Corporate Reporting and the Internet: Understanding and Using XBRL

Corporate Reporting and the Internet: Understanding—and Using—XBRL

FEI Research Foundation

Executive Report

September 2002

Corporate Reporting and the Internet Understanding—and Using—XBRL

Purpose Now more than ever, financial executives recognize how critical their responsibility is to communicate operational results to their stakeholders, both within and outside the company. They also recognize the growing demand for efficient delivery in an interactive medium, such as the Internet. However, there is resistance in many quarters to using the Internet for gathering and disseminating financial information, largely reflecting a perception that the Internet technologies for this purpose are too complicated, too unwieldy and perhaps not worth the time, talent and money. This report examines an Internet technology called EXtensible Business Reporting Language (XBRL) and explains how financial executives can use XBRL to enhance communication with internal management and external stakeholders increase operating efficiencies. The report also puts XBRL in a global context and describes the competitive advantages that can be achieved for every organization, regardless of size, budget, language or location.

Executive Summary

The capital markets rely on timely and reliable business information for the allocation of capital resources. The more useable information is, the more useful it is, and with business information, the better able is the market to correctly value a company. How can information become more useable? In a word, “automation.” Just as the assembly line was key to Ford’s automation of the manufacturing process—and drove the industrial revolution forward—a similar integration and automation of the business reporting supply chain is increasingly important for enabling investors to evaluate alternatives and make decisions—and move the evolving global economic revolution forward. The business reporting supply chain includes the community of preparers, distributors and users of performance information—finance, investor relations, news providers, regulators, analysts, investors and others. Because this chain links together the organizations comprising the capital market system, the responsibility for reporting falls not to any one individual or even a single organization, but to all of the organizations in the market. This interconnectedness of purpose logically dictates that advances in the system—such as use of the Internet—also be a collaborative effort. It is here that the XBRL standard comes into play. The use of Extensible Markup Language (XML) and its derivative, XBRL, can make overall information distribution more efficient in terms of time, accuracy and reliability. The accompanying flowchart outlines the Business Reporting Supply Chain and the role XBRL can play.

What aspect of XBRL would you like to learn more about? Contact Cheryl Graziano, Research Manager, at [email protected].

Business Reporting Supply Chain Today XBRL for Financial Statements

XBRL for G/L Journal Entry Reporting

Processes

Business Operations

XBRL for Business Event Reporting

Internal Financial Reporting XBRL for Audit Schedules

External Financial Reporting

Trading Partners

Investment and Lending Analysis

XBRL for Credit Filings Financial Publishers and Data Aggregators

Companies

Participants

XBRL for Regulatory Filings

Management Accountants

Auditors

Investors

Regulators

Software Vendors

Background

XML is a language for defining and naming data. It was recommended as a global Internet standard in February 1998 by the World Wide Web consortium (W3C), which is the same body that created the familiar Internet language, HTML. XML is revolutionizing the Internet by enabling the exchange of data between disparate software applications in a simple, straightforward manner. While many outside the Information Technology space would view this as a very quiet revolution, XML was a tremendous breakthrough and is now incorporated into every major database and every software product. Its popularity is likely to grow quickly as more and more businesses take advantage of the efficiencies of the Internet. Moreover, because XML is application independent, it can transports information between different software applications (from data warehouses to financial reporting writers to spreadsheets)—seamlessly. Within XML development, XBRL is the accounting, business reporting and investment communities’ contribution. XBRL, an XML based language, is used to express business-reporting content. It facilitates the automatic exchange and reliable extraction of business information among various software applications anywhere in the world. XBRL is freely licensed and represents an agreement among the more than 170 companies in the business reporting supply chain consortium (XBRL International) on how XML is used within the that chain. In essence, XBRL is like the “Universal Product Code,” but instead of bar coding physical products, it bar codes different kinds of business reporting information. Data are coded (or “tagged”) as they are prepared, distributed and consumed along the entire business reporting supply chain. As a result of XBRL, information is more useful to each and every participant in the supply chain, from the subsidiary level on up through the consolidation for management reporting and out to stakeholders in the broader community, including distributors, aggregators, creditors, analysts, investors and others who are consuming the reported information. Each step in the business reporting process is streamlined as the information is moved from application to application and across user groups. Further, the efficiency, accuracy and usefulness of the exchange are maximized.

