The Future of Financial Reporting
Presented by:
Liv Apneseth Watson
Director of International Business Development
WebFilings
Greater Philadelphia Chapter IMA
Continuing Professional Education (CPE) Conference
Temple University
Friday, December 7, 201212:30 pm – 2:10 pm
Failed Predictions
“The phonograph is of no commercial use”- (Thomas Edison, 1880)
“Everything that has been invented has been invented”
- ( Charles Duel, Director US Patent Office, 1899)
“Who the hell wants to hear actors talking?”- (Harvey Warner, 1927)
“I think there is a world market for about five computers” -(Thomas J Watson, Chairman, IBM, 1943)
“There is no reason for any individual to have a computer in their home”
- (Ken Oloson, President of Digital Equipment Corp., 1977)
“640k ought to be enough for anyone” - (Bill Gates, 1981)
Liv A. Watson
• IMA Member since 2006
• Active leaderships roles in local Evansville, IN. Chapter
• Active leaderships role in Lincoln Trail Council
• Active leadership roles in IMA National Board of Directors and several of committees.
Director Of International Business Development
Today Agenda
• TRENDS AFFECTING THE REPORTING PROCESS
OF THE FUTURE
• THE SOCIAL REPORTING REVOLUTION
• WHERE WILL THE JOURNEY TAKE YOU?
CORPORATE REPORTINGCritical for investor confidence
An essential element of corporate governance
Influences decisions and behavior of management
Influences decisions and behavior of shareholders and other stakeholders
Affects resource allocation (financial, natural and human resources) in
society
Influences perceptions of the company’s customers, vendors, and
employees
Shapes how a company sees itself and its role in society
CORPORATE REPORTINGCritical for investor confidence
An essential element of corporate governance
Influences decisions and behavior of management
Influences decisions and behavior of shareholders and other stakeholders
Affects resource allocation (financial, natural and human resources) in
society
Influences perceptions of the company’s customers, vendors, and
employees
Shapes how a company sees itself and its role in society
Source: Prof. Robert Eccles, Harvard Business School
The Future
Michio Kaku
“predicts that computer
power will increase to the
point where computers, like
electricity, paper, and water,
"disappear into the fabric of
our lives, and computer
chips will be planted in the
walls of buildings."
Future of Humanity: Planetary Civilization
Kaku ranks the civilization of the future,
with classifications based on energy
consumption, entropy, and
information processing.
Michio Kaku is an American theoretical physicist
Mass Collaboration and Peer Production Online Models Will Abound; Machine Readable Information a Must
Slide 17
K1 this graphic does not make sense to me. it doesnt correlate well with the text. Can we get rid of this and make the text bigger?Korie.Downs, 11/9/2012
INTEGRATEDREPORTING
FINANCIALSTATEMENTS
CSRREPORTING
The Evolution of Corporate Reporting
GRCREPORTING
COMPLIANCEREPORTING
MANAGEMENT REPORTING
SUSTAINABILITYREPORTING
ENVIRONMENTALREPORTING
Subsidiaries
Overseers
Investment
Community
INTERNAL
STAKEHOLDERS
Infomediaries
Service
Providers
©2011 Brad Monterio
and Liv Watson
Investment
Community
Institutional Investors
Retail Investors
Infomediaries
Media
Social Media
Data Aggregators
Financial Publishers
Overseers
Regulators
Lawmakers
Policy Makers
Central Banks
NGOs
Community Groups
Associations
Service Providers
External Auditors
External Legal
Professional Services
Technology Vendors
Trading Partners
INTERNAL
STAKEHOLDERS
Management
Employees/Staff
Board/Governance
EXTERNAL
STAKEHOLDERS
INTEGRATED
REPORTING
STAKEHOLDER
ECOSYSTEM
GOOGLE SEARCH
�Environmental Reporting: 65 Million
�Compliance Reporting: 60 million
�Financial Reporting: 38 Million
�Management Reporting: 32 million
�CSR Reporting: 21 million
�Integrated Reporting: 7 million�Sustainability Reporting: 3 Million
�GRC Reporting: 2 million
“We’ve overspent our
financial, environmental,
social and governance
‘capital,’ and now the debt’s
come due.
Integrated Reporting is the
starting point to help us repay
that debt.”Brad J. Monterio
“This is a very important initiative that draws together the key actors across
financial, environmental and
social reporting. The concept of integrated reporting is coming
of age.”
