Reporting Strategy in IFRS Age

Cat: ECO
Pub: 2010
#1903b

T. Iwamoto & Charles Hoffman

19315u/18227r

Reporting Strategy in IFRS Age

IFRS時代のレポーティング戦略

0. Introduction:
1. Reporting is the starting point of business:
2. Innovation reported information chain:
3. What is XBRL?:
4. How to deal with a flood of reported information?:
5. Global innovation based on XBRL:
6. XBRL as defacto standard:
7. Relationship of IFRS and XBRL:
8. Future of Reporting:

0. 序文:
1. 報告はビジネスの起点:
2. 報告情報連鎖のイノベーション:
3. XBRLとは何か:
4. 報告情報の洪水への対処:
5. 世界のXBRL型イノベーション:
6. XBRLをデファクトスタンダードに:
7. IFRSとXBRLの関係:
8. レポーティングの未来:

Résumé

Remarks

>Top 0. Introduction:

• Important rules in the financial market were established:
  • 1933 US Securities Act, and 1934 US Securities Exchange Act
• But in 21C, serious accounting fraud cases occurred such as Enron (2001) including Arthur Anderson, Worldcom (2002).
  • 2002 SOX (Sarbanes-Oxley) Act, known as Public Company Accounting Reform and Investor Protect Act.
  • 2006: SOX-Japan version
  • 2008: Lehman shock, which proved that release only of the information is not enough. Risks of a subprime loan had diffused worldwide. The prospectus of a fund amounted several thousand pages; which no one could neither understand nor manage.
    • This event caused by many falsification and intransparent release of related information.
• >Top IFRS (International Financial reporting Standards), which enables to evaluate various reports issued in different countries in a single standard.
• SOX Act function to enforce to publish correctly the information of a company's financial data.
• XBRL (eXtensible Business Reporting Language), which was proposed by Charles Hoffman.
  • 1998/10: XBRL 1.0 was released based on XML, which aims to reduce users from the burden of analyzing published reports, as well as to emancipate many business persons to make too monotonous reporting jobs.
  • Charles Hoffman appealed the necessity of establishing XBRL to AICPA (American Institute of Certified Public Accountants), whose original name was XFRML (eXtensible Financial Reporting Markup Language) but formally renamed XBRL in 2000/4.
  • 2001/12: The first international conference on XBRL was held.

0. 序文:

• 3 component to manage reported information:
  Reporting is the essential activity of a corporation or a business person.
  1. IFRS: Global Financial Standard
  2. SOX Act: Correct information
  3. XBRL: Computer processes the information
• XBRLはSOX法、IFRSと補完し合って、企業情報の報告を大量迅速活用のためにXMLベースに開発されたコンピュータ言語

>Top 1. Reporting is the starting point of business:

• 'Business' is an action to produce a kind of value; but its content and process are getting invisible nowadays.
• Reporting is a process to explain properly the value of a business.
• An able business persons tend to look down on reporting activity.
• An episode: "advised his friend who became CEO that there will be two things you couldn't get; a bad meal and a truth."; harsh or offensive information is usually filtered by the hierarchy.
  • It is said that only several percentage of information is generally used, though organizations are making enormous volume of information.
  • Most of critical or offensive information is intentionally screened, neglected or omitted.

1. 報告はビジネスの起点:

• 利用されるのはわずか数％の情報
• 耳障りな情報は忖度されて廃棄
• 「報告」はビジネス活動の中核の一つ

>Top 2. Innovation of reported information chain:

• Financial information is made from the data of money, contract, sales, asset, mortgage, right, credit, etc.
  • A transaction information consists of 1) data of transaction, and 2) reporting of result caused by the transaction.
  • Some information is to reported or registered to the authority, while some is kept in the organization as a classified information.
  • >Top In US, SEC (Securities and Exchange Commission) and FDIC (Federal Deposit Insurance Corporation)
• >Top Longtime problems of Financial Reporting:
  1. Transparency of reporting: easy to be checked, including entity, term, unit, measuring standard, etc., avoiding errors in transcription or posting.
  2. Usability of reporting: includes various definitions or calculations, like sales minus production cost minus sales cost equals operating profit, etc., including retroactive checking.
  3. Metadata of reporting: data which defines something, like gender, date of birth, etc.
  • Participants related to Financial Reporting:
    • The first reporter who made the report.; XBRL minimizes to make the report.
    • Acceptor and redistributor of the report (usually regulatory agencies)
    • Users who use the distributed reports.; XBRL maximizes to utilize the report.
• >Top Financial information should be distributed with correctness, quickness, and low-cost. (CQL)

