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Building with XML: 

Building with XML Walter Hamscher PricewaterhouseCoopers Global Technology Centre walter.hamscher@us.pwcglobal.com

Perspective: Who we are: 

Perspective: Who we are 150,000 people worldwide Accounting, Tax, Legal, Management Consulting, Systems Integration, Corporate Finance, Security, Human Resources, Outsourcing... Global Technology Centre in Menlo Park, CA: Technology forecasting, analysis, strategy, for both internal and external clients.

Perspective: What XML Means to Us: 

Perspective: What XML Means to Us As producers and users of documents: becoming key to our internal knowledge management technology infrastructure. As systems integrators: becoming key to integrating our clients’ applications both within enterprises and across the Internet. Emerging XML-based standards are (literally) central to e-Business. Examples: FpML, OAGIS, BizTalk for Energy, XFRML

The XFRML Project (XML-Based Financial Reporting Markup Language): 

The XFRML Project (XML-Based Financial Reporting Markup Language) What it is Why it is important Who should care How it works When it will emerge An AICPA sponsored open spec for financial reporting Transparency and usability of financial data on the web Financial report creators, users, auditors, and software vendors Core specification + Modules for document and reporting types Version 1.0 - March 2000

Big Picture: The Financial Information Chain: 

Operational Data Stores Big Picture: The Financial Information Chain What it is

Fragment of a financial report: 

Fragment of a financial report ------------------------------------------------------------------------------------------------------------- Year Ended June 30 1996 1997 1998 ------------------------------------------------------------------------------------------------------------- Revenue $8,671 $11,358 $14,484 Operating expenses: Cost of revenue 1,188 1,085 1,197 Research and development 1,432 1,925 2,502 Acquired in-process technology -- -- 296 Sales and marketing 2,657 2,856 3,412 General and administrative 316 362 433 Other expenses 19 259 230 ------------------------------------------------------------------------------------------------------------- Total operating expenses 5,612 6,487 8,070 ------------------------------------------------------------------------------------------------------------- Operating income 3,059 4,871 6,414 Interest income 320 443 703 ------------------------------------------------------------------------------------------------------------- Income before income taxes 3,379 5,314 7,117 Provision for income taxes 1,184 1,860 2,627 ------------------------------------------------------------------------------------------------------------- Net income 2,195 3,454 4,490 Preferred stock dividends -- 15 28 ------------------------------------------------------------------------------------------------------------- Net income available for common shareholders $2,195 $ 3,439 $ 4,462 ------------------------------------------------------------------------------------------------------------- Earnings per share (1): Basic $ 0.93 $ 1.44 $ 1.83 ------------------------------------------------------------------------------------------------------------- Diluted $ 0.86 $ 1.32 $ 1.67 ------------------------------------------------------------------------------------------------------------- (1) Earnings per share have been restated to reflect a two-for-one stock split in February 1998. See accompanying notes. What it is

Another fragment of a financial report: 

Another fragment of a financial report NOTES TO FINANCIAL STATEMENTSACCOUNTING POLICIES -------------------------------------------------------------------------------- PRINCIPLES OF CONSOLIDATION. The financial statements include the accounts of Microsoft and its subsidiaries. Significant inter-company transactions and balances have been eliminated. Investments in 50% owned joint ventures are accounted for using the equity method; the Company's share of joint ventures’ activities is reflected in other expenses. ESTIMATES AND ASSUMPTIONS. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Examples include provisions for returns and bad debts and the length of product life cycles and buildings' lives. Actual results may differ from these estimates. FOREIGN CURRENCIES. Assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date. Translation adjustments resulting from this process are charged or credited to equity. Revenue, costs, and expenses are translated at average rates of exchange prevailing during the year. Gains and losses on foreign currency transactions are included in other expenses. REVENUE RECOGNITION. Revenue is recognized when earned. The Company's revenue recognition policies are in compliance with American Institute of Certified Public Accountants Statements of Position 97-2 and 98-4, Software Revenue Recognition. Revenue from products licensed to original equipment manufacturers is recorded when OEMs ship licensed products while revenue from organization license programs is recorded when the software has been delivered and the customer is invoiced. Revenue from packaged product sales to distributors and resellers is recorded when related products are shipped. Maintenance and subscription revenue is recognized ratably over the contract period. What it is

Financial Publishing: 

Financial Publishing What it is

Current “best practice” publishing process: 