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Financial Executives Have Pivotal Role

Financial executives participate in the information supply chain in two primary ways: as consumers of (internal) business information and as preparers of (external) business information. As consumers of business information, it is critical for management to have the ability to quickly spot problems and opportunities and to know what’s going on in the enterprise in time to make a difference.

XBRL: Cheaper, Better, Faster For information preparers, XBRL helps to: • Reduce the cost of preparing and publishing information (cheaper) • Increase the speed and efficiency of business decisions, and provide real-time reporting to all stakeholders (better) • Automate the migration of information from accounting systems to financial statements (faster) • Improve internal reporting for management decisions (better)

Getting the right information to management in a timely manner is often difficult due to the complexities of disparate data stores within a For information consumers, XBRL will: company (or between companies in • Enhance access and reduce the cost of analyzing the supply chain). This makes timely financial information (cheaper) and accurate consolidations difficult. • Enables deeper analysis at any chosen level and For example, accounting information reduce the margin for human error (better) comes from many sources, such as • Increase the speed of data use and related outsourced payroll vendors, subsidiary decisions (faster) ledgers, outsourced accounting and bookkeeping systems, other ERP For all stakeholders, XBRL makes financial data: • More accessible and easier to use (better) applications and many others. • Easier to transfer (faster) Financial executives need to consume • More trustworthy when associated with an XML this information efficiently for analysis Digital Signature (better) and consolidation purposes. XBRL for the General Ledger provides a communication platform--a bridge—between such disparate systems, enabling them to function in a more integrated and timely manner. Likewise, financial executives are responsible for preparing consolidated business, operational and regulatory reports and sharing these with appropriate stakeholders. XBRL for General Ledger can be valuable in several situations: • consolidations for financial reporting • specialized consolidations for regulatory reporting (income taxes, property, environmental, etc.) • other consolidations for specialized purposes outside the typical financial consolidation environment (either internal or regulatory) that require data gathering from disparate systems. XBRL can increase preparer productivity by streamlining the gathering of information for internal reports and financial statement preparation simply by improving the accessibility of company information. Obviously, not all internal information is meant for all consumers and XBRL allows preparers to determine what level of detail will be available to internal and external users.

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From the Grocery Chain to the Business Reporting Supply Chain

To understand how powerful the transforming potential of XBRL is for the corporate reporting supply chain, take a look around your local supermarket. Almost three decades ago, the grocery industry joined together to take advantage of new capabilities offered by emerging technologies. Out of this collaboration, the Universal Product Code (“UPC”) was born, resulting in industry-wide productivity enhancements. This strategic foresight enabled a three-fold increase in the variety of products available to consumers and gave store managers far more control over price changes, promotions and product assortments than in the past. Clearly, grocery industry operations as we know them today would be inconceivable without the information derived from tracking merchandise using the UPC code. In addition to streamlining operations, the UPC code also allowed manufacturers to analyze consumer behavior to better manage the product supply chain. Similarly, XBRL leverages the emergence of new Internet technologies to improve the corporate reporting process exponentially for all users in the business reporting supply chain, including the capital markets. While information is hardly a shelf product such as meat or produce, presentation is still key. How information is reported to stakeholders is very relevant to the communication process. Stone tablets, tree pulp, manually prepared paper transcripts and Gutenberg printing press paper documents have all given way to Adobe’s pdf, the Internet’s HTML and Microsoft’s Word. This migration to ever more automated information formats continues to enhance the user experience at every step—and the message communicated. It also increases the demand for more information.

