Author: "Uri Jahran" Date: 04/07/2000 1:37 PM Subject: XBRL EXECUTIVE SUMMARY I am seeking the SEC assistance to ensure that proposed data standards (XBRL) enhance the integrity of the US financial reporting system. I want to (a) evaluate whether I can rely on the financial figures and (b) provide comments to improve the reliability of the financial information. I would like to provide my comments to the SEC so we can work together to rebuild my lost confidence in the US financial reporting system. Mr Kinman, 1. Ref: Our discussion on XBRL Financial Standard 2. On Friday, 7 Apr 2000, we discussed the proposed XBRL standard. Such a standard was reported in the 7 Apr 2000 edition of the London Financial Times. 3. Ref: By Adrian Michaels in New York - 7 Apr 2000 01:50GMT http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT3ZSROQQ6C&live=tr ue&ta gid=ZZZGXV4R00C&subheading=global 4. The proposed standard would allow companies to publish figures electronically "tag" each number with a code. 5. Theoretical benefits This would theoretically enable users to pull numbers together from across a range of industries and time-frames much faster. Investors would be able to compare revenues for every company in a sector, or instantly find the market capitalizations of the largest companies with headquarters in a particular state. Auditors would theoretically be able to audit and certify real-time independent financial information. 6. I am not clear that XBRL is related to the proposed SEC rule, RIN 3235-AH79, Rulemaking for EDGAR System Ref: http://www.sec.gov/rules/proposed/34-42462.htm 7. Issues and Concerns A. The FT Times lists the SEC as being a member of the XBRL group. This is a smart move. It gives investors like me the confidence that they shall have a voice on developing the standard. B. My concern is that the proposed standards are not available for review on the XBRL.org website. Since the SEC is reported to be a member of the XBRL working group, I was hoping the SEC could point me in the right direction. Also, I was hoping the SEC could give me the "warm fuzzy" that the standards shall increase the integrity of the US financial reporting system. C. I made many calls to the SEC and have found no point of contact on my own. I have spoken with the investor relations, investor education specialists, public affairs office, and public filing office. However, I been unsuccessful in finding an SEC point of contact. Also, I was unable to find "XBRL," "XFMRL" or "XML" listed in any SEC Commissioner reports, press reports, or concept releases. No one had heard of the term. This tells me that perhaps I have different expectations about the role the SEC should be playing in evaluating the XBRL standards. D. Assuming the XBRL standard is different than the SEC Edgar Rule, it seems prudent to address whether the SEC Edgar Rule should be developed in concert with this standard. I am interested in ensuring that the Edgar Standards and XBRL standards are both robust and developed in concert. 8. In the short term, I would like to accomplish the following: A. Make comments on the proposed standards; B. Share my inputs so that other financial data users can view my comments and have confidence that the XBRL standards will enhance the integrity of the US financial reporting system; C. Encourage the SEC to publish a "concept release" to actively seek investor comment s on the proposed standard and provide "data user comments" to the XBRL group; D. Ensure my comments help to facilitate a constructive discussion to provide reliable information to decision makers and increase confidence in the US financial reporting system. 9. FYI: Scope of research My ultimate goal is to assess the risks owner-investors expose themselves to by relying on data generated under the final XBRL standards. I shall assess whether the proposed standards create meaningful incentives for data generators to provide reliable information to decision makers so they can evaluate financial risks before the investment decision. I plan to assess whether the proposed standard improves the chances that financial information can be relied up to make financial decisions or whether the proposed standard does not provide any meaningful incentive to reduce the chances of operational risk. Thank you for helping me find the SEC point of contact. Best regards, Greg Siko ----------------- Discussion: What is prompting my letter --------------------------- 10. Article Excerpts: A. Who is providing inputs to XBRL? According to the FT, all Big Five accountancy firms are members, as is Edgar Online, the internet service of the US Securities and Exchange Commission. Microsoft, Reuters and Oracle are also among over 30 companies involved. - XBRL appears to be different than SEC Edgar http://www.sec.gov/rules/proposed/34-42462.htm B. The group has published at the website www.xbrl.org the technical specifications of the language for commercial and industrial companies. It is inviting public comment for 60 days, and hopes to finalize