Hot Topics in Financial Reporting

Hot Topics in Financial Reporting
Mike Malwitz
Director, Product Strategy
Oracle Corp
March 2010
Picture ThisA World With
Clear Regulatory Guidelines

Global Accounting Standards
Complete Corporate
Transparency
Fast, Easy Comparability of
Financial Results
Easy, Streamlined Corporate
Reporting
2009 Oracle Corporation

Instead, we have

Auditing
Instead, we have
Standard #5
IFRS
SOX
XBRL
GRC

Agenda
Hot Topics What Are they?

What is Oracle Doing to
Address?

Calls for Increased Regulatory
Scrutiny
Obama Gordon Sarkozy Jintao
AMERICAS EMEA APAC

HIPAA EU Privacy Directives J-SOX, C-SOX, K-S0X,
FDA CFR 21 Part 11 UK Companies Law C49
OMB Circular A-123 Restriction of Hazardous CLERP 9: Audit Reform &
SEC & DoD Records Retention Substances (ROHS/WEE) Corporate Disclosure Act
USA PATRIOT Act (Australia)
Gramm-Leach-Bliley Act GLOBAL Stock Exchange of
Federal Sentencing Guidelines International Accounting Stds Thailand Code on
Foreign Corrupt Practices Act Basel II (Global Banking) Corporate Governance
Market Instruments 52 (Canada) OECD Guidelines on
Corporate Governance
6
Global Momentum Towards IFRS
Countries that require or permit IFRSs

Countries seeking convergence with the IASB or pursuing adoption of IFRSs
Source: IASB, Dec 2007

US GAAP vs IFRS: Whats Different?
IFRS is More Principle Based not Rule
Based
US GAAP: 25,000 Pages IFRS: 250 Pages

Accenture Survey Insights
Investment Analysis
The amount of estimated spend on IFRS varies widely within each category
of company size, with some companies in the same size category expecting
to spend far more than their peers.
0.800%
$180.0
0.731%
$160.9M
USD Spent in Millions on IFRS Conversion
USD Spent in Millions on IFRS Conversion

0.700% $160.0
0.600% $140.0
$131.9M
$120.0
0.500%
$100.0
0.400%
$80.0
0.298%
0.300%
$60.0
0.200% $48.5M
0.200%
0.141% $40.0
0.103% $27.1M
$23.2M
0.100%
$20.0
0.000% $0.0
$1 Billion to $5 Billion to $10 Billion to $20 Billion to $50 Billion US $1 Billion to $5 Billion to $10 Billion to $20 Billion to $50 Billion US
$4.9 Billion US $9.9 Billion US $19.9 Billion US $49.9 Billion US or more $4.9 Billion US $9.9 Billion US $19.9 Billion US $49.9 Billion US or more
2009 Accenture All Rights Reserved.

Source: Accenture 2008 IFRS Survey Company Revenues Source: Accenture 2008 IFRS Survey Company Revenues

2008 Accenture Survey on IFRS
System Impacts
More than 50 percent of the sample has assessed the impact of IFRS
conversion on all systems as more than moderate or significant.
What is your assessment of the impact of IFRS conversion to the following systems?
Average rating:
Reporting and analytic systems 2% 5% 20% 32% 41%
4.04
Revenue systems 2% 5% 27% 27% 38%

3.92
General accounting ledgers 2% 8% 24% 28% 37%

3.89
Tax applications 2% 9% 24% 32% 33%

3.85
Consolidation systems 2% 9% 26% 31% 32%
3.82
Projects and fixed assets 4% 9% 27% 27% 32%
3.75
0% 20% 40% 60% 80% 100%
2009 Accenture All Rights Reserved. 1 Not at all 2 3 Moderately 4 5 Significantly

Source: Accenture 2008 IFRS Survey
Percentage of Respondents
10

Increasing Demand for Non-Financial
Information
New metrics for valuation
Board-level focus on
reputation, social
responsibility and
sustainability
Publishing of key non-

financial information along
side financial data
Source: PricewaterhouseCoopers

Corporate Governance and
Sustainability are in Focus
Standard & Poors Corporate

Governance Scores
FTSE/ISS Corporate
Governance Indices
Dow Jones Sustainability

Indices
Ethibel Sustainability Indices

50% of Financial Reporting is Operational
Dozens of Industry-specific Metrics in 10K Filings
How much of your financial reporting is made up of operational data
currently vs. two years ago vs. two years from now?
40% of respondents believe

50%+
operational data will make up
more than half of financial reporting,
31-50%
compared with 25% today.
11-30% The change from two years ago is

even more strikingonly one in five
>10% said operational data made up more
than half of financial reporting two
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
years ago.
Two years from now
Currently
Two years ago
13
PCAOB Auditing Standard #5
http://www.pcaobus.org
The Final Word Regarding Sarbanes-Oxley