Hans Hoogervorst,
Chairman, IASB
INTEGRATED REPORTING
“Integrated Reporting demonstrates the
linkages between an organization’s
strategy, governance and financial
performance and the social,
environmental and economic context
within which it operates. By reinforcing
these connections, Integrated Reporting
can help business to take more
sustainable decisions and enable
investors and other stakeholders to
understand how an organization is really
performing.”
The IIRC (www.theIIRC.org)
INTEGRATED REPORTING
�Evolution
�Journey
�Challenges Missing Links
�Story Opportunities
�Economic value
WHY PRACTICE
INTEGRATED REPORTING
�Shows commitment to being sustainable
�Helps integrate sustainability into strategy and operations for a better managed company
�Commitment to sustainability is good for shareholders
� Improves engagement with other stakeholders, especially employees and customers
� Improves reporting transparency
�Simplifies external reporting
�Positions company as leader and innovator
WHY PRACTICE
INTEGRATED REPORTING
� Improves relationship with investment community
� Enhances access to capital
� Strengthens relationships within communities through stakeholder engagement
� Improves reputation and strengthens brand
� Meets compliance/regulatory needs
CSR
REPORTING
TRENDS
Country 2002 (%) 2005 (%) 2008 (%)
France 14 40 73
Spain 27 44 70
Italy 66 70 61
UK 53 53 55
Denmark 45 31 46
Netherlands 38 40 44
Australia 42 43 42
South Africa 100 22 36
Sweden 15 5 33
Finland 29 19 30
Norway 20 33 30
Japan 26 31 24
Canada 10 10 19
USA 2 3 14
Source: KPMG International Survey of Corporate Responsibility
Reporting 2008, p. 56-58
CSR REPORTS WITH FORMAL ASSURANCE STATEMENT
� “Closing the non-financial books” on time
� Required level of inter-functional coordination
� Deciding on appropriate level of detail
� Deciding what’s material or not
� Lack of agreed-upon standards and audit (vs. assurance) methodologies
� Poor understanding of the relationship between financial and non-financial performance
� Getting the attention of investors for non-financial information
CHALLENGES TO INTEGRATED REPORTING
MISSING LINKSStandardization
Comparability
Materiality
Complexity
Stakeholder engagement
Assurance
Trust
MISSING LINKSStandardization
Comparability
Materiality
Complexity
Stakeholder engagement
Assurance
Trust
OPPORTUNITIES�Tell your story your way
�(re)Build trust
�Grow economic value
�Restore the balance
�Improve transparency
�Manage entire supply
chain
�Mitigate reputation risk
�Save money
�Build long term value
�Attract capital
HOW TO SPEED ADOPTION?�Missing links need to be
connected�Companies must take
responsibility to act � Innovation by many
constituencies is necessary�Support from investment
community vital�Standards essential – XBRL
is part of it; must be global�Legislation and regulation
will ultimately be required�Support from civil society
will encourage others to act
Statement Calls for Policies to Unlock the Vast Potential of Low-
Carbon Markets and Avoid Economic Devastation Caused by
Climate Change
(London) – The world’s largest global investors have a powerful
message for climate negotiators in Cancún and all national
governments: Take action now in the fight against global warming
or risk economic disruptions far more severe than the recent
financial crisis.
The statement was signed by more than 250 investors from Europe,
United States, Asia, Australia, Brazil and South Africa, with collective
assets totaling over US$ 15 trillion—more than one-quarter of
global capitalisation. Signatories included the global giants Allianz
Global Investors and HSBC Global Asset Management, as well as
many of the largest European pension funds and a dozen US public
pension funds and state treasurers. It is the largest-ever group of
investors to call for government action on climate change.
Thursday, November 18th, 2010
INVESTMENT COMMUNITY SUPPORT GROWING
SOLUTION MUST BE GLOBAL
“Sector, country-specific and
proprietary frameworks for
reporting on sustainability are at
odds with what the market needs
today. Solutions need to be global,
uniform, consistent, comparable
with current needs and extensible to
meet current and future needs; they
need to help the market understand
an organization‘s sustainability
practices, no matter in which
country or industry sector they
operate.”
- Liv A. Watson & Brad J. Monterio
Rio 20 – 2012 Brazil, Denmark, France, and South Africa have created a self-named group called “Friends of Paragraph 47”
Grenelle II law
Extra-financial information
ISAE 3000 and the AA1000.
Ad Hoc Data
SEC Adopts Rule for Disclosing Use of Conflict MineralsWashington, D.C., Aug. 22, 2012
• The Securities and Exchange Commission today adopted a rule mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act to require companies to publicly disclose their use of conflict minerals that originated in the Democratic Republic of the Congo (DRC) or an adjoining country.