Trusted and Efficient Reporting • Common interchange format and storage is good information management practice – Reduces redundancies & discrepancies – Repeatable processes using tools – A platform for continuous reporting Accounting System Explanatory Text Third Party Information

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Printed Financials Regulatory Filings

Web Site XBRL “Digital Bits”

Tax Return Trade Filings

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It is no surprise then that the migration of the capital markets information onto the Internet has increased the demand for information from financial executives. Fortunately, just as the UPC streamlined the grocery industry’s information gathering and analysis XBRL helps to increase information productivity for users and preparers in the business reporting supply chain. Financial executives can use XBRL to “bar code” financial information quickly and accurately, thereby enabling their companies to function in a more tightly integrated What XBRL Is Not manner, where information moves In outlining what XBRL is, it is also useful to understand seamlessly between different areas of what XBRL is not. XBRL is: the company, between business • NOT a set of accounting standards. Accounting partners, and from the supply chain to standards are the domain of the existing the financial markets. As an example of how XBRL provides a reliable and efficient way for companies to communicate internally and with stakeholders, consider that any piece of data needs to be published only once for it to become accessible to all others who need it. Once a data item is “bar coded” and made accessible to various users, those users all receive the same information from the same source. Bridging Disparate Data Stores From an internal/preparer perspective, the morass of disparate and tangled data stores inside most companies makes timely, accurate and reliable information gathering for management decisions a costly, timeconsuming proposition. XBRL for the General Ledger provides an integration bridge that radically reduces the time needed to consolidate information. XBRL removes the human error element from consolidating information both inside and outside of the enterprise. It also enables more qualitative analysis of information by allowing users to quickly access the relevant data sources.

Generally Accepted Accounting Principles (GAAP) and regulatory standards bodies. XBRL is a platform on which reporting standards content will reside and be represented.

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NOT a detailed universal chart of accounts. Charts of accounts are the domains of management (and in many countries, of the government itself), and it is their responsibility to define appropriate classifications for use in generating appropriate management information. XBRL can facilitate the implementation of such structures through its ability to transport data between disparate software applications that might be used within an organizations operational structure.

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NOT a GAAP translator. XBRL does not provide transparency of existing GAAP information into lower levels of information that would be necessary for translating from one GAAP to another. The business-reporting document contains the same GAAP information, be it in an XBRL format or a Microsoft® Word or Adobe® PDF format.

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NOT a proprietary technology. XBRL is freely licensed and available to the public. XBRL is XML-based and therefore is expected to be widely available in software applications.

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NOT a transaction protocol. XBRL is designed to address issues related to production and consumption of information contained within business reports and begins at the accounting classification level. XBRL is about business reporting information, not about data capture at the transaction level.

From an external user’s perspective, XBRL enables a parallel ability to gather information from different companies quickly. Online replication of paper documents is not much of an improvement over searching the actual hard copy. With XBRL, information can be downloaded directly into the user’s software again removing the element of human error. The implication here is that, over time, the XBRL-driven corporate reporting process will lead to better analysis by investors, analysts, regulators and other third parties. The FEI Research Foundation

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Additionally, the speed, ease and reliability of XBRL reporting, combined with an almost inevitable convergence of information standards will enable investors and Wall Street analysts to cover far more companies than they can today. With just one third of all public companies now covered by Wall Street analysts; the opportunities for capital allocation to a broader range of companies could be significant.

Annual Report as “Dialogue”

XBRL formatted reports give investors discovery capabilities that were previously inconceivable. Think about what today's investors don't know about the disclosure on page 7X of a company report because current electronic paper formats make the reports essentially opaque. With XBRL, investors can quickly “The annual report of the 21st century will not be annual access the information of and it will not be a report: it will be an up to date interest, no matter where in the informative, permanent dialogue” report these related bits of information are placed. The - Alan Benjamin in The 21st Century Annual Report (2000) result of eliminating the need for investors to dig through hundreds of pages of company reports and manually input the gleaned data into whatever software they’re using to conduct analysis would likely be a more efficient allocation of capital in an environment of greater integrity and trust.