2. 報告情報連鎖のイノベーション:

• 財務報告の長年の課題:
  • 透明性:
    数字の定義･単位･期間が明確
  • 利用性:
    コンピュータにとっても表現が明確化
  • メタデータ化:
    数字・指標の定義・計算式が明確でエラー検出が容易
  • これらの特徴によって作成作業が簡便となり、利用者にとっては活用応用が拡大
• 財務情報の配布に必須要素 (CQL):
  • 正確性
  • 迅速性
  • 低コスト

>Top 3. What is XBRL?:

• XBRL allows semantic meaning commonly required in business reporting, which is based XML technologies such as XML Schema, XLink, XPath, and Namespaces.
  • XBRL specification is develope and publish by XBRL International, Inc. (XII)
  • Latest version: XBRL 2.1
• Taxonomy: Definition of financial terms; such as
  • NetIncomeOrLoss = Net Income (loss) (English label)
  • SalesNet = Sales Net (English label)
• Instance: Reporting document with filename '.xbrl'; or fact reported or related information
• Tasks with or without using XBRL: <Fig.>
  • When use XBRL, value-added tasks can be increased, while routine tasks be decreased.

3. XBRLとは何か:

• XBRLの仕組み:
• Semantic WebとしてのXMLをベースに開発された。但し、業界ごとのルールでXML標準が乱立している現状から、XBRLは、監督当局への報告義務による世界標準を意図して拡張を規定して設計された。即ち、Business Reportingの標準言語化を目指した。
• Taxonomy (概念定義; 概念同士の関係や追加的な情報)
  なおTaxonomyは独立で、複数のInstanceと共有できるTaxonomyは業界毎に作成され、業界独特の表現など拡張機能もある
  • XML Schema: 勘定科目や注記事項の定義
  • XLink: リンクベースとはLink Databaseであって、表示･計算･定義･ラベル･表示の定義。Formula Linkによって決められたルールに反するデータははじかれるので、自動チェック可能。
• Instance (報告文書; 報告されるFactやその関連情報)
  • Fact: 報告する内容･数値事項
  • Context: Factが報告される背景な文脈；企業名･年度･予実
  • Unit: 通貨･面積･人数など単位
  • Footnote: 注記

• Inline XBRL (タグ付XHTML)

<NotesRegardingInventoriesTextBlock>

• 商品及び製品 <MerchandiseAndFinishedGoods> 9,642
  </MerchandiseAndFinishedGoods>
• 仕掛品
  <WorkiInProcess> 3,857
  </WorkiInProcess>
• 原材料及び貯蔵品
  <RawMaterialsAndSupplies> 3,297
  </RawMaterialsAndSupplies>
  ---------------------------------------
• 計
  <Inventories> 16,792
  </Inventories>
  ==========================

</NotesRegardingInventoriesTextBlock>

• 情報洪水に如何に対処するか。
  • 情報洪水の中心は膨大な注記情報など非財務情報。
  • 一次情報は、アナリストなどの加工を経て膨大な二次情報として流通する。その際、情報の錯綜･誤解が生じ、メタデータをチェックして、真偽を確認する必要性
  • 金融商品の証券化にともなうサブプライム問題 (2001エンロン、2008リーマンショックを踏まえて)
  • 内部統制に基づく情報開示ルール
  • 従来はWeb上での公開のため、HTMLやPDFフォーマットに変換していたが、XBRLによってこの工程が不要。
• XBRL導入効果（米国FDICの場合)
  • TCOが$65M→$26Mへ経費削減
  • タイムリーな情報公開: 45日→2日
  • 数値エラー: 18,000件→ほぼゼロへ
  • 再利用性の向上: 標準XBRLツールで加工可能
  • 変更の場合XBRL Taxonomyのみ変更すればよく、より頻繁なシステム更新が可能
  • 報告情報連鎖イノベーション
  • NPO活動報告 (資金集め、説明責任等)
  • VCのための情報発信
  • 社会企業家への事業支援

     

>Top 4. How to deal with flood of reported information?:

