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XBRL from the Analyst-Investor PerspectiveXBRL from the Analyst-Investor Perspective

XBRL US Conference, October 15, 2008

Tom Larsen, CFAHarding Loevner ManagementCFA Institute XBRL Working Group Chairman

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• XBRL: A move into the 21st Century

• CFA Institute and the XBRL Working Group

• Committee on Improvements to Financial Reporting (CIFiR)

• XBRL comment letter feedback

• Going forward

XBRL is Inevitable

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The 21st Century: An Analyst’s View of XBRL

• Historically accountants distilled financial reporting (GAAP) requirements onto pieces of paper

• XBRL has enormous potential to improve the – Convenience, accuracy, quality, transparency, and detail of financial

reports– Efficiency, timeliness and automation of delivery of those reports– Analysis, valuation, comparability and search-ability by analysts

• However, without continued analyst input comparability and consistency are at risk

• Achieving XBRL’s potential depends upon well considered implementation

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21st Century disclosure based on data and software

• Detailed information from notes are easily and automatically incorporated into analysis

• XBRL tagging moves us away from earnings-centric financial reporting and valuation

• Communication between investor and company improved Source: SavaNet

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Results from CFA Institute July 2007 Survey

1. Nearly 60% said “I am not familiar with XBRL”

2. A high level of importance was placed on the convergence towards a global XBRL taxonomy

3. Over 90% indicated a preference to limit the ability of companies to expand the approved taxonomy

4. Desire for reliable and consistent information was echoed loudly

CFA Institute Member Survey

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CFA Institute XBRL Working Group

Key Principles

1. Tagging/taxonomies based on GAAP disclosure

2. Comparability is key, customized extensions are a risk

3. XBRL framework should be the filing format

4. There should be open and free access to filed information

5. Taxonomy must be kept up to dateFor a discussion of these principles, visit:www.cfainstitute.org/centre/topics/reporting/pdf/principles_for_xbrl.pdf

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1. Serves on XBRL International committees

2. Frequent interaction: U.S. SEC and XBRL meetings and comment letters to both XBRL US and International

3. Promoting awareness of XBRL through panels at the CFA Institute Annual Conference and member societies;

4. Conducted member survey; applied results to development of key principles

CFA Institute Involvement

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1. Uncertainty reduces preparer, auditor, software company, and investor willingness to invest

2. Fear of Sarbanes-Oxley type implications (costs and assurance)

3. Small capitalization companies

4. How far to go disclosures, MD&A, beyond

5. “Bolt on” is a long way from integrated and filed

6. KEY Agreement by preparers and investors that mandatory phased-in adoption is needed

CIFiR — XBRL Issues

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1. Based on the voluntary program and initial recommendations of CIFiR, SEC proposed:

2. Three overlapping two-year phases, based on company size all public companies by 2012

• Year one: Tagging statements with block tags for notes• Year two: Increase to full tagging of notes

3. IDEA — The SEC’s new technology platform designed around XBRL to gather corporate information

4. New public disclosures using XBRL: mutual funds, credit ratings, oil & gas reserves

CIFiR — What Did the SEC Do?

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XBRL comment letter• The SEC should move forward as planned; once a large

number of companies file in XBRL investors/analysts will pay more attention

• Current & future tags are used consistently otherwise comparative analysis is lost Extensibility is kept to a minimum

• Sufficient data is tagged and accurately reflect published accounts

• International convergence needs to address the fact that there are fewer IFRS tags than US GAAP Tags

• Taxonomies are kept up to date as accounting rules and disclosures change

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XBRL Benefits to Investors• Almost real time data

• Less manual input and recheck of numbers

• Increased transparency with footnote information better analysis and less reliance on headline numbers

• Consistency & comparability across companies and accounting regimes due to standardized tags

• Sharing of data and convergence of information globally by investors, regulators and others

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XBRL challenges

• Will enough data be tagged or the right data be tagged?– Experience in China shows some data in paper filings have not been

tagged in XBRL filings• Loss of data through international convergence there

are fewer IFRS tags than US GAAP Tags • Standardized tags vs. extensibility

– First Japanese filings suggest problems with custom extensions– European Banking regulators are also struggling with extensions – Oct 3, 2008 letter from CFA Institute to IASC regarding extensions

• Keeping taxonomies up to date with accounting changes

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Conclusions

1. XBRL has enormous potential to improve the quality, accuracy, speed and cost of information to investors and analysts

2. XBRL can enhance financial analysis if implemented properly

3. Ongoing coordination with investor community is essential if we want to achieve the full potential of XBRL

4. Initial implementation should consider of how tags are reviewed for consistency, reliability, extensibility