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Introductory Remarks by James Turner

Vice-Chair, Ontario Securities Commission

Canadian Securities Administrators Panel Discussion

XBRL Canada Conference

Toronto

September 24, 2008




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• Welcome everyone to our regulatory panel discussion on eXtensible Business Reporting Language, or XBRL.
  • My name is Jim Turner. I’m a Vice-Chair of the Ontario Securities Commission.
  • This panel is sponsored by the Canadian Securities Administrators (CSA).
  • The CSA is the council of provincial and territorial securities regulators. It co-ordinates and harmonizes regulation for the Canadian capital markets.
  • The OSC is one member of the CSA.
• Thank you to XBRL Canada for hosting the morning conference.
  • The conference featured a strong line-up of speakers.
  • They covered a lot of important topics for market participants.
  • The conference is an example of how XBRL Canada is making a valuable contribution to the implementation of XBRL in this country.
  • We’re happy to work with XBRL Canada in this event today.
• My role today is to make some remarks that will serve to introduce the CSA panel discussion.

• So I’m going to start the dialogue and then hand off to the panel.

• The main topics of my remarks:
1. Explain the “regulatory view” on XBRL;

2. Outline the potential benefits of XBRL to Canada’s marketplace; and

3. Provide an update of the status of implementation of XBRL in Canada.
• Let me add at the outset that the opinions expressed in my remarks are my own – and not necessarily the opinions of the OSC or the CSA, or my colleagues on the staff of the OSC.
1. Regulatory view on XBRL
• I’ll begin by providing a regulatory perspective on XBRL.

• Securities regulators understand that information is the lifeblood of the capital markets.

• Similarly, the disclosure of accurate and timely information to the marketplace is of paramount importance.

• It’s crucial to the fairness and efficiency of those markets.

• The rigorous application of rules governing timely disclosure is meant to provide a level playing field of information:
  • Everybody must get the same information at the same time.
• Securities regulators work to make sure that the objectives of timely and accurate disclosure are met.

• Our digital age has created a particular challenge:
  • information moves so quickly and in such massive volumes that investors are at risk of being overwhelmed.
• We all know that the mass of financial data has become unmanageably huge.

• That was an issue in the ABCP matter.

• That’s one reason why there’s a large financial information industry.
  • Middlemen do a brisk business in repackaging and reselling existing information.
• To paraphrase Francis Bacon who said “Knowledge is power”: Knowledge is also money.

• Securities regulators want to make sure that money is not the only route to knowledge.

• We can’t have a market for those who can afford to get and use information and another market for those who can’t.

• The CSA believes that XBRL has the power to reduce current inequities in our capital markets.
  • XBRL has the potential to foster a level playing field of information and make a huge volume of information more manageable for investors and analysts.
• The CSA is committed to moving forward in an XBRL world, alongside other international regulators.

• We’re encouraging its use across Canada because we believe XBRL will benefit Canadian investors and Canadian markets.

• At the same time, the CSA is working on an approach to implement the technology in a manner that’s appropriate for our market.

• This brings me to my second topic: the specific benefits that XBRL would bring to the capital markets in Canada.

• As I mentioned before, investors and analysts are often overwhelmed with a mass of financial information and data these days.

• To make the best use of this information, investors spend a great deal of time sifting through piles of documents to find the pieces of data they need.

• XBRL could eliminate the tedious process of searching for financial information manually.

• That means that investment professionals such as the sell-side analysts would be able to review and recommend more investment choices more efficiently.

• By making coverage easier for analysts, XBRL allows them to cover more companies, larger and smaller companies alike.

• That would benefit our markets because Canada is home to roughly 4,200 public companies.
  • 70% of all these public companies have a market cap of under $25 million.
• XBRL will help analysts discover investment opportunities that otherwise might have gone unnoticed.

• That’s good for Canadian investors, public companies and the markets generally.
  • And it’s a benefit to the Canadian economy as a whole.
• So, we think XBRL can deliver benefits for analysts, issuers and investors.

• The investment industry would benefit by improving the ease of coverage of public companies.

• Smaller public companies would benefit from increased coverage from the analysts, thereby improving the information flow to investors.

• And investors would benefit from more transparent disclosure and access to more manageable information.

• The net result would be more competitive and efficient capital markets, which are a vital part of the economy of this country.

• What’s more, the standardization of information in a more usable filing format lets investors, public companies and regulators get on with their real jobs.
  • This saves time and resources in the process.
• For example, XBRL will eliminate the error potential inherent in the repackaging and re-keying of the financial data of public companies.

