ENHANCED BUSINESS REPORTING

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• ENHANCED BUSINESS REPORTING

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CONTENTS

• Business Reporting A Changing Dynamic
• Why Enhance Business Reporting?
• Stakeholders of Enhanced Business Reporting The
  Corporate Reporting Supply Chain
• Elements of Enhanced Business Reporting
• Call to Action
• Whats in it for the Accounting Profession
• Special Committee on Enhanced Business Reporting
• Special Committee Representation
• Special Committee Mission
• Consortium Approach
• Consortium Representation
• High-Level Timeline/ Next Steps

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BUSINESS REPORTINGA CHANGING DYNAMIC
Historical Financial Statements
Enhanced Business Reporting

• Lagging indicators
• Periodic
• Historical
• Cost-basis
• Financial only
• Statements
• Looking backward

• Leading indicators
• On-demand
• Real-time/future
• Value-basis
• Comprehensive
• Custom reports
• Looking forward

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BUSINESS REPORTINGA CHANGING DYNAMIC
Historical Financial Statements
Enhanced Business Reporting

• Lagging indicators
• One size fits all (GAAP)
• Ignores non-financial measures
• Reports results of past decisions

• Leading indicators
• Tied to mission, vision and values
• Tied to factors critical to success
• Moves decision criteria to forefront

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WHY ENHANCE BUSINESS REPORTING?

• Current reporting model no longer sufficient
• Not timely -- its after-the-fact information
• Not customizable
• Not informative enough
• Ignores many factors of performance
• To date -- calls for change and some action
• Time is NOW for coordinated action

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STAKEHOLDERS
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CORPORATE REPORTINGSUPPLY CHAIN
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ELEMENTS OF ENHANCED BUSINESS REPORTING
CONVERGENCE TO NEAR REAL-TIME
SCALABLE
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ELEMENT MAP

• Corporate Accountability
• S-O Act 404 internal control
• Environmental, Health Safety (EHS) e.g. Global
  Reporting Initiative
• Social responsibility e.g. AccountAbility 8000
• Risk reporting e.g. COSO Enterprise risk
  management
• Corporate governance e.g. ISS Corporate
  Governance Quotient

• Financial Non-Financial Measures
• US GAAP/SEC financial statements
• Non-financial KPIs
• Customer satisfaction
• Customer retention
• Market share
• Product defects
• Employee training
• Employee satisfaction
• Patents held
• RD spending
• New product pipeline
• Costs per transaction
• Industry benchmarking
• Revenue per customer, square foot, ton-mile
• Forward-looking information, NOT prospective
  financial statements

• Understandable Disclosures
• SEC plain-English
• VMRC

• Information Dissemination
• XBRL
• Customizable by users flexible reporting by
  CPA
• Capital markets
• Debt markets
• Board of directors
• Management
• Regulators
• Employees
• Customers
• Suppliers
• NGOs
• Near real-time

• System Reliability
• Data assurance
• Audit of financial statements
• Close expectation gap
• SSAE 10 or ISAE 100
• XBRL data tags
• Footnote terminology related to XBRL
• Systems/process assurance
• Examination of S-O Act 404 assertion
• SSAE 10 or ISAE 100
• e.g. SysTrust
• Process-based
• KPIs
• Fwd-looking info

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Recommendations are good, but ACTION is better!
CALL TO ACTION

• We must build upon the foundation to chart the
  path for the future through Enhanced Business
  Reporting

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WHATS IN IT FOR THE ACCOUNTING PROFESSION?

• More valued role in the supply chain
• Enhanced public perception about profession
• Sustainable profession (attack relevance decline)
• Broader services scope/talent recruiting
• Revenue
• Potentially reduced liability due to more
  frequent, enhanced information available in the
  market
• More confidence in assurance and greater
  efficiency through enhanced IT audit tools

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SPECIAL COMMITTEE ON ENHANCED BUSINESS REPORTING

• Action taken to date Formation of the AICPA
  Special Committee on Enhanced Business Reporting
• Approved by AICPA Board in September 2002
• Composed of CPAs in public practice, business
  industry, government and academia

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SPECIAL COMMITTEE REPRESENTATION
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SPECIAL COMMITTEE MISSION
I Identification of key stakeholders whose
collaborative involvement is critical to
successful development implementation
MISSION To establish a consortium of investors,
creditors, regulators, management, other
stakeholders to improve the quality
transparency of information used for
decision-making
II Overarching goal of making better information
available to investors creditors, helping them
to see organizations through the eyes of
management
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CONSORTIUM APPROACH

• Work collaboratively
• Consortium-based
• Globally focused
• Comprised of key stakeholders of enhanced
  business reporting
• Build consensus
• Help define migration paths to drive adoption by
  participants in the business reporting value chain

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CONSORTIUM REPRESENTATION

• IMPLEMENTATION of enhanced business reporting
  will require consortium participation by the
  following organizations
• Government/Regulatory Agencies (SEC, FASB, IASB,
  GAO)
• Investment Community (large fund managers, rating
  agencies, Council of Institutional Investors,
  etc.)
• Public Companies and Industry Associations
• Accounting Firms and Associations
• Technology/Software Enablers
• Think Tanks (Brookings, CATO, AEI)

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HIGH-LEVEL TIMELINE/NEXT STEPS