G/L Data Text Text Text Text 10-K N30D Web HTML Hard Copy 10K N30D EDGAR PDF Investor Financial Data Aggregators Text Proprietary Mark-up Other Current “best practice” publishing process What it is

Future publishing process: 

Future publishing process G/L Data Text Text Text Hard Copy PDF Investor Text XML-based Standard Text 10-K N30D 10K N30D EDGAR Other Financial Data Aggregators What it is

Demo from Charlie Hoffman’s site, www.xfrml.org...: 

Demo from Charlie Hoffman’s site, www.xfrml.org... What it is

A fragment of XFRML: 

A fragment of XFRML <AccountCode id=“USGAAP:Revenues” enName=“Revenues”/> <AccountCode id=“USGAAP:CostOfRevenues” enName=“Cost of Revenue”/> ... <Rollup to=“IncomeStatment” from=“USGAAP:Revenues” sense=“+”/> <Rollup to=“IncomeStatement” from=“USGAAP:OperatingExpenses” sense=“-”/> <Rollup to=“USGAAP:OperatingExpenses” from=“USGAAP:CostOfRevenue” sense=“+”/> <Rollup to=“USGAAP:OperatingExpenses” from=“USGAAP:ResearchAndDevelopment” sense=“+”/> ... <IncomeStatement entity=MSFT periods=“1996,1997,1998” currency=USD scale=millions> <Group acctCode=“USGAAP:Revenues”> <Item period=1996 value=8671/> <Item period=1997 value=11358/> <Item period=1998 value=14484/> </Group> <Group acctCode=“USGAAP:OperatingExpenses”> <Item period=1996 value=5612/> <Item period=1997 value=6487/> <Item period=1998 value=8070/> </Group> <Group acctCode=“USGAAP:CostOfRevenue”> <Item period=1996 value=1188/> <Item period=1997 value=1085/> <Item period=1998 value=1197/> </Group> ... </IncomeStatement> What it is

A similar fragment of XFRML: 

A similar fragment of XFRML <AccountCode id=“UKGAAP:Turnover” enName=“Revenues”/> <AccountCode id=“UKGAAP:CostOfGoods” enName=“Cost of Revenue”/> ... <Rollup to=“IncomeStatment” from=“UKGAAP:Turnover” sense=“+”/> <Rollup to=“IncomeStatement” from=“UKGAAP:OperatingExpenses” sense=“-”/> <Rollup to=“UKGAAP:OperatingExpenses” from=“UKGAAP:CostOfRevenue” sense=“+”/> <Rollup to=“UKGAAP:OperatingExpenses” from=“UKGAAP:ResearchAndDevelopment” sense=“+”/> ... <IncomeStatement entity=MSFT periods=“1996,1997,1998” currency=GBP scale=millions> <Group acctCode=“UKGAAP:Turnover”> <Item period=1996 value=3435/> <Item period=1997 value=5679/> <Item period=1998 value=7242/> </Group> <Group acctCode=“UKGAAP:OperatingExpenses”> <Item period=1996 value=2806/> <Item period=1997 value=3243/> <Item period=1998 value=4035/> </Group> <Group acctCode=“UKGAAP:CostOfRevenue”> <Item period=1996 value=594/> <Item period=1997 value=542/> <Item period=1998 value=598/> </Group> ... </IncomeStatement> What it is

Another fragment of XFRML: 

Another fragment of XFRML <Notes> <NotesLabel>NOTES TO FINANCIAL STATEMENTS ACCOUNTING POLICIES</NotesLabel> <Note> <NoteType>principlesOfConsolidation</NoteType> <NoteLabel>PRINCIPLES OF CONSOLIDATION</NoteLabel> <NoteNumber>A</NoteNumber> <Paragraph>The financial statements include the accounts of Microsoft and its subsidiaries. Significant inter-company transactions and balances have been eliminated. Investments in 50% owned joint ventures are accounted for using the equity method; the Company's share of joint ventures’ activities is reflected in other expenses.</Paragraph> </Note> What it is

Why it is important: 

Why it is important For the Investing Community (e.g. Institutions) Easier, more timely analysis and comparisons. For the Reporting Community (e.g. Companies) Increasing the transparency of reporting lowers companies’ cost of capital. Improves internal efficiency via “create once publish many” approach. For the Assurance Community (e.g. Auditors) Improves efficiency of some analytic processes For Vendors - interoperability Why it is important

XFRML Project Steering Committee Members: 

