation Information Worker Organizational Solutions Group Solution Planning Manager
Agenda 1 Introduction to the US EDGAR System 2 Big Question 3 4 5 Analytical Tools Microsoft Live Demo - Jon Clemens Conclusion
In Conclusion Adoption of XBRL will bring democratization of financial markets. XBRL and other XML derivative languages are going to change information generation and distribution. The information intermediation industry will have to change consequently bringing greater transparency to financial Information.
"The significant problems we face cannot be solved at the same level of thinking we were at when we created them. " - Albert Einstein (1879 -1955)
Concluding Remarks…. .
Thank you! Liv A. Watson EDGAR Online Inc – Vice President of XBRL Strategies E-mail: lwatson@edgar-online. com Phone: (203) 852 -5703 Web: www. edgar-online. com
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