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Glen L. Gray Sung Wook Yoon California State University, Northridge Determinants of Levels of Satisfaction with SEC- Mandated XBRL Filing Process: A Work in Progress University of Kansas April 26-27, 2013

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Disclaimer The analysis, interpretations, and views expressed in this paper are solely those of the authors and do not necessarily represent positions or opinions of the Financial Executives International (FEI). 2

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A Brief XBRL History 1969: Al Gore invents the Internet 1994: Commercialization of the Internet 1999: FASB and IASC each publish reports on financial reporting on the Internet Most large companies are including financial reporting information on their Web sites No consistency in terms of content, format, and navigation Probably violating financial reporting regulations! (Still true?) Boundary problems (In or out of financials?) Automated searches almost impossible October 1999: First XBRL meeting with 13 members December 2008: SEC required XBRL filings starting in 2009 3

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Adoption summary for corporate filers Periods ending after June 15, 2009 Periods ending after June 15, 2010 Periods ending after June 15, 2011 (1) A. Large Accelerated Filers w/ public float > $5B (~ Fortune 500) Year 1 structure amounts in financial statement tables in detail and notes to financial statements in 'block text'. Roughly 300 disclosure elements. (~950 filings) Year 2 - structure amounts in financial statement tables and individually tag each significant accounting policy, table within a footnote and each quantitative amount within a footnote. Roughly 3,000+ disclosure elements. Same as year 2. Limited liability provisions are scheduled to be lifted by the SEC after 2 nd year. Companies may desire more comfort on processes and controls. B. Balance of Accelerated Filers with public float > $700m (~ next 1,600 largest public companies) Early Adoption available.Year 1 structure amounts in financial statement tables in detail and notes to financial statements in 'block text'. Roughly 300 disclosure elements. (~5,000 filings) Year 2 - structure amounts in financial statement tables and individually tag each significant accounting policy, table within a footnote and each quantitative amount within a footnote. Roughly 3,000+ disclosure elements. C. Balance of ~10,000 public companies (including FPIs under IFRS) Early Adoption available. Year 1 structure amounts in financial statement tables in detail and notes to financial statements in 'block text'. Roughly 300 disclosure elements. (~26,500 filings) US SEC Mandate Summary 3 Three year phase-in In year 2, volume & complexity increase 10X 4

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Statusin the USA* IFRS FilersGAAP Filers Required SEC Filers Tax Filers Internal XBRL Users Financial Statements to Banks *Much more action outside the USA 5

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PwC Common Adoption Alternatives Portal 1. Regulator provided XBRL enabled excel, word, and PDF templates and Web Interface 2. Bolt-on via Outsourcing or internal Utility 3. Bolt-on via Internal Process 4. Embedded Processes The Regulator will provide submission options using the Regulatory portal and via XBRL embedded word documents, excel workbooks, and PDF templates Printers and other third party service providers provide outsourced solution for mapping the disclosure elements on the financial statements and note disclosures (in block text) to the Regulator Taxonomy Report Writer ERP XBRL can be adopted by companies at the highest reporting level (i.e. consolidated) solely for purposes of complying with regulatory requirements. However, potential XBRL process enhancement benefits are not fully realized. - Enables automation of currently manual assembly and review processes - Requires companies to assess information needs and provides an opportunity to eliminate inefficiencies in current compliance and reporting processes. - Enables process enhancements that lead to more timely higher quality data for decision making purposes - Maximizes benefits of XBRL to preparers and internal users of financial and non- financial information. 6

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SEC Staff Observations On initial submissions http://www.sec.gov/spotlight/xbrl/staff-review-observations.shtml October 2009 1.Rendering 2.Element selection 3.Contextual references 4.Negative values and negated labels 5.Decimals 6.Other observations November 2010 1.Negative values 2.Extending for an element where an existing US GAAP Taxonomy element is appropriate 3.Observations on Axis and Member use 4.Observation on US GAAP modeling of Axis and Members 5.Observation on Tagging completeness Parenthetical Amounts 7

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FEI XBRL Preparedness Survey www.financialexecutives.org * www.financialexecutives.org Conducted by Financial Executives Research Foundation (FERF) Survey closed October 4, 2011 142 companies respond (138 unique companies) Tier 1: 34; Tier 2: 57; and Tier 3: 47 55 survey questions (some w/ sub-questions) *SEC Reporting and the Impact of XBRL: 2011 Survey Free to FEI members; $49.95 for non-members, however Email: Bill Sinnett, Senior Director, Research, at bsinnett@financialexecutives.org 8

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Continue with Current Process? 9