Financial Process Continues to Incur Control
Weaknesses
CFOs struggle to improve governance of their financial processes
Percentage of Internal Control

Weaknesses by Category
Other
6% Personnel
Issues
17%
Significant
Account
Level Financial
40% Close and
Controls
37%
Source: Market Reactions to the Disclosure of Internal Control Weaknesses and to the
Characteristics of those Weaknesses Under Section 302 o the Sarbanes Oxley Act Of 2002,
July 2007
SEC FACT:
Auditing Standard No. 5 (AS5) directs auditors to focus on those areas
that present the highest risk, such as the financial statement close
process and controls designed to prevent fraud by management.
Source: SEC Approves PCAOB Auditing Standard No. 5, July
2007

COSO 2 Enterprise Risk
Management Framework
What is it? Gold Standard for Internal Controls
The four objectives categories

- strategic, operations,
reporting and compliance - are
represented by the vertical
columns.
The eight components are
represented by horizontal
rows.
The entity and its
organizational units are
depicted by the third dimension
of the matrix.

Importance of XBRL
By scrapping our 1980s-era EDGAR system and

moving to a 21st century interactive data platform,
we're not leading the XBRL revolution we're just
observing what's happening all around us, and all
around the world, and keeping up with the
times.That's why, on September 25 2006, I
announced a series of contracts that will
completely rebuild the SEC's public disclosure
system and make it interactive. .
Chairman Christopher Cox
U.S. Securities and Exchange Commission
14th International XBRL Conference
Philadelphia, Pennsylvania
December 5, 2006

What is XBRL?
eXtensible Business
Reporting Language
Interactive Reporting
for investors and
analysts
Standardizes how to
exchange financial
information
Semantics
Validation
Dynamic extensibility
Business rules
Intended to replace
current Edgar system

The SEC Rule Proposal Started Jun 2009
Who? Public Companies on US
Exchanges
June 09 Large accelerated filers with
public float over $5Billion
June 2010 All large accelerated filers
(public float over $700Million)
June 2011 The rest of public and
foreign filers (IFRS)
What? Addendum to 10K/Q XBRL: the barcode
Year 1 Financial statements & notes for business reporting
and disclosures to the financial
statements (block text)
Year 2 - Financial statement & notes
and disclosures to the financial
statements (detail tagging)

Agenda

Address?

Hyperion: 25+ Year History
2009 Close Process, Disclosure Management, Electronic Reporting

3500 CFOs
2005 Accelerated Filings, IFRS Helped
2002 Sarbanes-Oxley, SAS99, COSO
2001 Euro Euro Transition Hyperion

Financial Mgmt
1997 FAS131/IAS17 Segment Reporting
1989 FAS95/IAS7 Cash Flow Reporting Hyperion

Enterprise
1988 FAS94/IAS27 Minority Interests
1982 FAS52/IAS29 Fx Trans Micro Control
Global Impact
Copyright 2009, Oracle and/or its affiliates. All rights reserved. 21

Agenda

Address?
IFRS
World Class Close
Integrated GRC
Sustainability Reporting

Agenda

Address?
IFRS
World Class Close
Integrated GRC

First Time Adoption of IFRS Retrospective
Restatements, not a Cumulative Change
Net Income Trend
160
140
120
$(000,000)
100 USGAAP
80 IFRS
60 Difference
40
20
0
2010 2011 2012 2013 2014
Years
First-time Adoption of International Financial Reporting Standards (IFRS No.1):

Companies electing to adopt the financial reporting standards of the International
Accounting Standards Board (IASB) are required to retrospectively apply the
international standards that exist as of the companys adoption of IFRS, to all
periods presented as if they had always been in effect.

Impact on US Companies
Start early for transition period with multi-GAAP
2009: Limited group 2014: 2016: Non-

of large US firms are Large accelerated
permitted to use accelerate filers begin
IFRS on an optional filers begin filing in IFRS
basis for fiscal filing in
periods ending on IFRS
or after Dec 15, 2009
2011: SEC evaluates

achievement of 2015:
roadmap milestones Accelerated
and decides whether filers to
to adopt a mandatory begin filing
approach for IFRS in IFRS
Source: SEC Announcement, Aug 2008

Impact on US Companies
Start early for transition period with multi-GAAP
Transition Date?
2009: Limited group SEC may require 2
2014: 2016: Non-
of large US firms are years of comparatives.
Large accelerated
permitted to use
IFRS on an optional Start Now! accelerate filers begin
d filers filing in IFRS
basis for fiscal begin filing
periods ending on in IFRS
or after Dec 15, 2009
2011: SEC evaluates

achievement of 2015:
roadmap milestones Accelerated
and decides whether filers to
to adopt a mandatory begin filing
approach for IFRS in IFRS
Source: SEC Announcement, Aug 2008