Advantages for Business Report Preparers

The advantages that accrue to preparers of business reports in the XBRL format include: •

Enhanced communication through increased distribution of and access to information contained in the business reports,

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Increased and more efficient coverage by analysts due to lower consumption costs,

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More efficient access to capital,

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Decreased time and cost of preparing business reports due to more efficient internal consolidation processes.

In the future, foot dragging financial executives may find that their reluctance to implement XBRL reporting leaves their company at a distinct disadvantage. Once stakeholders are aware of the more efficient, accurate and complete platform XBRL provides, and once companies at the forefront of implementing XBRL start to provide stakeholders with reports in this format, demand that all companies use XBRL for reporting will grow by leaps and bounds. XBRL makes it significantly easier for information consumers to access, use and reuse the information contained within company business reports. The enhancement of shareholder communications is a very significant incentive for financial executives to produce reports in the XBRL format. Investor Relations. On Wall Street, the high cost of analysis, driven by the impediments of the existing paper based supply chain, limits the number of companies that can be covered by analysts. Due to the significantly lower consumption costs associated with the XBRL format, analysts can spend less time, money and resources on gathering more data and more time money and resources on analysis. Creditor Relations. Capital providers will also benefit from the efficiencies that XBRL provides consumers: opportunities for credit applications will be prioritized for those companies who can complete the credit request and provide information in the XBRL format.

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Upper Management. Getting the right information to management in a timely manner is an arduous task due to the various and sundry data stores that exist within a company. This situation plays to the sweet spot of XBRL by automating what can be automated and allowing management and stakeholders to be fully engaged in what matters—the issues, the strategies, the opportunities and the decisions that have to be made. XBRL Once stakeholders are aware of the more enables more efficient data collection efficient, accurate and complete and consolidation to provide higher platform XBRL provides…demand that all quality information for management companies use XBRL for reporting will decisions. Simply put, XBRL helps grow by leaps and bounds. “connect the dots” for internal management reporting. For preparers, as part of a larger business process related to the assembly of information for management decision and analysis, the XBRL format has several benefits: - Higher quality information provided to management for decisions - Lower costs for data consolidation from disparate systems - Lower costs for report preparation and distribution - Easier implementation of internal and external reporting models (e.g., a common chart of accounts for tax or GAAP or management reporting) - Easier viewing of information in a variety of reporting hierarchies. Proactive involvement and leadership by financial executives in the development of the XBRL reporting model will ensure that the ultimate solution fully meets their needs and minimizes the risks of a proprietary or less relevant solution being developed by other participants in the supply chain.

"XML is key to distributing information in the Internet age, and the developing XBRL standard will greatly increase the power of financial reporting. Reuters is committed to using open standards technology, and we are delighted to be leading the deployment of XBRL in this way." David Grigson, Reuters Chief Financial Officer International Accounting Bulletin, November 2001 “Reuters’ reputation stands on its ability to communicate and the Extensible Business Reporting Language standard it has employed this week to publish accounts online is amongst the most significant of developments in promoting transparency in financial information.” ACCOUNTANCY AGE, November 2001

Advantages for Business Report Consumers

The advantages that accrue to consumers of business reports in the XBRL format include: •

Less time and lower cost of accessing business report information

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Enhanced ability to analyze business report information

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Enhanced discovery capabilities for business reports.

