XBRL Next Steps – What you need to know for 2010 and beyond

Overview
2010 is a significant year for the Securities & Exchange Commission’s (SEC) XBRL mandate. It is the second year of a three-year phased-in schedule that will require all public companies to begin submitting additional exhibits with certain SEC filings. These new exhibits will be in the eXtensible Business Reporting Language (XBRL) format. XBRL exhibits will include a company’s financial statements, footnotes and schedules in a computer language A computer language that tags each item in the financial statements so that computers can “understand” the content that tags each item and context of those financials. This will assist the SEC in their ability to analyze and monitor the in the financial overwhelming amount of information that SEC registrants file annually. statements so that computers can The first wave of filers was mandated to begin submitting XBRL exhibits on June 15, 2009. This “understand” the wave of Large Accelerated Filers - numbering more than 475 companies - has now been submitting content and context of XBRL for almost one year. After June 15, 2010, the second wave of filers - all remaining Large those financials. Accelerated Filers - will be required to begin submitting XBRL exhibits. To complete the phased-in schedule, all remaining companies will be required to begin submitting XBRL exhibits after June 15, 2011. The following is a chart of the SEC’s phase-win schedule. Per the SEC’s Interactive Data to Improve Financial Reporting Final Rules, page 41: http://www.sec.gov/rules/final/2009/33-9002.pdf

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What do I need to know about XBRL?
“XBRL is a language for the electronic communication of business and financial data which is revolutionizing business reporting around the world. It provides major benefits in the preparation, analysis and communication of business information. It offers cost savings, greater efficiency and improved accuracy and reliability to all Since XBRL is an those involved in supplying or using financial data. It is an open standard, free of license fees, being open standard developed by a non-profit making international consortium.” (non-proprietary) and regulators are The above excerpt is taken from www.xbrl.us, the U.S. jurisdiction of the international non-profit requiring compliance consortium dedicated to the development, promotion and implementation of this global open standard. documentation in Many regulators, exchanges and other organizations have already mandated XBRL or are on the path this format, there towards requiring financial information to be “tagged” in XBRL. is no doubt XBRL will become the Since XBRL is an open standard (non-proprietary) and regulators are requiring compliance standard format documentation in this format, there is no doubt XBRL will become the standard format for for communicating financial information. communicating financial information. Essentially, every number in a financial statement will have an associated code or tag assigned to it. This tag will include the accounting definition and its attributes – l.e., is the number a credit or debit, an instance or duration value, identifies the calculation relationship to other items in the report and the context of the value including the time period.

What are the potential uses of XBRL?
XBRL can be applied to a very wide range of business and financial data. Among other things, it can handle: • • • • • • Company internal and external financial reporting Business reporting to all types of regulators, including tax and financial authorities, central banks and governments Filing of loan reports and applications; credit risk assessments Exchange of information between government departments or between other institutions, such as central banks Authoritative accounting literature - providing a standard way of describing accounting documents provided by authoritative bodies. A wide range of other financial and statistical data, which needs to be stored, exchanged and analyzed.

What are the benefits to a company who converts its financial statements into XBRL format?
XBRL increases the usability of financial statement information. The need to re-key financial data for analytical and other purposes can be eliminated. By presenting its statements in XBRL, a company can benefit investors and raise its profile. It will also meet the requirements of regulators, lenders and others consumers of financial information, who are increasingly demanding reporting in XBRL. This will improve business relations and lead to a range of benefits.

