By Diane Mueller, Chair, XBRL International Technical Working Group on Rendering

Web 2.0 technologies like XML, web services and social networking have taken off like wildfire and have caught many accounting professionals off-guard. The accounting profession only recently put down their pens and made the move from paper to spreadsheets and electronic forms for processing and visualizing financial data.

Accountants and regulators alike require a visual representation of the financial reports before approving their release or attesting to the authenticity of a financial document. There is an almost gut-level need harkening back to the days of the abacus and stone tablets to an almost instinctual need to touch and see the numbers in order to believe and trust in their authenticity.

By Diane Mueller
In the aftermath of banking failures, subprime mortgages, and bailouts across multiple industry sectors, it is a good time to examine the strategies it will take to rebuild public trust in our government and in the world’s financial markets. I believe the answer depends both on what we can do and how we do it.

With all the financial information that corporations were obligated to report because of existing government regulations, how could we not have foreseen this financial disaster? Did we misread the data? Was the information in the reports incorrect? Is there more that should have been required to report?  What was missing were regulations that properly addressed how the information was to be reported. Being specific on the “how” may very well have provided the warnings of the impending disaster rather than finding out how bad it was in the midst of it.

The key to solving the problem is figuring out the best way to publish our data.

A major step towards solving the problem of how to report financial information has been addressed in the latest set of regulations from the U.S. SEC. The regulations now require a growing number of companies to provide financial statement information in eXtensible Business Reporting Language (XBRL). Once all companies that are required to report use this format, analysts will be able to provide more accurate and timely warnings. Rather than using the past rules of demanding information — whether locked inside spreadsheets, forms, PDFs, the web, and other proprietary formats — specifying XBRL makes the data more usable and more easily gathered and analyzed.

If we can’t find the data, if we can’t figure out the problems that may be buried in the mountains of information, and if we haven’t any means to explore the data, we are no better prepared for the next financial crisis.

Creating Compliant Data

To complete the true financial picture of our economy, we need to complete the move to XBRL to ensure that all financial reporting is available as XBRL-tagged content. The government also needs to use XBRL reporting as part of creating a complete picture of the economy. As the bailout legislation, Recovery Act and other massive appropriations that include requirements for public disclosure continue, XBRL reporting could provide an excellent method of measuring the effects to the economy in real-time. Usually economic indicators lag behind because time is needed for surveys and reports to be collected and processed.

The initial impact of new regulations layered on top of existing regulations like Sarbanes-Oxley will be that corporations will be obligated to publish even more data, more frequently. The Obama administration’s effort to push more government data out via Recovery.gov is a good example of the movement to encourage more disclosure. If that information was in XBRL, we could more easily use the data. As the government rolls out its mandate for corporations to submit their financials using XBRL to the U.S. SEC for closer scrutiny and better compliance, they could also take a page from their own book and make all government financial reporting available to the public in XBRL, facilitating a more open national dialogue on our government’s financial health.

As Obama said in his Memorandum on Transparency, “Government should be transparent. Transparency promotes accountability and provides information for citizens about what their Government is doing. Information maintained by the Federal Government is a national asset.” This information needs to be compiled in a harmonized, compliant fashion across agencies to facilitate its preservation, dissemination, and exploitation and to maximize the research that is derived from it.

Connecting the Data

Like pages on the web, we intuitively know that the public data being posted to sites like SEC.gov and Recovery.gov is interconnected with other sources of data. But discovering the connections when all the data is in disparate formats is next to impossible for most — even  the expert research analysts at times. The government has already started to require XBRL with positive results in terms of access to data, so there should be no reason not to settle on XBRL for all financial reporting by companies and government entities alike. Beyond any specific qualities of XBRL, just by using the same format, reporting and analyzing the reports is faster and more likely to be accurate.

Further transformations like those proposed at recovery.gov (such as a service to transform the data to RDF-tagged semantic data) can allow the financial data in XBRL to be combined with data from other industry and government sectors — transforming the way we explore information.

In addition, the data about the data needs to be discoverable. Just having information in a usable format does little without it being easily accessible. Any kind of data object or concept should be found at a specific Uniform Resource Locator (URL) so that people can look up specific names, get useful information, and discover more.

As Tim Berners-Lee, director of the World Wide Web Consortium, put it, “It is about making links, so that a person or a machine can explore the web of data. With linked data, when you have some of it, you can find other related data.”

Another consideration is trusting the provenance of the data itself — maintaining the connection to the source of the data whether it’s a filing on the SEC website or a recovery.gov document listing all the grant recipients for bailout funds. If the link (or URL) to the primary data source is lost, the connection and the provenance of the data is no longer assumable and any derived research loses its authenticity. When posting financial information for public consumption, entities enter into an unspoken agreement to maintain those links with the consumers. As more and more data is available online, the long-term stability of government sites and the continued maintenance of links must be guaranteed. The links are the mechanisms that will enable us to trace back to the sources and link us to the authoritative literature; whether that content is a Financial Accounting Standards Board (FASB) ruling, a Senate Bill allocating billions of bailout dollars, or the financial data related to an entity’s compliance with these rules and regulations.

