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«Mike Willis, Founding Chairman XBRL International, PricewaterhouseCoopers partner and Global XBRL Co-Leader (United States) Bruno Tesnière, ...»

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Corporate Communications

for the 21st Century

A white paper discussing the impact of Internet technologies

on business reporting

Mike Willis, Founding Chairman XBRL International,

PricewaterhouseCoopers partner and Global XBRL Co-Leader (United States)

Bruno Tesnière, PricewaterhouseCoopers partner and Global XBRL

Co-Leader (Belgium)

Alison Jones, Partner representing PricewaterhouseCoopers

on the UK XBRL consortium

Corporate Communications for the 21st Century

XBRL – The impact of internet technologies on business reporting Corporate Communications for the 21st Century Corporate communications 3 for the 21st century Abstract XBRL (Extensible Business Reporting Language), a new Internet language for business reporting, provides significant benefits to producers and consumers of financial and nonnancial information. The greater the degree of collaboration between all participants in this supply chain, including government regulators and public sector accountants, the greater the benefits that this information format enables for all participants; companies, regulators, investors, and government agencies alike.

At PricewaterhouseCoopers, we acknowledge that successful XBRL implementation requires both content expertise and technology knowledge. Our XBRL proposition for our clients leverages the strengths of our existing business advisory solutions. This involves integrating specific XBRL components into many of our existing offerings and methodologies.

For further information on how we can help you, please contact us:

Mike Willis (USA) mike.willis@us.pwcglobal.com +1 813 340 0932 Bruno Tesnière (Belgium) bruno.tesniere@be.pwcglobal.com +32 2 710 72 26 Alison Jones (UK) alison.jones@uk.pwcglobal.com +44 207 213 5343 XBRL – The impact of internet technologies on business reporting Corporate Communications for the 21st Century Executive Summary Corporate reporting is in the spotlight today more than ever before. Though most of the attention has been focused on what is (or is not) reported, there is another side to the story, how information is being delivered. While regulators and the markets deal with the ‘what,’ answers to the ‘how’ are quicker in coming. The development of a new Internet language, XBRL (Extensible Business Reporting Language) - the business reporting extension of the

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As well as transforming the corporate reporting supply chain, widespread adoption of XBRL will bring benefits to all participants. Consumers of information will have faster and richer content to work with; producers will be able to create and disseminate richer information better and faster; and the interoperability that XBRL affords means that regulators are more likely to obtain the degree of transparency that they require, quicker. In short, the speed, efficiency and reliability of business reporting will be exponentially enhanced by the widespread adoption of XBRL. These same benefits will offer investors, creditors and other information consumers better access to the information necessary for more informed decisions.

Of course, there are hurdles to be overcome before XBRL is adopted as the reporting language for business. XBRL will only work if the collaborative efforts that have contributed to its development to date continue to flourish and the business information supply chain participants continue to deliver. XBRL is not a new set of accounting standards; it is a language in which those standards can be incorporated and expressed. XBRL provides a bridge between those who prepare information and those who use it for decisions. The greater the number of parties who actively participate in its development, the stronger that bridge will be and more informed decisions will be the result, an outcome beneficial to all supply chain participants.

Quick facts

• The Internet has forever changed our expectations about communications; this affects businesses in many ways.

• Recent market events have shown that corporate communications methods are obsolete and not meeting the needs of the markets.

• A collaborative group seeking to leverage Internet technology to improve corporate communications have come together in the form of XBRL International.

• XBRL (Extensible Business Reporting Language) is a key element in addressing today's corporate communication failures, and provides significant additional benefits.

• Continued active participation in XBRL International, by all members of the corporate reporting supply chain, will ensure that the benefits of XBRL can be realised across the whole supply chain.

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The Internet is driving an information revolution. Extensible Markup Language (XML) is an exciting new Internet technology that is already being used for the electronic exchange of transaction data in a wide range of companies, both internally and externally, and across supply chains enhancing the exchange of information, goods and services. XML is the core language, it is applied in the form of agreed dialects or sub languages that address a specific business process. The application of XML for accounting entries and business reporting information is called the “Extensible Business Reporting Language” or XBRL.

XBRL is an interoperable information format that facilitates the exchange of business reporting data between disparate information systems.

The XBRL International Consortium of currently approximately 170 organisations worldwide provides agreement on this Internet-based information standard. XBRL offers significant benefits to both the preparers and consumers of financial and non-financial information including companies, investors, analysts, regulators and government reporting entities. XBRL is relevant to any organisation or individual that either produces or uses financial reports. Collaborative participation, by all members of the corporate reporting supply chain, in developing and using XBRL will bring about enhanced speed and quality of information supply.

The information age Overview of changes in business, corporate communications and capital market expectations Technology advances have revolutionised the way information is exchanged and the way business is conducted. The Internet allows information to move quickly and easily all over the world and makes information accessible at any time – in any place – to anyone with Internet access. Internet technologies are now widely used within businesses as the basis of internal corporate communications, and open Internet standards are now a key element of any IT platform. As a result there is an ongoing transformation in the way business is conducted and regulated, and whilst this leads to opportunities there are also new risks to be managed. The onslaught of the information revolution has profound ramifications for corporate reporting, for both preparers and users of this information.

