Global Public Policy Symposium - PARIS, November 2006.

Toward a Single Global Company Reporting Model

  Until recently, countries required public companies doing business in their jurisdictions to comply with their own national “Generally Accepted Accounting Principles” or GAAP. In the early 1970s, many national securities regulators and accounting standards-setting bodies began to recognize the need for a common set of reporting standards, given the (already then) increasing global nature of selling and buying company securities. The result was the formation, in 1973, of the International Accounting Standards Committee, a 15-member body affiliated loosely with the International Federation of Accountants (IFAC).

  Eventually, the IASC forged an agreement with the International Organization of Securities Commissioners (IOSCO) to develop International Accounting Standards (IAS) for companies doing business in multiple countries and accessing international capital markets. In 2000, IOSCO recommended that its member regulatory bodies permit multinational issuers of securities to use IAS for cross-border securities offerings and listings, subject to “reconciliations” with national GAAPs. These reconciliations, however, resulted in duplication, as companies choosing IAS had to prepare statements under two accounting conventions.

  In the United States, since 1973, the SEC has delegated the setting of GAAP to the Financial Accounting Standards Board (FASB), an independent private-sector body, with seven full-time members and a chairman. The trustees of the Financial Accounting Foundation oversee FASB, while input for its standards is provided both from FASB’s advisory council and from the SEC.
In 2001, the IASC reorganized its membership to include representatives of national standards-setters, and renamed itself the International Accounting Standards Board (IASB), and the standards it issued the International Financial Reporting Standards (IFRS). The new structure and standards have elicited widespread support from national standards-setters around the world, most notably the European Union, which required companies listed on its national exchanges to begin using IFRS in 2005. China will adopt an IFRS accountingbased system in 2007.

  The United States remains one of the only major countries not to allow foreign companies to use IFRS or to require those standards for all companies listed on its exchanges. However, in 2003, the FASB launched a “convergence process” to “harmonize” U.S. GAAP and IFRS. That process is under way and making progress. Accordingly, the SEC’s staff reportedly is working toward allowing foreign issuers of securities in the United States to report solely on the basis of IFRS, without the need for reconciliation with U.S. GAAP, by some time in 2009.


XBRL: An Important Enabler
  Just as the Internet is rapidly changing the way individuals and businesses engage in commercial and social activities, a major project under way in the financial arena . the Global XBRL Initiative . promises to revolutionize the way investors, governments and companies themselves use, analyze and generate information. This revolution, in turn, must eventually transform the way this information is verified.

  XBRL is an acronym that stands for “Extensible Business Reporting Language.” It is the financial equivalent for the language of the Internet . “HTML.” In plain language, XBRL is a format that any data generator can use to input its data. The Global XBRL Initiative defines the categories to which the data belong. In other words, what counts as revenue, expense, asset or liability, at multiple levels of detail? Once the data are so formatted, users can retrieve them, put them in any standard spreadsheet software, and then view or manipulate them in any way they want. Users can ask “what if” questions, construct any number of graphs (with current, past and projected future data), compare companies against peers (however defined), view information in any language, any currency, and even under different accounting conventions (U.S. GAAP or IFRS, for example) . and get the answers virtually instantaneously, at the touch of a computer mouse.

  There are multiple users who would benefit from being able to access XBRL-formatted information: investors, analysts, governments, public companies (for internal and external reasons), employees, consumers, nongovernmental organizations, and yes, auditors. XBRL opens a brave new world of information access and lower costs, for users and generators of data alike. Our networks also believe that companies that adopt XBRL should see significant savings in their internal and external audit costs over time.

  In fact this new world is already here for the approximately 40,000 companies that already use XBRL to input their data. Some countries, such as China, Spain, The Netherlands and the United Kingdom, have required companies to use XBRL.

  U.S. banking authorities have required U.S. banks to file their financial reports in XBRL beginning in 2006 (having successfully tested the filing system in 2005). As for other companies, the SEC is encouraging the adoption of XBRL, and is hoping that peer pressure and investor demand will lead to its widespread use. Given the rapidly growing number of companies around the world that are adopting the XBRL, this is a plausible outcome. For further information see www.xbrl.com.


PDF File contains Full Text.
Global Capital Markets and the Global Economy:
A Vision From the CEOs of the International Audit Networks ,November 2006
http://www.globalpublicpolicysymposium.com/CEO_Vision.pdf