• The minerals are “necessary to the functionality or production” of a product manufactured or contracted to be manufactured by the company.
• Congress enacted Section 1502 of the Act because of concerns that the exploitation and trade of conflict minerals by armed groups is helping to finance conflict in the DRC region and is contributing to an emergency humanitarian crisis. Section 1502 of the Act amends the Securities and Exchange Act of 1934 to add Section 13(p).
• Companies will file their first specialized disclosure report on May 31, 2014 (for the 2013 calendar year) and annually on May 31 every year thereafter.
• The final rule requires a company to provide the disclosure on a new form to be filed with the SEC (Form SD).
http://www.sec.gov/news/press/2012/2012-163.htm
The minerals involved in this trade – cassiterite (tin ore), coltan (tantalum ore),
wolframite (tungsten ore) and gold – are traded into international supply chains and
used in the production of consumer goods such as laptops, cell phones and jewellery.
CSR Reporting Challenges
CONTENT & STRATEGY
PROCESS
Access and control
Data aggregation
Version control
Collaboration
Lack of standards & frameworks
Level of detail
Materiality
Linkage: financial & non financial performance
�Helps CSR report
preparers eliminate
or minimize these
process challenges
�Allows company to
focus on content &
strategy
�Frees up time to
better tell the
company “story”
CSR Reporting Pain Points
#1
Excel works poorly
with Word
#2
No supply/value
chain collaboration
or version control
#3
Managing change is
difficult
Copyright 2012 WebFilings LLC Company Confidential
#4
End-game crunch
#5XBRL
Compliance
“� in this networked world, there is a need for
greater flow of knowledge across boundaries.
�. knowledge needs structure - without structure
you cannot retrieve it efficiently and you cannot
personalize
�the internet has facilitated access to
information, but complicated the task of
identifying relevant knowledge”
The Information Overload Challenge"
Source: Quotes from TFPL Taxonomies for Business conference, London 23 October 2000
Looking at XBRL in Different Ways
• A freely available, market-driven, open, global standard for exchanging business information
Looking at XBRL in Different Ways
• XBRL is a means of modeling the meaning of
business information in a form
comprehendible by computer applications
XBRL is a formal description
of concepts, terms, and
relationships within a given
knowledge domain.
Validation
Standardization
Adding Meaning to Electronic Data
CalculationCash = Currency +
Deposits
FormulasCash ≥ 0
Contexts
US $
FY2004
Budgeted
LabelcashCashEquivalentsAndS
hortTermInvestments
ReferencesGAAP I.2.(a)
Instructions
Ad Hoc disclosures
PresentationCash & Cash Equivalents
XBRL
Item
XBRL
Item
PresentationComptant et Comptant
Equivalents
Presentation
Geld & Geld nahe Mittel
Presentation
Kas en Geldmiddelen
Presentation
现金与现金等价物
Presentation
現金及び現金等価物
Presentation
Деньги и их эквиваленты
Presentation
Гроші та їх еквіваленти
“Adoption of new technologies never occurs as
quickly as we expect – but the impact is far greater
than we realize.”
- Cringley’s Law
GRI and XBRL
Source: https://www.globalreporting.org/resourcelibrary/GRI-Taxonomy-Implementation-Guide-2012.pdf
The goal of this document is to
provide guidance to people
who use the GRI
Taxonomy to either report
sustainability information or wish to
receive it.
Different types of users of the GRI XBRL taxonomy
• Reporters:
– Organizations who disclose their sustainability performance
• Filing agent:
– Organizations creating a report on behalf of another organization
• Consumers:
– Organizations that use information provided by reporters
• Extenders:
– Organizations that create an XBRL taxonomy reusing the work done
by GRI
• Regulators and governmental agencies:
– Organizations that adopt the GRI Taxonomy to define reporting
requirements to be provided by filing organizations
• Software vendors:
– Organizations that embed the GRI Taxonomy in their solutions
GRI’s XBRL Voluntary Filing Program
• GRI Taxonomy 2012 / G3. and G3.1.
• GRI Taxonomy enables organizations to tag their
sustainability data in reports
For More Information Contact: [email protected]
Paul Simpson, CEO Carbon Disclosure Project
Greenhouse gas emissions and global warming are amongst the most material and
commonplace sustainability challenges addressed
KEY TAKEAWAYS
Corporate reporting is evolving
Many new data sets are non-financial
CSR is leading into integrated reporting
XBRL mandates: CDP, GRI and IIRC
Structured Data is here to stay!]
Innovation
Liv A. Watson
Director, New Markets
www.webfilings.com
Author or contributing author to the following books:
Liv A. Watson
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