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What is the SEC requiring?
Once a company is required to comply with the SEC’s XBRL mandate, they must submit these new exhibits with their Annual and Quarterly reports, transition reports and registration statements. These exhibits will reflect the primary financial statements, the notes to the financial statements and the schedules. Highlights of the SEC’s Final Rules for the XBRL mandate: • • • • The Rules apply to domestic and foreign companies using U.S. GAAP and in 2011 to foreign private issues using IFRS (as issued by IASB) The XBRL exhibits are deemed “furnished” and supplement to the officially deemed filed documents filed in the HTML or ASCII formats XBRL exhibits have a limited liability protection within 24 months of the time the filer is first required to submit XBRL. Additionally, the limited liability provision will terminate completely on Oct. 31, 2014 A company is required to post these XBRL files on their corporate web site The SEC’s mandate requires that a company include in its XBRL exhibits their financial statements and the footnotes and schedules tagged with XBRL. For the first 12 months, a company has to tag the footnotes and schedules as individual elements. This is referred to as “block tagging.” For example, the Significant Accounting Policy footnote would be included in the XBRL exhibits as a single block with two tags associated with it. Twelve months after a company has begun to submit XBRL exhibits the rules require additional information in the footnotes and schedules to be tagged with XBRL codes. Per the SEC’s Interactive Data to Improve Financial Reporting Final Rules, page 59: http://www.sec.gov/rules/final/2009/33-9002.pdf

The SEC’s mandate requires that a company include in its XBRL exhibits their financial statements and the footnotes and schedules tagged with XBRL.

“We are therefore adopting the requirement that footnotes be tagged using four different levels of detail: (i) each complete footnote tagged as a single block of text; (ii) each significant accounting policy within the significant accounting policies footnote tagged as a single block of text; (iii) each table within each footnote tagged as a separate block of text; and (iv) within each footnote, each amount (i.e., monetary value, percentage and number) separately tagged. To allow filers time to become familiar with tagging footnotes, in each filer’s first year of interactive data reporting, only level (i) will be required. All four levels will be required starting one year from the filer’s initial required submission in interactive data.”

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Illustration: Block Tagging - For the first 12 months, a company would tag the following note as a single element.

NOTE 5. INCOME TAXES The Company recorded a tax provision of $50 million, an effective income tax rate of 10.5%, for the quarter ended August 31, 2009 and recorded a tax provision of $130 million, an effective income tax rate of 40.0%, for the quarter ended August 31, 2008.

XBRL expression for block tagging: <Income Taxes> - beginning tag NOTE 5. INCOME TAXES The Company recorded a tax provision of $50 million, an effective income tax rate of 10.5%, for the quarter ended August 31, 2009 and recorded a tax provision of $130 million, an effective income tax rate of 40.0%, for the quarter ended August 31, 2008. </Income Taxes> - ending tag Detailed Tagging - After twelve months, a number of other facts within that footnote will also be required to be tagged. The following looks at the previous example – Income Taxes footnote: <Income Taxes> - beginning tag NOTE 5. INCOME TAXES The Company recorded a tax provision of $50 million, an effective income tax rate of 10.5%, for the quarter ended August 31, 2009 and recorded a tax provision of $130 million, an effective income tax rate of 40.0%, for the quarter ended August 31, 2008. </Income Taxes> - ending tag To satisfy the detailed tagging requirements, the facts numbers highlighted in yellow would also need the appropriate taxonomy element assigned to them. As this illustration suggests, the amount of information required to be tagged increases after 12 months from approximately 150 tagged facts from within the financial statements, footnotes and schedules to approximately 600 facts, a four-fold increase.

The average number of facts that will be required to be tagged will increase to approximately 600, a four-fold increase.

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The following table identifies the reports for which a filer would first be required to include XBRL with the company’s financial statements according to the company’s filing status. Domestic and Foreign Large Accelerated Filers Using U.S. GAAP with Worldwide Public Common Equity Float above $5 Billion as of the End of the Second Fiscal Quarter of Their Most Recently Completed Fiscal Year All Other Large Accelerated Filers Using U.S. GAAP

Quarterly report on Form 10-Q or annual report on Form 20-F or Form 40-F containing financial statements for a fiscal period ending on or after June 15, 2009. Quarterly report on Form 10-Q or annual report on Form 20-F or Form 40-F containing financial statements for a fiscal period ending on or after June 15, 2010. Quarterly report on Form 10-Q or annual report on Form 20-F or Form 40-F containing financial statements for a fiscal period ending on or after June 15, 2011. Annual reports on Form 20-F or Form 40-F for fiscal periods ending on or after June 15, 2011.