• Information released by corporations:
  • Financial Information: Profit & Loss, Asset, Cash,...
  • Non-financial Information: Information of major projects & contracts, construction or disposal of equipment & facility, shareholders.
• Reporting of financial information based on XBRL: mostly numerical data
  • 2001: Financial Services Agency: EDNET
  • 2003: Tokyo Stock Exchange: TDNet
  • 2004: National Tax Administration Agency: e-Tax
• >Top Reporting of non-financial information: more serious situation of information flood: particularly 'Note Information' partly remarked on the financial data is more important.
• Particular reasons related to the major difference from the original estimate.
• Particular assumptions related to the referred figure.
• Major reasons or break down which attributed the latest figure.
• References to the risk factors or risk correlations.
• Particular reference to the source of information.
• Flood mechanism: 2009/7 workshop by XBRL researchers revealed:
• Release of 8 kinds of reports required by laws by corporations may affect a million of related information.
• This phenomenon is caused by:
  • Repetition of the same information not only by public organization but various custodians, brokers.
  • Secondary information is released by various analysts with revision or comments.
  • Intricacy, misunderstanding, or errors in transcription occurs during these processes.
  • Deviation of timing of publishing information.
• >Top Semantic Web:
  • HTML can describe the layout of expression on the web; which cannot have the meaning of information.
  • Though XML can include semantic description, it is flexibly extensible in expression; which may cause various XML standards are made according to each industry.
  • XBRL adopted such semantic web approach, and is made it to a rule based on the world standard.
    • XBRL regulated the rules of extension, considering interoperability of disclosed information, reports to financial regulatory organizations, and registration information, etc.

4. 報告情報の洪水への対処:

• 注記情報がむしろ重要

• HTML: Web上の表現のみ
• XML: 意味情報もたせたが拡張性の自由度もあり、対象は、特定領域のみ。
• XBRL: XMLに基づくも、拡張の仕方を規定。分野業界国境を超えて企業組織の財務情報＋非債務情報の報告形式に相互運用性をもたせた。
• 米国金融規制当局
  • FRB: 連邦準備制度理事会→日銀
  • FDIC: 連邦預金保険公社→預金保険機構
  • OCC: 通貨監督庁→財務省外局

>Top 5. Global innovation based on XBRL:

• Common issues in using XBRL:
  • Open or Closed:
    • beneficiary of XBRL reporting is open or closed.
    • storage problem of the reports
  • Static or Dynamic:
    • XBRL taxonomy is static (unchangeable) or dynamic (changeable)
    • Dynamic system is more difficult; to what extent the expansion of taxonomy is allowed.
  • Simple process or Complicated process:
    • Simple (data volume is 10-20), or complicated (several hundred data)
    • XBRL system tends to be heavier to the simple processing.
  • Lower or Higher Reuse Rate:
    • Various formats of expression are allowed or not.
    • Trade off of XBRL taxonomy:
      flexible (meaningful reuse) or stable of the system (meaningless reuse).
• >Top Use cases of XBRL:
  • US:
    • <Public>
    • FDIC receives quarterly Call Reports from 8000 banks in US.
    • 2008 SEC: made it obligatory 500 major companies to report based on XBRL.
    • NV state:
    • FHA (Federal Housing Administration)
    • <Private>
    • UTC (United Technologies Corp.); effect is written in 'ROI on XBRL'
    • MIX (Microfinance Information Exchange); established similar EDGAR system of MIX
    • Deloitte Australia
    • Morgan Stanley
    • PWC; iDP (iDataPlatform) related to IFRS and USGAAP taxonomy.
  • EU: CEBS (Committee of European Banking Supervisors):
    • already using report based on IFRS and new BIS banking regulations
    • first is Belgium, then Spain, France, Germany, Poland, and Luxemburg.
  • Netherlands:
    • Water Board
    • 2004: NTP (Netherlands Taxonomy Project), now 2007 SBR (Standard Business Reporting), affecting Australia or Singapore SBR project.
  • Software application:
    • SAP, Oracle can export/import XBRL format.

5. 世界のXBRL型ソリューション:

>Top 6. XBRL as defacto standard:

• XBRL Taxonomy: Taxonomy and Instance (definition and entity) cover all information.
  • Taxonomy Schema: defines financial vocabulary such as sales, sales cost, liquid asset, etc.
  • Taxonomy Linkbase: defines relationship (tree-structure), or calculation formula.
  • Instance: a context (time, period, which company, etc.) information.
• XBRL Linkbase:
  • Nested structure of XML can express single relationship only, but financial information needs to express multiple relations (rules), such as:
    • Net profit is defined 1) sales minus all expenses and taxes, and 2) difference of net capital of previous BS and present BS.
  • XBRL adopted similar mechanism of Chemical formula using atomic symbol; which is more flexible in defining financial information.
  • Taxonomy can include related rules other than relationship.
    • E.g.: Tangible fix asset needs to include depreciation method, durable life, and asset class.
• Sub-rules in each industry:
• E.g.: Common practice in construction industry: sales can be recorded according to percentage of completion.
• E.g.: Accounting title 'Data Communication Facility' of NTTData means a service including ownership, development, maintenance, and operation.
• Variety of Taxonomy:
• Japanese rules in accounting principles are about 2,500.
• Accounting titles of common practice of individual industry are about 2,200.
• These 4,700 titles were selected from as much as 50,000 candidate of titles.