IFRS Action Plan
Achieve early mover advantage
Stage 1 Stage 3 Stage 4
Stage 2
Study Impact & Record Transform Your
Enable Top End
Determine Strategy Transactions Business & Win with
Reports
in both GAAPS IFRS
Determine impact Determine

Perform Collect GAAP
on accounting in changes to
Preliminary Study Financial Results
subsystems business model
Adjust and
Configure Transform
Consolidate
Assess Impact accounting rules operations using
Under GAAP &
and set up ledgers IFRS results
IFRS
Determine Report, Reconcile Process and report Report IFRS

Strategy and Audit Results using dual results, increase
accounting shareholder value
All Stages: Apply Policy and Control Management
Milestone 1 Milestone 2 Milestone 3 Milestone 4

Completed Preliminary IFRS Reports Produced Transactions Recorded Business Model
Study in Multiple GAAPs Optimized

Oracle Enterprise Performance Management
Enable Top End IFRS Reporting
CORE CONSOLIDATION FEATURES CUSTOM DIMENSIONS

Multiple reporting standards in a
single solution Enables tracking of
GAAP vs. IFRS
GAAP IFRS adjustments
Flexible Rules Engine
Journal Entries and Audit
DOCUMENT ATTACHMENTS FLEXIBLE REPORTING
Creates Electronic Easy to

Binder of all reconcile and
adjustments trend GAAP vs.
IFRS results

IFRS Adjustments: Different Accounts,
Different Systems
FORM 10-Q/K
- Load differences from

ERP Systems
- Enter differences not in
ERP Systems - Reconciliations
- Inventory - Pensions - Trend Reports
- Fixed Assets - Tax Reserves
- Filings, Press
- Share Option Expense
- Billing/Revenue Releases
- Etc
- Fernbach, Etc - Etc

Whats Required for IFRS
HFM Enterprise
No Commingling of Accounts
Workflow Controls
Data Validations
Data Audit Trails
Supporting Documentation
Disclosure Controls
Multi-Dimensional Trend Reports
Partial Ownership Accounting
Journals Module
Basic Consolidation Functionality
(Intercompany, FX etc.)

Agenda

Address?
IFRS
World Class Close
Integrated GRC

Close Process and Key Activities
Gather and validate Deliver self
complete data sets to service reporting
support all financial Automate and
Close Sub Ledgers to the deliver Edgar &
into GL (i.e. AR, AP, reporting needs (i.e. organization for
Legal Entity, Segment, XBRL filings,
FA, etc.) performance Statutory
Management, Tax, discussions and
Sustainability Metrics, filings, Tax, etc.
plan realignment
etc.)
Automate consolidated
Perform Reconciliations financial reporting Automate external
Bank Reconciliations leveraging multiple reporting
Standard Account Recon hierarchies and gathering
calculations (i.e. CTA, disclosures and
Sub Ledger Recon
FASB, KPIs, FX, Retained financial
Post Accruals Earnings, Topside Entries information
etc.)

Workflow and Task Management Issues
Lack of visibility to tasks across financial systems, departments,

regions, etc.
Manual spreadsheets are used to manage the financial close calendar
Hope and email are core to the process
Account reconciliations are managed manually
Task management is fragmented and manual

Document Management and Creation
Issues
Management and creation of critical documents is manual (Debt

Covenants, 10Q/K, Board Package and Presentation, etc.)
Gathering and managing commentary is manual
Adjustment of financial data is manual
MS Word documents sent to 3rd party who reformats and files with
EDGAR (error prone)
MS Word files are converted to XBRL by 3rd parties or manually (error
prone)

Oracle World Class Financial
Close Architecture
CFO Dashboard
Governance, Risk & Compliance
Financial Close Management
Tax Tax
ERP: Calculations Filing
Data Financial
Oracle, SAP,
Assurance Consolidation Disclosure
Legacy, Other Financial and Management
Mgmt. Reporting XBRL/SEC
Transactions Reporting

Streamline the Extended Close
Process
Close Process Analysis,
Trending and Improvement
Process Monitoring
Financial Calendar
Single Task List
Automated workflow
Ensure Compliance
Email and calendaring
(e.g. Outlook)
Account Reconciliations

Financial Close Management
Streamline the Extended Close Process
PROCESS MONITORING ACTIVE CALENDAR
Executive Dashboard Views
Active integration
with EPM and ERP
systems
TASK MANAGEMENT ACCOUNT RECONCILIATIONS
Automation
Centralized web through matching
based task capabilities and
management and integration with all
collaboration sources