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XBRL Filing Status SEC Filing Status Bringing In- House/ Software Solution OutsourcingUndecided TIER 1Large Accelerated Filer100%% TIER 2Large Accelerated Filer90%5% TIER 3Accelerated Filer100%% Non-Accelerated Filer100%% Smaller Reporting Company100%% If switching, what do you plan to change to? 10

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Results Plan to Continue to Use Current Process (CONT) Satisfied with Current Provider (SAT)NODon't KnowYES Not Very Satisfied 68.0% 24.0%8.0% Somewhat Satisfied26.5% 46.9% Very Satisfied 13.4% 73.1% 11

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Fiat 500 12

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A Deeper Dive into the Data Dependent Variables Will you continue the same process going forward?(Q33). 13

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A Deeper Dive into the Data Independent Variables (Survey) Size: Revenue Complexity: International Ops & # of business units Service provider XBRL filing bottleneck In-house vs. outsourcing Resources (e.g., training, FAQs, etc.) Preparation hours XBRL familiarity Pencils down Level of tagging Delayed filing date (caused by XBRL) Filing errors or issues 14

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A Deeper Dive into the Data Independent Variables (Outside) External auditor Audit fee/client revenue Non-audit fee/audit fee for client XBRLCloud.com Numbers of errors related with EDGAR Filing Manual Numbers of errors related with US GAAP Architecture % Extension tags 15

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16 H1: More complex organizations will have lower satisfaction levels. H2: Organizations with more complex XBRL filings will have lower satisfaction levels. H3: Level of satisfaction will not be different for in-house vs. outsources preparation. H4: Organizations with Big 4 auditors will have higher satisfaction levels. H5: Organizations with higher levels of using non-audit services from their auditors will have higher satisfaction levels. Working Hypotheses

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17 H6: Organizations with higher levels of training will have higher satisfaction levels. H7: Organizations with higher errors rates will have lower satisfaction levels. H8: Organizations that experience filing delays due to XBRL will have lower satisfaction levels. H9: Overall process satisfaction levels will not vary by provider. Working Hypotheses

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18 Results: Continue w/ Process Will ContinueWill Not Continue XBRL Filing Status (XBRLFILER)Tier 3Tiers 1 & 2 XBRL ProvidersDonnelly & Other choiceIrrelevant XBRL Creation (FOUT and INTERNAL)Completely internal process (INTERNAL)Irrelevant Hours to review and coordinate with outsourcing provider (OUTHOUR) Less than 80 hoursMore than 80 hours Pencils Down period (PENCIL) Shorter periodLonger period Level of tagging detailsLower level of taggingHigher level of tagging Filling errors or issues Less errors or issuesGreater errors or issues

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19 R-Square0.4702 Max-rescaled R- Square 0.5426 Analysis of Maximum Likelihood Estimates ParameterEstimate StandardWald Pr > ChiSq ErrorChi-Square XBRLFILER1.50700.62685.78090.0162 Donnelley4.26171.62606.86940.0088 OtherPro4.33201.93685.00250.0253 INTERNAL2.11900.89505.60590.0179 OUTHOUR-0.49340.20925.56010.0184 PENCIL-0.55100.27593.99040.0458 TAGGING-2.83470.89809.96570.0016 ERROR-0.88110.50743.01550.0825 Results: Continue w/ Process

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20 No big surprises regarding what variables are on the prior table. Some surprises regarding what variables are not on the table. Big 4 vs. Non-Big 4 Non-audit fees Training and resources Familiarity with XBRL Results: Continue w/ Process

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21 Field and case studies to look behind the numbers. Conduct a survey with fewer, more-focused questions to achieve a higher response rate. The application of various theories that can support (or not) the findings. Moore, G.A. (2002) Crossing the Chasm, revised edition, Collins Business, New York. Rogers, E.M. (2003) Diffusion of Innovations, Fifth Edition, Free Press/Simon & Schuster, Inc. New York. Swan, J.A., and Newell, S. (1995) The role of professional associations in technology diffusion, Organization Studies, 16(5), pp. 847-874. Swanson, E. B., & Ramiller, N. C. (1997). The organizing vision in information systems innovation. Organization Science, 8, 458-474 Troshani, I., and Doolin, B. (2007) Innovation and diffusion: A stakeholder and social network view, European Journal of Innovation Management, 10(2), pp. 176-200. Zhu, K., Kraemer, K.L., Xu, S. (2006) The process of innovation assimilation by firms in different countries: A technology diffusion perspective on e-business, Management Science, 52(10), pp. 1557-1576. Research Opportunities

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Questions/Suggestions? Thank You glen.gray@csun.edu 22