For business report consumers, the cost of locating, accessing, inputting and finally analyzing information is high due largely to its manual nature. This high consumption cost limits the breadth, frequency and volume of information that can be processed. The The FEI Research Foundation

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value proposition for the consumer is that information formatted in XBRL exponentially lowers consumption costs and provides for more efficient analysis. The manual processing of business reports also leads to errors in the transfer of information between preparers and consumers. Wrong information is simply a keystroke error away. Inaccuracies are also rife as information is transferred from providers and then distributed by aggregators who have “summarized” the original information provided by individual companies into ”normal” classifications. The “summarizing” and “classification” process so common today often leads to distortion of information. XBRL formatted reports enable investors to go straight to the source, rather than relying on potentially misleading aggregators and distributors. Investors who choose to can gather information from various companies with the same ease as intermediaries. With XBRL, companies have a more effective way to communicate with their stakeholders, and investors have a more efficient way to analyze companies Thus, the overall transparency of the corporate reporting environment is enhanced. Regulators See Benefits, Too Regulatory agencies in different parts of the world are already recognizing the benefits of XBRL and are using it to decrease the cost of regulation while enhancing the regulatory process. The Australian Prudential Regulation Authority (APRA) began providing companies with “interactive regulation” and direct feedback on their reported information versus their peer group. The UK’s Inland Revenue has already decided that XBRL is the format for company returns starting in 2003. The U.S. Federal Deposit Insurance Corporation (FDIC) is pursuing a similar path for call reports (reports of condition and income required and collected by the FDIC). These regulators see the significant opportunity for productivity using XML/XBRL and are moving quickly to reap the potential benefits. XBRL: Theory and Practice Moving from theory to practice, the best example of XBRL’s real benefits is its single largest implementation to date. APRA collects information from more than 7,000 institutions. In August 2000, APRA decided it needed a single data format for regulatory reporting. The format needed to be an internet-based, industry standard—one that would enhance transparency, lessen the burden of filing and provide a way to seamlessly exchange this information with other economic institutions such as the central bank and statistics agency. The format they chose was XBRL. Today, the majority of banks in Australia, and an increasing number of credit unions, insurers and pension funds, use a free utility report in their quarterly regulatory filing in the XBRL format to APRA. For banks, it has resulted in a 40% reduction in duplication of reporting work; for APRA, it means a more efficient way of getting and analyzing industry information. John Turner, former project manager of the XBRL implementation at APRA, summarizes the improvement this way: “The big win is when organizations provide XBRL out of their systems, they get end to end integrity, we get more confidence in quality and timeliness of information and it cuts out huge amounts of manual processing.” (Australian Financial Review, October 25, 2001). Every day thousands of individual investors, analysts and institutional investors sort through financial statements and securities filings to gather the data they need to make decisions that impact whole societies. For these users, the advent of XBRL will be a very practical means of improving transparency. 8

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To see how this might work in action, a demonstration website is available at http://www.nasdaq.com/xbrl. The demonstration consists of three parts: (1) Exemplary data tagged in XBRL from a small group of companies, (2) a Web Service providing the data to the Internet, and (3) an analytical worksheet in Microsoft Excel that quickly consumes user selected data from the Web Service and allows the user to efficiently analyze/manipulate the selected data. This demonstration also illustrates how XBRL moves the corporate communication process from a “publishing model” to a “broadcasting model.” It is the next step in the evolution mentioned previously from stone tablets to paper transcripts to printing press. Today, corporate communications operate in a publishing environment wherein investors come to a company web site, search for published documents, open those documents and manually read them looking for relevant information to include in their analysis. Despite the electronic “habitat” of reports published on the Internet, the inherent transparency of the reported information is limited. The Internet, Web Services and XBRL move the process forward, providing companies with a significantly more effective way to reach constituents, by “broadcasting” company information to investors in the XBRL a format so that it can be immediately consumed by their analytical applications and/ or viewing tools including browser, worksheet software, data warehouse, and many other software tools.

A Closer Look at XBRL International

XBRL International is a collaborative consortium of more than 170 organizations, representing virtually all components of the business reporting supply chain, that have committed to consensus-based data entry interchange formats. The consortium members have also committed to incorporate the consortium work into their products and services. Important members include: Deutsche Bank, FDIC, Fidelity, Fujitsu, Hitachi, Hyperion, General Electric, IBM, IMA, Microsoft, Morgan Stanley, Reuters, Thomson Financial, and many others. "Coming down the road are standards like XML and XBRL that take data handling a major step forward from HTML, the current web standard. With these new standards, plus those for accounting, it will be possible to scan a universe of corporate data across the web and extract, say, the chairman's report for all companies with a certain market cap, EBITDA, and gearing. If Europe moves quickly to take up these standards, it could give them an attractive lead in the race to accessible and comparative key data that would stimulate investor interest. It would undoubtedly spawn a plethora of research tools that would be useful to both private and professional investors.”