• And once a public company files in XBRL, a regulator such as the OSC can quickly check for errors or deficiencies in the filing.

• This will make our job easier and allow us to follow-up promptly and ensure that the public is provided with the information it needs.

• It also makes our work more efficient, thus lowering the cost of regulation.
  • That is a priority for the OSC and the rest of the CSA.
• This brings me to the third main topic of my remarks: An update on the status of the CSA’s XBRL project.

• Many of you know that the CSA introduced a voluntary filing program last year.

• It allows for optional XBRL filing in addition to the required PDF filing.
  • The data are made available on SEDAR, our financial reporting website.
• We see this as a significant first step to help remove the barriers to adoption of XBRL in Canada.

• For those companies ready and willing to move into this exciting new world, our message to them and to the rest of Canada is that “our doors are open for business”.

• But we appreciate that not all participants in Canada’s capital markets may be ready for XBRL just yet.

• A significant current market event is the changeover to International Financial Reporting Standards (IFRS) from Canadian Generally Accepted Accounting Principles.
  • More specifically, the preparations are well underway within our marketplace to be ready for this change, which will occur in 2011.
• We’re very conscious of the time and effort that the conversion to IFRS requires from public companies.

• For many public companies – especially smaller ones – changing both the accounting standards and the reporting language may be seen as simply too much to take on at the same time.

• We’ve learned from the experiences of other countries in similar situations: Israel.
  • Israel implemented IFRS and XBRL at the same time.
  • As of January 1, 2008, IFRS and XBRL are required for all public companies.
• In general, our view is that Canadian regulators shouldn’t require adoption of XBRL before IFRS is implemented in Canada, but the panel will have more to say on this topic.

• Perhaps the right answer is to “sequence” these events for our capital markets:
  • First, make the transition to IFRS. Then adopt XBRL.
• That approach may facilitate the transition, given the enormous effort that is currently going into our market shifting to IFRS.

• Having said that, we do not expect adoption of XBRL to be a substantial cost.

• Issuers may well decide that it makes sense to adopt it as part of the move to IFRS.

• At the same time, we expect the XBRL rules of the SEC will be a catalyst for change in the North American markets.
  • Canadian issuers may well find that early adoption of XBRL is advantageous from a competitive perspective.
  • We will take steps to ensure our market is a part of, and ready for, that transition.
  • But as regulators, we will look to the marketplace to help us decide the appropriate timing.
• SEC Chairman Christopher Cox has said:

“It's time to get beyond seeing interactive data as ‘technology,’ and instead to see it as a tool, as help, that can make easier the work that companies and investors do every day.”

• We agree with Chairman Cox’s comments. And we look forward to the day when North America’s capital markets – as well as the other major markets around the world – have embraced both universal accounting standards and a global business reporting language.

• Our priority right now is on:
  • raising awareness about XBRL in our marketplace;
  • encouraging its use;
  • educating issuers and market participants that adopting XBRL is not a daunting task; and
  • showing the benefits of this tool to investors, issuers and the securities industry.
• Before I hand off to the panel, I want to conclude by emphasizing that the CSA wants to take right approach to adopting XBRL for our marketplace.

• As securities regulators, we can see the substantial benefits of this technology.

• We’re also confident that others in our capital markets will see it, too.

• The benefits of accessible and accurate information for investors, for public companies, for everyone participating in the capital markets are crystal clear.
  • XBRL will help to expand the universe for companies raising capital globally – and both larger and smaller Canadian companies will benefit.
  • XBRL will provide data in a much more manageable form that will allow all investors to make more informed investment decisions.
  • XBRL will help securities regulators fulfill their goals of providing protection for investors and fostering fair and efficient capital markets.
• Canadian public companies compete for capital in a global marketplace.
  • More countries are adopting XBRL which means that our public companies have to provide high quality financial information that’s accessible and transparent in order to compete effectively.
  • XBRL is a tool that can help Canadian public companies meet this competitive priority.
• Canada is part of the global move toward adopting XBRL.

• Indeed, the support for XBRL in Canada is very strong – so the CSA is working to sustain the momentum and convey the positive message about XBRL.

• Thank you.

• I’d now like to hand off to the OSC’s representative on the panel.

• Cameron McInnis is the Acting Chief Accountant at the OSC. He’s been working on the XBRL project for some time and will moderate the panel discussion. Over to you Cameron.