All Remaining Filers Using U.S. GAAP

Foreign Private Issuers with Financial Statements Prepared in Accordance with IFRS as Issued By the IASB

This phased-in schedule positions 2010 as a turning point in the SEC’s XBRL mandate. Companies phased-in, in 2009 are now coming to their 12-month anniversary of submitting XBRL exhibits, which is significant because they will now have additional requirements, namely the requirements to “detail” tag their footnotes. The remaining Large Accelerated Filers are preparing for their first filings requiring XBRL exhibits after June 15, 2010. Finally, many companies being phased-n after June 15, 2011 have researched their options and decided to outsource this work to an experienced XBRL service provider. Many of these issuers have also decided to prepare for the mandate well in advance of the mandate next year.

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How do I prepare for a successful filing with XBRL exhibits?
Preparing for the SEC’s XBRL mandate is an involved, complicated matter. It requires expertise in: • XBRL - this new computer language/standard • Specialized XBRL software • In-depth knowledge of the SEC rules To better understand the effort involved to comply with this new rule, the AICPA jointly conducted an online survey with XBRL US in November 2009. • • • 57% of respondents said it took them more than 120 hours to complete their first submission; 64% of those that filed a second time around said it took less than 40 hours 45% of those that filed a second time said it was significantly easier the second time Respondents noted that the most challenging part of the process was mapping/tag selection (15%), getting educated (10%) and validation (9%)

The SEC in their Final Rules also estimated the effort involved in complying with this new regulation by estimating the following cost of doing all XBRL work internally: 1st year: $76,860 to $146,240 2nd year: $ 93,925 to $173,970 XBRL is not a simple language. In order to gain a good sense of what is required to successfully create and submit XBRL exhibits, we recommend a review of the XBRL US GAAP Taxonomy Preparers Guide found at http://xbrl.us/ documents/preparersguide.pdf. This 129-page document explains all aspect of successfully creating and submitting XBRL exhibits including: • • • • • • • Understanding and Using Taxonomies Establishing Calculations Relationships Using Tables Creating Extensions Creating Instance documents Review of the Instance documents Validating the XBRL files to ensure they are accepted by the SEC

Because of these requirements and others, more than 75% of the companies that are currently required to comply with the SEC’s XBRL rules have turned to an outside service provider. Why is this? First, there is a significant amount of work to set up a company’s XBRL structure. It starts with selecting the appropriate tags or codes that accurately reflect the line items in the financial statements. These tags or codes are

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found in a directory of elements that reflect U.S. GAAP concepts. This directory (l.e.taxonomy) currently contains more than 16,000 elements (l.e.tags). The Financial Accounting Standard Board (FASB) maintains the U.S. GAAP taxonomy and we can expect annual updates beginning in 2011. More than 75% of the companies that are currently required to comply with the SEC’s XBRL rules have turned to an outside service provider. Even though there are more than 16,000 elements reflecting various possible accounting concepts, there are also financial statement line items and items in footnotes and schedules that are not covered in the U.S. GAAP taxonomy. In these cases, a company is allowed to create a companyspecific tag or element. When creating these company-specific tags we are extending the taxonomy, and that is where the word eXtensible comes from. On average, we see that companies need to create extensions for about 10% of the items that are tagged, unless a company is in the financial services or insurance industry. In these industries, we find that extensions are required for about 30% of the items in financials.

After a company has selected the standard tags from the taxonomy and has created the extensions necessary, the next step is to create the XML schema file. Specialized software is used to create this file, which is then used to tag financials to be reported under XBRL. Note, this step requires that updated values and periods be merged with the schema file so that they reflect the financials as stated in a given report. Six different files should be created:

Notice that all of the files become Exhibit 101 for the SEC’s filing. Each file plays an important role in the analysis of XBRL data. The primary file is the Instance file. This is an XML document containing XBRL elements that identify the accounting concepts reported and their associated values. The SEC believes that by requiring these new XBRL exhibits they can someday use technology to assist in analyzing financial statements. Currently, the SEC requires HTML- or ASCII-formatted documents, which do not lend themselves to computerized analysis of a company’s financials. By requiring a company to tag its financials with this new format, the SEC can begin developing the technological tools and systems needed for XBRL analysis.

