XBRL for Internal Reporting XBRL International Conference Boston April 27, 2005 Neal J. Hannon...

XBRL for Internal Reporting

XBRL International Conference BostonApril 27, 2005

Neal J. HannonDirector, XBRL Software Development Allocation Solutions, Inc.

Barney School of Business, University of Hartford

Internal ReportingExternalFinancialReporting

BusinessOperations

InternalFinancialReporting

Investment,Lending,

RegulationProcesses Economic

Policymaking

Nature of Internal Reporting Purposes

Planning Control Decision making

More detailed More frequent More varied; less

standardized More difficult to justify up-

front 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.

Business DataVarious formats, Structures,Platforms

Governance

Application Integration Layer

XML, Web Services, X-link EII, XBRL-GL

Sarbanes-OxleyCompliance

Continuous Audit

ForensicAccounting

InternalAuditing

ExternalAuditing

Business Reporting

Scorecarding

KPI’s

Board AuditCommittee

SEC Reporting

Budgets

Monthlyreporting

Desk-topManagement

Data-Centric ApproachTo Enterprise Reporting

Real-Time Reporting

Exceptionreporting

BAM

Phases of Development: XBRL Reporting

Phase I - Today

Phase II

Phase III

Using XBRL for SEC filing; XBRL-GL for internal Data gathering (Wacoal); Data Analysis (Edgar-Online)Government reporting (APARA, FDIC, etc.)

Feeding XBRL-GL data to business Internal and external reporting, SEC filing, Sarbanes-Oxley compliance, KPI’s, Scorecards, internal audit

Open, Dynamic Real-Time Reporting,Continuous Auditing, Real Time Analysis from stakeholders both inside and outside

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

Copyright 2004 Hitachi

XiRUTE

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

1. Manual

2. Periodic

3. Physically connected to Internal data store

4. Segregated in each business unit/redundant costs

5. Reactive/untimely

6. Opaque/ deep in organizational processes

7. Less secure

1. Automated

2. Persistent

3. Embedded in data process flows - Optimized

4. Integrated within enterprise processes/cost effective

5. Proactive/timely

6. Visible/transparent

7. More Secure

Today Taxonomy Driven

The outcome is to move controls further up the quality curve.Credit: Walter Hamscher

XBRL-GL Can Help Here

And Here

Automated ControlMonitoring

Transaction data

Multiple departmental Excel spreadsheets

Senior Management

Consolidated spreadsheets for

management

2000 elements = 6500 spreadsheets (this is not a typo)

SQL

SQL

Current Management Reporting – Insurance example

ACORDXBRL GL

ACORDXBRL GL

ACORDXBRL GL

W. Hamscher

Transaction Data

Multiple Departmental Excel Spreadsheets

Senior Management

Consolidated spreadsheets for management

SQL

SQL

Current Management Reporting

ACORDXBRL GL

ACORDXBRL GL

ACORDXBRL GL

W. Hamscher

Subsidiary ERP’s

Senior Management

Supplemental information aggregation

Controls

Controls

Controls

Controls

Controls

Controls

Controls

Controls

Controls

Controls

Controls

Controls

Controls

Controls

Control located with data or in supplemental manual processes

Current Management Reporting

Services architecture leveraging taxonomies

Transaction and or subsidiary

Data

Senior Management

Viewing and aggregation for department & management

XBRLWeb

Services

Controls

Controls

Controls

Controls

Controls

Controls

‘Wrap & Map’ACORDXBRL GL

ACORDXBRL GL

ACORDXBRL GL

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)

Audit Servic

e

Accounting bots and services

SelectiveLayered

Reporting

Fraud detection Service

FinancialAnalyticServices

ERP

Other Assurance

Services

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. HannonDirector 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