330 Eccles Presentation

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Business-Finance

Published on December 8, 2008

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XBRL & Enhanced Business Reporting: A Consortium ApproachDr. Robert G. Eccles XBRL International April 27, 2005Boston, USA : XBRL & Enhanced Business Reporting: A Consortium ApproachDr. Robert G. Eccles XBRL International April 27, 2005Boston, USA Wait a minute… enhanced business reporting, improving the reporting model… : Wait a minute… enhanced business reporting, improving the reporting model… Didn't Sarbanes-Oxley § 404 lead to improved internal controls and result in better information? No…..SOX targeted improved internal controls over financial reporting, however… Investors, creditors and business executives do not use the financial statements as their primary tool when making decisions about the allocation of capital Then, what information is important? Research tells us what is important : Research tells us what is important Provide shareholders and others with information needed to make decisions Financial and nonfinancial value drivers Tangible and intangibles assets In general, many measures require information from outside the Company's financial or business systems Vast majority of measures are not subject to standards or reporting frameworks of any kind Enhanced Business Reporting = Better Information PwC ValueReporting capital markets research : PwC ValueReporting capital markets research Source: PwC ValueReporting Capital Markets Survey PwC ValueReporting capital markets research : PwC ValueReporting capital markets research Source: PwC ValueReporting Capital Markets Survey PwC ValueReporting capital markets research : PwC ValueReporting capital markets research Source: PwC ValueReporting Capital Markets Survey PwC ValueReporting capital markets research : Chemicals Metals Mining Free Cash Flow Strategic Direction Manufacturing Costs Earnings Market Growth Performance by Business Segment Product Quality Quality of Management Capital Expenditure Utilization of Facilities Market Share Customer Loyalty Market Share Energy Prices & Supply Earnings Costs per Ton Delivered Market Growth Metals Prices Capital Expenditures Performance by Business Segment Potential Supply Globally & Locally Utilization of Facilities Product Quality Free Cash Flow Age & Quality of Plant Strategic Direction Value of Tangible Assets Implementation of New Processes & Technologies Quality of Management Regulatory Environment Strategic Direction Cash Cost per Ounce/Kg/Ton Capital Expenditures Earnings Existing/Potential Environmental Liabilities Health & Safety Performance Statistics Metal Prices Quality of Management Acquisition Strategies Ounces/Kilograms/Tons Produced per Year Performance by Business Segment Cost per Ounce/Kg/Ton Labor Relations Sustainable Development Strategy Environmental Policy/Risks Potential Supply/Production Globally & Locally PwC ValueReporting capital markets research Source: PwC ValueReporting Capital Markets Survey PwC ValueReporting capital markets research : PwC ValueReporting capital markets research Source: PwC ValueReporting Capital Markets Survey PwC ValueReporting capital markets research : PwC ValueReporting capital markets research Source: PwC ValueReporting Capital Markets Survey PwC ValueReporting capital markets research : Automotive Entertainment Utilities Market Growth Market Share Free Cash Flow Performance by Business Segment Customer Demographics Quality of Management Earnings Strategic Direction New Business Capital Expenditure Cost reduction Investment/acquisition strategy Margin improvement Market growth Operating cash flow growth Operating profit growth Quality of management Regulatory environment and price controls Risk Management processes Strategic direction and focus - integrated vs. specialist player PwC ValueReporting capital markets research Earnings Free cash flow Market Share Strategic direction Product quality Customer satisfaction Market Growth Facility or capacity investment strategy Sales volume Performance by business segment ROIC Source: PwC ValueReporting Capital Markets Survey Everyone needs better information : Everyone needs better information Management… to optimize allocation of capital and people resources Boards of directors… to provide the level of oversight that shareholders demand Investors… to more efficiently and effectively allocate and price capital Regulators… to ensure that the capital markets are functioning as efficiently and effectively as possible The net result is a higher return on capital for society as a whole What makes information better? : What makes information better? Information which is more relevant Content matters – not the normal boiler plate Management’s perspective Different users have different needs Information which is not overly costly to produce or consume Format matters Timing is important Focus on analysis not data gathering and validation Both content and format of information enhance transparency What do you mean… content and format? : What do you mean… content and format? Enhanced Business Reporting is about content Provides information that is actually used for decision-making It is information that is not always disclosed Business community may want to develop standards for this type of content (rather than waiting for territory regulatory actions) XBRL (eXtensible Business Reporting Language) is about format Current taxonomies are based on accounting standards Taxonomies for MD&A/OFR content are very high level Taxonomy extensions will provide more relevant information What is Enhanced Business Reporting? : What is Enhanced