6. XBRLをデファクトスタンダードに:

• Does standardization mean simplification of taxonomy?

>Top 7. Relationship of IFRS and XBRL:

• IFRS Framework: Chapter 1: The Objective of general purpose financial reporting
  • The primary users of general purpose financial reporting are present and potential investors, lenders and other creditors, who use that information to make decisions about buying, selling or holding equity or debt instruments, providing or settling loans or other forms of credit, or exercising rights to vote on, or otherwise influence, management’s actions that affect the use of the entity’s economic resources. [1.2]
  • The primary users need information about the resources of the entity not only to assess an entity's prospects for future net cash inflows but also how effectively and efficiently management has discharged their responsibilities to use the entity's existing resources (i.e., stewardship). [1.3-1.4]
  • The IFRS Framework notes that general purpose financial reports cannot provide all the information that users may need to make economic decisions. They will need to consider pertinent information from other sources as well. [1.6]
  • The IFRS Framework notes that other parties, including prudential and market regulators, may find general purpose financial reports useful. However, these are not considered a primary user and general purpose financial reports are not primarily directed to regulators or other parties. [1.10]
• Portion of non-financial information:
  • As not only XBRL-basen financial information, but also non-financial information is getter important as a useful information for IFRS users, further expansion of XBRL-based disclosure is considered.
  • It is getting difficult for investors to use effectively enormous paper-based disclosure of report made based on principle rule.
    • XBRL functions effectively for smooth implementation of IFRS.
    • Japan had delayed in adopting IFRS, but has progressed and contributed in using XBRL.

7. IFRSとXBRLの関係:

• IFRS基準書フレームワーク:
  • 財務諸表報告の主たる利用者は、現在および将来の投資者・債権者であり、彼らが株式・債務の売買･与信の意思決定に役立つ情報を提供する。
  • 主たる利用者は、当該企業の将来のCFを評価するだけでなく、企業の現在の資源活用の評価材料としても有効であること。
  • IFRSフレームワークはユーザにとって経済意思決定に必要な全ての情報を提供することはできないので、適宜他の情報も検討すべきである。
  • IFRSフレームワークは、市場の規制当局に対してこれらの財務情報は有用ではあるが、この財務報告の主たるユーザとみなしている訳ではない。

>Top 8. Future of Reporting:

• Productivity of white-color tasks:
  • XML is mainly used in the back-office tasks regarding transaction information, while XBRL is used in the front-end white-color tasks regarding reported information.
    • White-collar tasks are the works creating new value or mechanism to create it.
    • XBRL makes to digitize such creating tasks, which means a dawn of new reporting age.
• Whitelist or Blacklist:

• 	Target	Definition	Share	Reporting
  Whitelist	Favorable client	Difficult routine research	no incentive to share	difficult definition & no comprehensive database
  Blacklist	Unfavorable client	Easy routine research	incentive to share	easier definition & making database

  • Whitelist information (against blacklist) is useful to find actively new client or partners to deal with; which is equivalent to business know-how.
  • Whitelist information is rather difficult to collect and share, because there is no common definition who is white.
• Covenants:
  • Borrower does not provide mortgage or guarantee, but agrees 'covenant clause' stating to promise certain financial ratio, etc. in the financial agreement; if the borrower breach the covenant clause, the loan must be repaid.
  • Covenants clause usually includes: 1) must submit financial report, 2) negative pledge (not place a mortgage), 3) asset disposal (limit to assign or transfer particular asset), 4) financial covenants (restrictions), 5) rating triage by a certain rating firm 6) to maintain the project, and 7) to keep financial level
• US SEC EDGAR Database:
  • is accumulating XBRL data, which will be used by the user's own database.

8. レポーティングの未来:

Comment

• It is a keen insight that XBRL has been expanded based on XML technology, which is also extention of HTML technology.
• Furthermore, it is also awakening that the essencial output of white collar is Reporting; if it became XBRL Reporting information, the productivity of white collar could be raised remarkably.

• XMLがHTML技術の拡張であり、そのXML技術をベースにXBRLが拡張されたことがまさに慧眼である。
• 更にホワイトカラーの本質がレポーティングにあるとしたことも目から鱗である。もしXBRLレポーティング情報となれば、ホワイトカラーの生産性は飛躍的に上昇することになろう。