XFRML Project Steering Committee Members Sponsor: AICPA (American Institute of CPAs) IASC (International Accounting Standards), Equivalent CPA institutes in Australia, Canada, UK, Germany, Sweden, FEI (Financial Execs Institute) Morgan Stanley Dean Witter Microsoft, SAP, Great Plains, Interleaf, Edgar Online, FRX, Caseware, Docutech PwC, KPMG, E&Y, D&T, AA, Crowe Chizek Charlie Hoffman, Woodburn Group, Cohen Consulting, other individuals. Why it is important

How it Works - General: 

How it Works - General Core Schema Domain Schema Domain Schema An XFRML Document Document Schema How it works

How it Works - Example: 

How it Works - Example Core Schema USGAAP Schema KPMG Schema DotCom.Com Financials 10-K Schema How it works

The Core Schema specifies leaf element syntax : 

The Core Schema specifies leaf element syntax Core Schema Item: like an RDBMS table for representing financial data; attributes are like columns and each element represents one row of the table, e.g.: <Item entity=“NASDAQ:MSFT” period=“19980101-19981231” acctCode=“USGAAP:Revenues” scale=“millions” units=“USD” value=“14484”/> Account: Binds account identifiers to their properties, e.g.: <Account type=“USGAAP:Revenues” enName=“Sales of Goods” frName=“Ventes des Merchandises”> Rollup: Specifies a tree of arithmetic relationships, e.g.: <Rollup to=“USGAAP:Revenues” from=“USGAAP:SoftwareLicensing” sense=“+”/> How it works

Core and Domain schemas are sufficient for some jobs: 

Core and Domain schemas are sufficient for some jobs Mutual Fund N30D (Raw Text) Prospectus (Web or PDF) Before How it works

Domain Schemas define terms and relationships: 

Domain Schemas define terms and relationships Core Schema USGAAP Schema KPMG Schema <Account type=“KPMG:Goodwill:BrandEquity” enName=“Brand Equity” description=“Explanation for what this separate goodwill item means.”/> <Rollup to=“KPMG:Goodwill” from=“KPMG:Goodwill:BrandEquity” sense=“+”/> Rollup and other relationships are used when transforming XFRML documents for display (e.g., indentation and underlines for subtotals) or further processing (e.g., checking arithmetic consistency across different tables). How it works

Document Schemas specify document structure: 

Document Schemas specify document structure Core Schema USGAAP Schema KPMG Schema Document Schema <IncomeStatement entity=MSFT periods=“1996,1997,1998” currency=GBP scale=millions> <Group acctCode=“UKGAAP/Turnover”> <Item period=1996 value=3435/> <Item period=1997 value=5679/> <Item period=1998 value=7242/> </Group> <Group acctCode=“UKGAAP/OperatingExpenses”> ... </Group> ... </IncomeStatement> The semantics of XFRML assumes that Item attributes can be inherited from parent elements. Document schemas need to support this. How it works

Mapping Schemas declare correspondences: 

Mapping Schemas declare correspondences <mapOnto from=“USGAAP:Revenues” to=“UKGAAP:Turnover”/> <mapOnto from=“TELER:0IMP00007I72000” to=“NGCSF:Immobilisations:Incorporelles:Fonds Commercial”/> <mapOnto from=“NGCSF:Immobilisations:Incorporelles” to=“USGAAP:Intangibles”/> <mapOnto from=“TELER:0REP00011V99000” to=“NGCSF:Réserve relative à l'achat d'oeuvres d’art” /> <mapInto from=“NGCSF:Réserve relative à l'achat d'oeuvres d’art” to=“USGAAP:Reserves”/> How it works

Timeline: 

Timeline Today: www.xfrml.org web site demos cover a variety of uses, but its details do differ from the emerging technical specification. January 20th: Release of “exposure draft” for comment. Likely to cover only the core plus one document type that looks somewhat like a 10-K. Jan 20-Mar 31: Pilot implementations at US- and non-US companies of various sizes & industries March 31st: Public launch of specification supported by publicity around the pilot implementations. When it will emerge

Shameless Pitch for Broader Participation: 

Shameless Pitch for Broader Participation Tomorrow Wednesday December 8th 4pm -- 6pm Doubletree Hotel Avenue of the Arts, Broad Street at Locust

Building with XML: 

Building with XML Walter Hamscher PricewaterhouseCoopers Global Technology Centre walter.hamscher@us.pwcglobal.com

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