The XBRL International consortium is working to create an Internet reporting platform for business reports. The XBRL membership is focused on the development of the XBRL Specification, XBRL Taxonomies that promote adoption, and other materials that increase awareness and education of supply chain participants.

The XBRL Specification is the use of XML for the purpose of business Investors Chronicle, August 9, 2000 reporting; it is the technology platform for transporting the information contained within business reports. XBRL Taxonomies are the data definitions or reporting language used within business reports. Taxonomies currently exist for a limited range of reporting purposes, such as United States GAAP for Commercial & Industrial Companies, International Accounting Standards for Commercial & Industrial Companies and others. These taxonomies are for general reporting purposes. More detailed taxonomies will be required to expand commercial use within the capital markets. There are other more specific taxonomies such as the APRA reporting for financial services company reporting in accordance with APRA regulations. The FEI Research Foundation

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XBRL International conducts conferences around the world every four months wherein the consortium participants share market activities, product developments and collaborate on the development of the XBRL Specification, Taxonomies, educational materials, liaison and marketing activities and more. Conferences to date have been held in Berlin, New York, Sydney, Toronto and Washington D.C., with future conferences scheduled for Tokyo (November 2002), Dublin (March 2003), and Redmond (July 2003). Conferences welcome attendees from the general public and provide local speakers (in local languages) on educational topics, implementation considerations and other market implementations and activities.

For More Information: To learn more about XBRL, readers can do the following: •

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FEI Research Foundation Activities: −

Ask an FEI Researcher for other materials on XBRL Taxonomy development and implementation Case Studies.

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Participate in the FEI Working Group on the Internet Reporting Model.

Visit the Microsoft, Morgan Stanley and Reuters Web pages to see the human-readable format of XBRL financial statements: −

http://about.reuters.com/results/2001-pr/html/xbrl.asp

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http://www.morganstanley.com/xbrl/

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http://www.microsoft.com/msft/xbrlinfo.htm

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Visit the XBRL.org site at http://www.xbrl.org/ and view some of the XBRL demonstration pages at http://www.xbrl.org/demos/demos.htm.

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View the demonstration of XBRL capabilities at http://www.nasdaq.com/xbrl

Visit the Australian Prudential Regulatory Authority web site and learn about their production environment. http://www.apra.gov.au/ (search on ‘XBRL’). Download the free XBRL utility used by most companies to report to APRA at http://www.xbrl.org.au

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Talk with their own company’s investor communication benefits of the XBRL platform.

relations

manager

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Talk with their own company’s accounting software supplier, consolidation tool developer or Internet service provider about their readiness for XBRL.

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Talk with lead analysts about how they might value the more useful XBRL format.

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Send a representative to the next XBRL event: A calendar is available at http://www.xbrl.org/events/events.htm.

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Review their company internal information flow for any point at which custom bridges are created or manual entry is required.

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Discuss XBRL with their CPA, CA, bank and analyst.

and

assess

the

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Conclusion

Accurate, timely, complete and reliable information is necessary for the success of any business in today’s competitive environment. It is critical for financial executives to spot problems and opportunities at many levels of the enterprise and act in time to make a difference if necessary. XBRL General Ledger provides an enabling tool to significantly enhance the internal business consolidation and reporting process. Management communication with capital market stakeholders ensures liquidity for company capital activities. XBRL provides a tool for broader, more accurate and timely communications with the market and other interested parties. This is a more effective communication medium for companies and their stakeholders. Clearly, the migration of corporate reporting onto the Internet platform is well under way. XBRL provides a communication platform specifically designed for corporate reporting on the Internet. However, XBRL is only as good as the quality of the information on which it is based. Realizing the benefits that XBRL promises will require a much closer and broader collaboration of business reporting supply chain participants.