Business Reporting? Enhanced information for consumers Internationally recognized, voluntary guidelines for industry-specific value drivers and key performance indicators (KPIs) A framework for disclosure of non-financial information, e.g., opportunities, risks, strategies and plans and about the quality, sustainability and variability of cash flows and earnings Simplified report preparation Stronger focus on quality of information, not quantity Prepare and disseminate information using efficient and effective business processes A standardized format matters if information is to be more useful : A standardized format matters if information is to be more useful Management… to quickly populate a wide range of analytical and reporting tools with relevant information Boards of directors… to access and analysis of information buried deep within the enterprise Investors… to more efficiently and effectively access and analyze information in business reports Regulators… to more effectively analyze information in business reports The net result is greater transparency of business information The challenge : The challenge CEOs and management must resolve to report externally the same information that is used to manage the business Boards of directors must determine the optimal level of transparency required to ensure that all stakeholders have the information needed to make decisions Investors must demand and use qualitative, non-financial information and key performance indicators Regulators must be willing to trade long-time requirements for more relevant and useful information The benefits are worth the effort : The benefits are worth the effort Better Management Improving the ability of companies to benchmark performance against all key performance indicators This level of benchmarking is impracticable in a paper-centric world Better Governance Directors can better fulfill their fiduciary responsibilities to shareholders, e.g., more appropriate executive compensation through benchmarking Better Markets The over-emphasis of quarterly earnings will decline, as companies provide richer information that enables to investors take a longer term view More efficient and cost-effective regulation One possible model for business reporting… : One possible model for business reporting… One possible framework enhanced business reporting… : Performance Summary Supply chain Customers Acquisitions Innovation People Sensitivity analysis Estimates Projections Strategy Overview Strategic priorities Operational goals Risks and risk management Opportunities Value drivers The Market Competition Regulatory Macro-economic One possible framework enhanced business reporting… Financial Financial statements Segment analysis Source: Report of the Public Company Task Force to the AICPA Special Committee on Enhanced Business Reporting, June 2004 What do we need to do? : What do we need to do? Work together along industry lines to create thoughtful proposals for greater transparency involving both simplification and enhancement Lead positive change, through a collaborative solution, by establishing an international Enhanced Business Reporting Consortium of diverse stakeholders to improve the quality and transparency of information used in decision-making Market collaboration is the best solution for all participants Are there any alternatives to the EBR Consortium? : Are there any alternatives to the EBR Consortium? Do nothing and… Live with uncertainty in the markets about strategic intent and future performance, but remember, uncertainty breeds market volatility Fail to demonstrate that users and providers of market capital are committed to hold themselves accountable for the quality of the information provided to the capital markets Fumble an opportunity to build upon the SEC's interest in a market-led effort One thing is certain… Failure of the business community to develop and present constructive proposals will result in future regulatory mandates Companies are trying to explain why they did not make a target that they didn’t set in the first place : Companies are trying to explain why they did not make a target that they didn’t set in the first place “Enhanced Business Reporting will help companies move beyond the earnings game; placing more emphasis on measures that give a better picture of their value, their risks, and their opportunities.” Bob Herz Chairman Financial Accounting Standards Board What does the SEC think of the Enhanced Business Reporting Consortium? : What does the SEC think of the Enhanced Business Reporting Consortium? “I am encouraged by the Enhanced Business Reporting Consortium's efforts to develop a voluntary, internationally recognized framework for presentation of industry-specific key performance indicators and disclosure of non-financial information about opportunities, risks and management's strategies and plans. This effort represents the type of discussion and action that should be occurring in the marketplace as we all seek to continually improve the value of information for the sake of investors.” Don NicolaisenChief AccountantSecurities and Exchange Commission We are on the verge of a fundamental transformation of business reporting practices : Will you join us in providing leadership for change? www.ebrconsortium.org We are on the verge of a fundamental transformation of business reporting practices XBRL & Enhanced Business Reporting: A Consortium ApproachDr. Robert G. Eccles XBRL International April 27, 2005Boston, USA : XBRL & Enhanced Business Reporting: A Consortium ApproachDr. Robert G. Eccles XBRL International April 27, 2005Boston, USA

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