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Next Steps
Let us examine the challenges for each group’s requirements starting with the third group being phased in after June 15, 2011. These companies will be required to begin submitting XBRL exhibits with block tagging of their footnotes and schedules. Using a December 31 Year-End Accelerated Filer as an example, their first SEC filing requiring XBRL exhibits will be the second quarter 10-Q in 2011. That seems like a long way off, but if you look at what it takes to be prepared for the first XBRL filing, we recommend you get started sometime this year. The set-up typically takes up to six weeks if you are working with a service provider. We believe that a best practice in preparing for a successful first filing is to perform a “practice run” during the preceding quarter to your first live XBRL filing. We believe that a best practice in preparing for a successful first filing is to perform a “practice run” during the preceding quarter to your first live XBRL filing. In the example noted above, the preceding filing would be the first quarter 10-Q. During this filing, practice creating XBRL exhibits as if you were going to file the XBRL exhibits with that 10-Q to the EDGAR system. This will give you the practice and knowledge required for a successful filing come the second quarter 10-Q.

For most companies, the January to May timeframe is not ideal for working with a service provider to ensure proper taxonomy element selection. Therefore, most of these companies are electing to have the set-up work performed in 2010 at a time of their choosing, typically after a quarterly report. This will help position them to take advantage of the recommended practice run. The next steps for a company in the second group being phased in after June 15, 2010 depend solely on how prepared the issuer is now. Many companies have just completed their “practice run” with their first quarter 10-Q. They are reviewing the results and in some cases, fine tuning the procedures. The biggest impact on a company’s filing process is the timeframe required to create and process XBRL formatted exhibits. Creating XBRL formats takes much longer to produce than HTML documents and this is one area where a company’s experience will depend on the service provider they use. For the most part, service providers are requiring that they have 48 hours to create the XBRL exhibits, with a 24 hour cut-off for changes to those exhibits. There are other companies in the second group being phased in after June 15, 2010 that are just now deciding on which service provider to work with. Before their first 10-Q after June 15 they will have to perform the set-up and, while they do not have the luxury of a “practice run” they can test file with the SEC’s EDGAR system to ensure that their XBRL exhibits will be deemed valid and accepted by the SEC. Looking forward to the additional tagging requirements issuers

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will face after June 15, 2011, many will begin their tagging process before the end of 2010. This is the same process that companies who have been submitting XBRL exhibits for almost 12 months are now going through. In preparing for the additional detailed tagging requirements, companies are selecting the elements that best express the items within the notes and schedules and are testing the validation of the resulting XBRL exhibits.

Conclusion
Preparing for the SEC’s XBRL mandate requires a company to plan accordingly, understand the XBRL process, and obtain the required resources.One of the basic questions is whether a company should do this work themselves or work with a service provider? If they were going to outsource this work, then which production model would they be most comfortable with? Any plan that is decided on should take into account that the rules are phased-in over a two-year period. Of course, the first step is to learn about the SEC’s mandate. Business Wire, as Business Wire, as a leading XBRL/EDGAR service provider, offers companies valuable presentations a leading XBRL and EDGAR service on the SEC’s XBRL mandate. You can schedule a webinar by contacting your local Business Wire provider, offers Account Executive; if you do not have an Account Executive, then you can contact your local Business companies valuable Wire office or XBRL@BusinessWire.com. presentations on the SEC’s XBRL mandate.

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Reported by: Gary Purnhagen Director of Compliance Services, Business Wire A Berkshire Hathaway Company 40 East 52nd Street, 14th Floor New York, NY 10022 Tel: 212.752.9600 Fax: 212.752.9698 Email: gary.purnhagen@businesswire.com

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