If governments and corporations publish financial information using harmonized data standards and ensure that relevant links are maintained and accessible, this will go a long way to improve finding the location of relevant data.  Public scrutiny will diminish, and we will again trust the financial markets and the agencies that regulate them.
 

By Diane Mueller

How can you turn the U.S. SEC eXtensible Business Reporting Language (XBRL) mandate’s requirements into an opportunity when making process improvements to comply? Implement an XBRL-enhanced document management strategy as part of your internal corporate filing workflow which will both boost compliance and save money.

Strategies for Success

Document management is based on applying the principles of structured content — documents that have been chunked into meaningful component parts and tagged in a systematic fashion. In the case of the corporate financial reporting process, the structure now being applied to financial content is XBRL, the financial XML standard that promises to transform, and perhaps revolutionize, how companies create and use their financial information to meet business objectives. With the SEC mandating the use of XBRL, now is the perfect time to take advantage of these two converging industry best practices. Its standardized structure makes the application of document management systems possible for the corporate accounting sector, whereas in the past, the lack of structure had hindered the adoption of document management strategies in this domain.
Document management workflows have long been known to speed the delivery of corporate information materials, improve quality and accuracy of content across the global enterprise, increase staff efficiency with content, and reduce publishing costs. IT departments have been waiting a long time for accounting departments to open up the kimono to document management practices for the sake of improving archiving, content reuse, and data management. Going forward, successful organizations will apply document management practices to help streamline their corporate reporting processes.

posted by Diane Mueller

In  an article posted today on Wired.com, Daniel Roth interviews Phil Moyer of EDGAR-Online and Charlie Hoffman and comes to the realization that XBRL is a radical and innovative technology that changes the game for finanical reporting. As he aptly notes " Even the regulators can't keep up. A Senate study in 2002 found that the SEC had managed to fully review just 16 percent of the nearly 15,000 annual reports that companies submitted in the previous fiscal year; the recently disgraced Enron hadn't been reviewed in a decade."    He points out the obvious - that plowing thru a ~500 page Bear Stearns prospectus isn't for the faint hearted and certainly not conducive to a transparent flow of information to the masses.  The devil is in the detail and the detail has been tagged with XBRL.

Kudos for a great article, which I encourage everyone to read - Road Map for Financial Recovery: Radical Transparency Now! by wired.com's Senior writer Daniel Roth (daniel_roth@wired.com)

By Diane Mueller

In an article on Law360.com entitled "XBRL Filings To Become Mandatory This June", the author, Jesse Greenspan takes an interesting point of view in saying that the US Securities and Exchange Commission's XBRL initiatives were an attempt to empower amateur analysts. It's the first time I've ever heard XBRL described in this manner which at first glance might seems to minimize the impact that XBRL is expected to have across the entire Financial Reporting Supply chain. It would be nice to think that the SEC would spend 59 million dollars to modernize the EDGAR filing system just so amateur analysts could have a field day and uncover the next bubble  - but in reality, the SEC is also being self-serving as there is no way that the current system could continue in place without such an XBRL-enhanced modernization effort. 

A nice side effect of the SEC's XBRL initiatives is, indeed, empowerment of individual investors and analysts to freely access high quality tagged data that will now be machine-readable. This should lower the cost and barriers for so-called amateur analysts to come up with their own algorithms and financial models - perhaps landing them on "the cover of  Fortune magazine" - as the article goes on to quote a parther at a respected law firm.  To read the entire Law360 article, click here:  XBRL Filings To Become Mandatory This June

By Diane Mueller

by Diane Mueller

Within the XBRL consortium, there is widespread agreement on the importance of developing a wide user base for XBRL content and fostering adoption of the standard. the inevitable mandate of XBRL’s use for US SEC filings, and the ripple effect that this is having on application development for the financial sector, has sent financial software application developers scrambling to accommodate their client’s filing preparation requirements and looking for opportunities for leveraging XBRL metadata on the consumption & analytical applications development side of the financial supply chain.  The community needs take advantage of particular moment in the regulatory spotlight and promote wider adoption by making it easier to develop financial applications that leverage XBRL.

The complexity of the XBRL 2.1 specification and the modules that have sprouted up to support it’s extended application is definitely a stumbling block for most financial software applications developers to entering this market. As with any new standards-based endeavor, developers need access to the right enabling technology, development tools and runtime software that can automatically overcome technical issues without passing the burden of deep specification knowledge to the developer.