the standard 30 days later. - Comment: The site does not list the standards. C. Questions I have - Does the SEC plan to announce a concept release on XBRL similar to the IASC standards review? Ref: http://www.sec.gov/rules/concept/34-42430.htm - Does the SEC plan to consolidate investor-owner inputs and provide these to the AICPA as an SEC-position? Ref: AICPA Prototype http://www.xfrml.org/aicpa/ AICPA lists this as XFMRL http://www.aicpa.org/news/p101999a.htm 11. Observations - Unclear whether the standards reflect owner-investor concerns that auditors: (1) fail to conduct audits in accordance with GAAS; (2) evade responsibility for certifications in contravention of Section 11 of 1933 Securities Act, SAS 26, and SAS 82 (3) auditors continue to fail to adhere to industry standards http://www.sec.gov/news/press/2000-4.txt http://www.sec.gov/pdf/pwclaw.pdf - Unclear that financial reporting system has the owner-investor interests first given the lack of access to the proposed standards and no current listing on the SEC-website to request owner-investor comments 12. Assessments: A. Auditor responsiveness to Blue Ribbon Commission If the auditing profession wants to send the signal that they are sensitive to the owner-investor concerns they promised to address in the Blue Ribbon commission, then I would expect they would actively invite investor comments on the proposed standards. B. SEC: Investor Advocate If the SEC is interested in increasing the integrity of the US financial reporting system, then I would expect to see that the SEC communicate to the XBRL.org group that the SEC wants to ensure that proposed standards facilitate a method to: "Communicate to data users that the data providers and data certifiers are providing the audited financial data in accordance with requirements called out in the 1933/4 Exchange and Securities Acts." C. Obligations of data generators Data providers should include reasonable assurances that information they have is valid and reliable. The proposed standards must ensure that data users know the source of the data, what assurances the data providers place behind the data, and what recourse data users have at their disposal should the data prove to be fraudulent despite being certified without comment by an auditor. D. User input prior to finalizing standards The time to actively solicit investor comments on the proposed standards is now, not after the data proves to be false and materially misleading and the owner-investor is attempting to recover losses in accordance with rule 10b. Software developers need inputs from data users before the standards are set, not during beta testing of the final software product. E. Parallel efforts International accounting standards should be developed in concert with international internet standards. There needs to be a method to insure that both efforts are keeping the data users requirements first, not the data providers. What may be easy for the data providers may not be in the interests of the owner-investors of getting access to reliable and credible financial information to make investment decisions. F. Burden of proof Gone are the days when I blindly accepted data outputs from companies, nor do I blindly accept "audited financial statements" as being worthy of serious consideration. In the wake of the SEC Blue Ribbon Commission, we see that PwC has 8,000 violations. In my view, the industry has provided amble evidence that they need to make some quantum leaps to actively regain investor confidence in the US financial system. I continue to place the US financial reporting data in the same category as that of the information from China, Russia, and emerging markets--unreliable. If the US financial reporting system would like to have access to my funds for investment purposes, I would like to see a serious effort to actively consider and incorporate investor comments prior to finalizing the XBRL standard. Based on my numerous calls today, I continue to have every confidence the auditing profession continues to be unresponsive to data users as they have been in the past. This does not bode well for the legacy of "increasing the integrity of the US financial reporting system" that the SEC Chairman is so actively promoting. The data providers have the burden of proof of justifying why I should have confidence in the US financial reporting system. Now is the opportunity for the AICPA to extend the olive branch to the owner-investor and actively listen to their concerns. I invite the SEC to solicit comments from investors. G. Recommendations: (1) Actively solicit owner-investor comments on the proposed XBRL standards on the SEC-website using a concept release format; (2) Consolidate the owner-investor comments and provide them as a consolidated "user objective standards" to the XBRL group by the 60 day deadline; and (3) Encourage the AICPA to publish the standards on the XBRL.com site; and move back the suspense data to "60 days after the publication of the standards on the XBRL.com site."