Disclosure Management
Covers the entire process of taking a
companys consolidated results and
transforming them into specifically
stylized statutory filings
Document creation process manages
the entire distributed development of the
statutory report
Simple end user experience leverages
users preferred document application -
Microsoft Word
Built-in, extensive XBRL reporting
capabilities including full instance
document creation and validation
Supports multiple output formats

XBRL: Just another output
format
Output will support various regulatory authorities
USGAAP - SEC
IFRS - European Exchanges, Asia
The following output formats are supported for the
main document:
PDF
Word
XBRL
HTML
XHTML (in-line XBRL)
EDGAR

Agenda

Address?
IFRS
World Class Close
Integrated GRC

The Inter-related Disciplines of Financial Governance
Only Oracle Offers All Three
Enterprise Enterprise
Resource Performance
Planning Management
Governance,
Risk, and
Compliance

Oracle Governance, Risk, and Compliance Suite
Manage changes to policies and controls
GRC DOCUMENTATION REPOSITORY COMPLIANCE WORKFLOW

Record changes to business
process due to IFRS
Automate
steps to audit
IFRS
compliance
APPLICATION CONTROLS MONITORING COMPLIANCE DASHBOARDS

Single subledger transaction creates multiple Monitor status of testing and
accounting representations exceptions
Control
changes to
ERP
applications

Assess Risk: Visibility To All Authorized Users
Across the Enterprise
43
Enterprise Risk Analysis
Intelligence that brings together risk assessment and financial
balances
Consolidated view
of financial
balances from
Hyperion Financial
Management and
risk rating from
GRC Manager
Intelligent scoping
for testing

Drill Down to the Root of the Issue
Visibility into financial balances

Drill Down to the Root of the Issue
Visibility into risk indicators

GRC: How Important Is It?
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
I, Lawrence J. Ellison, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Oracle Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and we have:
a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal
quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrants auditors and the Finance and Audit Committee of the registrants board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control
over financial reporting.
Date: December 22, 2008 By: /s/ LAWRENCE J. ELLISON

Lawrence J. Ellison, Chief Executive Officer and Director
47
Agenda

Address?
IFRS
World Class Close
Integrated GRC

Coming Soon
Sustainability Reporting Starter Kit for HFM

GRI Metrics Built In

Sustainability Reporting in Financial
Management

Management

Management

Q&A
You can also email me at

mike.malwitz@oracle.com


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Hot Topics in Financial Reporting

Clear Regulatory Guidelines

2009 Oracle Corporation

2009 Oracle Corporation

2009 Oracle Corporation

Hot Topics What Are they?

2009 Oracle Corporation

Obama Gordon Sarkozy Jintao

AMERICAS EMEA APAC

Countries that require or permit IFRSs

Source: IASB, Dec 2007

2009 Oracle Corporation

USD Spent in Millions on IFRS Conversion

2009 Accenture All Rights Reserved.

2009 Oracle Corporation

Revenue systems 2% 5% 27% 27% 38%

General accounting ledgers 2% 8% 24% 28% 37%

Tax applications 2% 9% 24% 32% 33%

2009 Accenture All Rights Reserved. 1 Not at all 2 3 Moderately 4 5 Significantly

2009 Oracle Corporation

New metrics for valuation

Publishing of key non-

2009 Oracle Corporation

Standard & Poors Corporate

Dow Jones Sustainability

Ethibel Sustainability Indices

2009 Oracle Corporation

40% of respondents believe

11-30% The change from two years ago is

Two years ago

2009 Oracle Corporation

Percentage of Internal Control

2009 Oracle Corporation

The four objectives categories

2009 Oracle Corporation

By scrapping our 1980s-era EDGAR system and

2009 Oracle Corporation

2009 Oracle Corporation

2009 Oracle Corporation

Hot Topics What Are they?

2009 Oracle Corporation

2009 Close Process, Disclosure Management, Electronic Reporting

2001 Euro Euro Transition Hyperion

1989 FAS95/IAS7 Cash Flow Reporting Hyperion

1982 FAS52/IAS29 Fx Trans Micro Control

Copyright 2009, Oracle and/or its affiliates. All rights reserved. 21

Hot Topics What Are they?

2009 Oracle Corporation

Hot Topics What Are they?

2009 Oracle Corporation

First-time Adoption of International Financial Reporting Standards (IFRS No.1):

2009 Oracle Corporation

2009: Limited group 2014: 2016: Non-

2011: SEC evaluates

Source: SEC Announcement, Aug 2008

2011: SEC evaluates

Source: SEC Announcement, Aug 2008

Determine impact Determine

Determine Report, Reconcile Process and report Report IFRS

All Stages: Apply Policy and Control Management

Milestone 1 Milestone 2 Milestone 3 Milestone 4

2009 Oracle Corporation

CORE CONSOLIDATION FEATURES CUSTOM DIMENSIONS

Flexible Rules Engine