3 STEPS TO NIRVANA Business Technical Political Steps

3 STEPS TO NIRVANA Business, Technical & Political Steps To XBRL Financial Statement Exchange in Europe John Turner Chairman XBRL International Domain Working Group Member XBRL International Steering Committee KPMG LLP – john. turner@kpmg. co. uk

Overview § A starting proposition § Where are we? § Building the XBRL airport § Three steps § Business § Technical § Political § What you should do

Fundamentally: Transparency is the main tool that securities regulators rely on…. The dissemination method must be capable of providing investors with regulated information without delay. This is especially the case where regulated information is, or may be, of a price sensitive nature, CESR/04 -511: CESR’s Advice on Possible Implementing Measures of the Transparency Directive. (Consultation Paper) … but too much information in Europe is on paper.

IFRS financial statements can’t help inform the capital markets if no-one reads them! “Across Europe, the number of stocks researched has fallen by nearly 15 per cent to 2, 599 from the peak in 2002 and the number of European analysts following stocks is down by nearly 20 per cent from the 1999 peak. ” Starmine Research, quoted in Financial Times, 8 November 2004 PLANNING: Resources ¦ Framework ¦ Components ¦ Test Plans ¦ Review

A federated reporting framework § Dear CESR, Our Answers: Yes, No § Making European dissemination and storage more accessible will take time but is essential § Different member states will necessarily move at different speeds § The standard is the key

Lets step back… § The XBRL Financial Reporting Airport § We must have § § § § A stable specification Comprehensive, reliable taxonomies Wise custodians Tools and knowledge to build instance documents Preparers and Analysts that “get it” Assurance that works Less visible technology, more visible business processes. PLANNING: Resources ¦ Framework ¦ Components ¦ Test Plans ¦ Review

A stable specification - the runway XBRL 2. 1 - 12 months old, but here to stay Arguments about complexity are fading Solid conformance suite Multiple APIs Greatly improved consortia processes and controls § Increasing recognition within wider technical community that accounting is complex and that XBRL is therefore a meta -standard § § §

FRTA – the ILS of XBRL? § § Recent addition to the XBRL family Extremely strong set of suggestions Incentives set by way of approval process Three validators already, more on the way FRIS – A Three Point Seatbelt? § Public Working Draft this week § Constrains instance documents § Vendors also delivering, on cue

Reliable Taxonomies: Flight Paths § Pass the weight test § Pass the validation tests! § Modularity and versioning – an ongoing puzzle § Review processes – poorly formed, poorly resourced and still too hard

Wise custodians – Air traffic controllers? Incredible growth in jurisdictions XBRL in Europe Initial steps – the market, modelling Later steps – accounting authorities for GAAPs/IFRS(? ) § Later steps – industry collaboration for performance reporting measures § The jurisdiction life-cycle § §

Tools and Knowledge around instance document production - flight plans § A long way down the road § Next releases of tagging/mapping/export tools are likely to include FRIS compliance § Vendors realise that extension taxonomies are here to stay, and are starting to accommodate them § SEC Pilot likely to launch the next round of efforts from ERP and GL vendors § Area of intense business innovation

Preparers and Analysts that “get it”: Frequent Flyers § Preparer community is very, very poorly educated about both the promise and the reality of XBRL filing § Outreach is limited and somewhat incoherent § Public Relations effort by the community tends to be inconsistent. § Analyst community (with one notable exception) is exceedingly poorly educated, change resistant, and under pressure § Difficult group to convince. Very poor outreach effort. § Warning! Angels fear to tread.

A workable assurance framework – airworthiness certificates § In the current climate, innovation in assurance is, to be clear, the very last thing that the audit profession wants. § The audit profession understands at a conceptual level the need for assurance over XBRL materials. § The process of getting assurance standards created, through IFAC, is ongoing. § XBRL validity § Accuracy of mapping and element attributes § Appropriate use of extensions § Confident Preparers are also part of the picture § Leadership of audit profession are not yet aware of some of the positive implications of instance documents as primary reporting formats

Less visible technology! Doors on the cockpit § Accountants and corporate decision-makers are interested in their businesses. Not our technology. § Very positive recent releases § Innovation is essential § One of the hardest, but most interesting challenges in IT today – making complex rule and data layers work quietly.

To summarize? § Technical framework that allows true interoperability for XBRL based financial reporting of financial statements. § Amazing achievement – 400 years to create the complexity of modern accounting, 5 to model it. § Tools and operators still needed, but level of acceleration is stunning

An aside § The XBRL community works because we have a shared vision and a shared passion § As much as resources allow, XII and jurisdictions are seeking to professionalize and focus on measurable, sensible goals § This is essential § But there is plenty of room for your passion § Innovation will always be rewarded

Step 1: Business Involvement § Collaborate on taxonomy construction and review § Lose the angle brackets § Gain new communities § Build Special Interest Groups to exchange knowledge, provide support and build momentum § Evolve into certification and training

Step 2: Technical § § Simplify the user experience And: § XBRL versioning § XBRL formulae § XBRL dimensions § And § Provide referencable implementations § Project Shanghai and the PDT

Step 3: Political § Careful, credible outreach now required § The standard enhances economic cooperation, cross-border capital flows § The standard substantially enhances regulatory knowledge § The network effect makes it real § Federated financial filing in Europe is that network effect.

3 STEPS TO NIRVANA Business, Technical & Political Steps To XBRL Financial Statement Exchange in Europe John Turner Chairman XBRL International Domain Working Group Member XBRL International Steering Committee KPMG LLP – john. turner@kpmg. co. uk