XBRL for Internal Reporting XBRL International Conference Boston

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

Processes Interna l Financi al Reporti ng External Financi al Reporti ng Investme nt, Lending, Regulati on Internal Reporting Business Operations 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 1990 s, they must focus on the 21 st 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

Phase III Phases of Development: XBRL Reporting 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 Xi. RUTE 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

trols Current Management Reporting Subsidiary ERP’s Controls Control located with data or in supplemental manual processes Controls Controls Controls Supplemental information aggregation Senior Management Controls

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 XBRL Web Services Senior Management 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 Service 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