Business is moving at an increasingly faster pace – a fact not lost upon the financial markets, which are loudly demanding that business reporting keep up. It is clear that speed is of the essence and loss of accuracy is an increasingly apparent risk. XBRL makes it easier for companies and governments to report and for stakeholders and regulators to quickly access and analyse information. As a consequence there will be increasing transparency and demands for additional information. The greatest benefit to all participants in the business reporting supply chain will flow from collaborative development efforts to leverage the Internet-enabled reporting platform. It is time for corporate reporting to adopt an Internet-optimised platform and, thereby, gain its benefits.

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XBRL also expresses how the various language building blocks fit together to form an end 9 document such as a set of financial statements. As a result the standard XBRL blocks within different documents can be compared at the touch of a button. Consequently, the strongest support for this new technology is likely to come from two areas, the capital markets and financial services sector and government regulators. Both of these groups and their constituents will benefit from the greater usability of information which facilitates targeted analysis, easier comparisons between companies and across industries, and, ultimately, quicker decisions.

Over time, the capital markets and their regulators will almost certainly focus on the heightened level of corporate communication that the new technology enables, and call for greater transparency in external reports. There are two primary factors underlying these calls for more disclosure: first, the critical data needed by investors, analysts and regulators is substantially the same as that used by managers to make both strategic and operating decisions; and second, the technology used to generate in-depth information channels within companies is the same one used to generate corporate communications to the public via the Internet. Financial market participants are already clamouring for companies to provide a broader continuum of information.

Thus, it is not a far stretch to imagine the pressure that the full range of capital market participants can place on managers who are viewed as “information barriers” by virtue of their decisions about what to share and what not to share with the public. XBRL alone can also lead to significant data collection and interoperability benefits across a supply chain for regulators or companies handling large volumes of forms.

XBRL is valuable for any entity for external reporting in isolation but is even more valuable when it is part of a more comprehensive solution. Companies and government agencies alike are looking to achieve efficiencies in their own activities from interoperability and joined-up systems. Solutions typically use Internet technology including XML, and XBRL is but a small addition.

In addition to tagging information for reporting purposes, XBRL is also used to tag accounting data, as commonly recognised by general ledger and other applications, including journals. This information is of a totally different nature and detail to the high level information finally presented in reports and is represented in a specific sub-taxonomy – XBRL GL, the Journal Taxonomy.

Improving the Internet’s information exchange abilities The Internet has grown to its present popularity largely because Hypertext Markup Language (HTML) made it relevant for business and personal use. HTML provided the common blueprint needed for describing and linking information, thereby making user access easier. Software vendors quickly made using HTML a simple matter: today, creating an HTML document is straightforward from almost every software application. Document creators do not even need to know anything about how HTML works to make content Internet ready.

HTML has some shortcomings, however, and these are addressed by the next big step in Internet technology: Extensible Markup Language (XML),1 which brings “smart data” to the Internet through self-describing data structures. XML, like HTML, is freely available and also a standard recommended by the World Wide Web Consortium (W3C).2 XML enables powerful capabilities, which explain why it is the fastest-growing Internet technology today.

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industries’ supply chains. Efforts are also under way to combine Electronic Data 11 Interchange (EDI) (the “old” way to exchange standardised business documents electronically) with XML, so EDI messages can be exchanged within the XML framework.3 Why the rush toward XML? The business landscape is now more competitive and the speed of change is increasing. XML is the latest addition to the Internet technology and standards platform and will enable businesses to process information more quickly, whilst achieving cost efficiencies, and improving customer responsiveness. The potential benefits are so great that a business not embracing Internet and XML technology could very quickly find that its competitive position has been seriously eroded.

New connections between existing systems To gain the benefits promised, information must be easily exchanged inside and outside organisations. In addition, new kinds of information must be quickly and easily assimilated into business, governmental and regulatory accounting systems. XML meets all of these needs, making it possible to integrate vertical supply chains – from manufacturers to distributors to retailers to end users – quickly and cheaply. This integration drives efficiencies by removing one of the biggest obstacles to timely decisions by management, investors, analysts, regulators, and others – differing/disparate information systems.

The costs of implementing common ways to exchange data every time companies seek to establish new relationships has hindered the formation of many otherwise sound business alliances. This is especially true for companies that are less technologically sophisticated.

By more easily integrating disparate systems, XML and industry-specified data tags make business exchanges of information over the Internet more practical and affordable for all companies, large and small, in any part of the world.

The common cause of business rivals Developing and agreeing on industry XML specifications is very important for achieving the full promise of the Internet’s next step in the information revolution. The only way this can happen is if stakeholders in an industry work together. XML provides an Internet platform for an agreed dictionary of terms used in a particular process that has standard components for all stakeholders in that industry. XML is a tool that provides little supply chain benefit without cooperative industry efforts. Therefore, it is vital that companies and other supply chain participants become involved in or, at the very least, maintain an awareness of, decisions and proposals being made by their industry XML consortium(s).

These standards will govern the data transfers foundational to supply chain operations in the not-so-distant future.

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