About the Authors Zachary Coffin Founding Member, XBRL International Steering Committee Global XBRL Leader, KPMG LLP Zachary Coffin is responsible for leading the integration of XBRL into KPMG's assurance, audit, tax, corporate finance, and advisory services for clients of every industry worldwide. To this end, he's worked with executives ranging from start-ups to the Fortune 10 and with stakeholders and officials ranging from the White House to governments in over thirty countries around the world. As a founding member of the International Steering Committee and past Liaison Chair of XBRL International, Mr. Coffin led the growth of the XBRL organization from a twelve-company committee in the United States to a consortium of 170 organizations in over a dozen countries. He is the author of numerous articles on digital reporting, and co-author of the forthcoming book Introducing XBRL: Decision Making in a Digital Economy (Prentice Hall). Beyond XBRL, Mr. Coffin has over fourteen years of experience in a variety of information technologies, and at KPMG has worked with clients in nearly every industry, from non-profits to investment banking. Mr. Coffin graduated with an M.F.A. from the University of Southern California, and with a B.A., magna cum laude, from Columbia University; and is on the Board of Directors of the Alumni Association for the School of General Studies at Columbia University. He can be reached at either [email protected] or [email protected]. Mike Willis, CPA Founding Chair, XBRL International Steering Committee Partner, PricewaterhouseCoopers Mike Willis served as founding chairman of the XBRL International Steering Committee and currently chairs the Preparers and Accountants Working Group. Willis has more than 22 years of accounting industry experience and is a partner with PricewaterhouseCoopers, where he has responsibilities for collaborative applications, software tools and business process used by PwC professionals and their clients. Willis joined PricewaterhouseCoopers in 1983 and has served clients in the software, Web services and electronic commerce sectors. Willis graduated from the University of Florida’s Fisher School of Accounting in Gainesville, Florida, and is a member of the American Institute of Certified Public Accountants and the Florida Institute of Certified Public Accountants. He currently serves on the board of trustees at the University of Florida's Fisher School of Accounting.

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Note: This article is of a general nature and is not intended to address the specific circumstances of any individual or entity; in specific circumstances, the services of a professional should be sought. The views and opinions are those of the authors alone and may not necessarily represent the views and opinions of XBRL International, KPMG, PricewaterhouseCoopers or the FEI Research Foundation. Thanks to David Nord, Vice President and Controller, United Technologies Corporation and Taylor Hawes, Assistant Controller, Microsoft Corporation, for their conversations on the subject and/or review of this article and to Cheryl Graziano, Research Manager of the FEI Research Foundation, for her input and facilitation of this project.

Financial Executives Research Foundation, Inc. Copyright © 2002 by Financial Executives Research Foundation, Inc. All rights reserved. No part of this publication may be reproduced in any form or by any means without written permission from the publisher. International Standard Book Number 1-885065-43-4 Printed in the United States of America First Printing Financial Executives Research Foundation, Inc. is the research affiliate of Financial Executives International. The purpose of the Foundation is to sponsor research and publish informative material in the field of business management, with particular emphasis on the practice of financial management and its evolving role in the management of business. The mission of the Research Foundation is to identify and develop timely, topical research to advance the financial management profession. The Foundation’s work is educational rather than editorial. The Foundation is an independent 501(c)(3) educational organization. The Foundation receives no portion of FEI Members dues; rather, it relies on voluntary tax-deductible contributions from corporations and individuals. The views set forth in this publication are those of the author and do not necessarily represent those of the Financial Executives Research Foundation Board as a whole, individual trustees, or the members of the Advisory Committee. This and more than 50 other Research Foundation publications can be ordered by logging onto www.fei.org/rf. Discounts available to FEI members and Foundation donors.

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