XBRL: Integrating Financial and Corporate Responsibility Reporting
Written by Bob Schneider Posted on December 4, 2010
Harvard Business School recently held the 2010 Workshop on Integrated Reporting to encourage the trend of combining financial and nonfinancial information — especially measures of environmental, social, and corporate governance (ESG) performance — in a single company report. The Landscape of Integrated Reporting: Reflections and Next Steps, an eBook available for free online, collects the thoughts and views of the workshop participants. Two of the essays — by Maciej Piechocki and Olivier Servais, and by Brad Monterio and Liv Watson — specifically address the role of XBRL in facilitating integrated reporting.
Company reporting of ESG — also known as corporate social responsibility or sustainability reporting — is making steady progress, at least among the world’s largest firms. According to the most recent KPMG Survey on Corporate Responsibility Reporting, nearly 80% of the world’s biggest companies issued corporate responsibility reports in 2007/2008, up from 50% three years earlier. More than three-quarters use GRI Guidelines for their reports. However, most companies still present ESG information in stand-alone reports, with perhaps a summary in a separate section of the company’s annual report. Only 3% of companies “fully integrate” corporate responsibility reporting with financial reporting in their ARs. (There’s a nice chart on page 16 of KPMG’s survey that shows the breakdown of stand-alone versus fully integrated reporting of companies by country.)
Already the emerging global language for financial reporting, XBRL now is gaining traction as a standard for nonfinancial information as well. In their essay “The Role of XBRL and IFRS in Integrated Reporting,” Piechocki and Servais enumerate a growing list of nonfinancial XBRL taxonomies under development:
The Global Reporting Initiative (GRI) has published the GRI Taxonomy to reflect GRI Sustainability Reporting Guidelines. The World Intellectual Capital Initiative (WICI) is conducting a similar effort in the area of intellectual capital and has developed a taxonomy that reflects Gartner and Enhanced Business Reporting Consortium metrics, management discussion and analysis, and the WICI framework. There is also interest in XBRL from projects such as the Prince’s Accounting for Sustainability Project, the Carbon Disclosure Project, and the International Integrated Reporting Committee. [p. 157 of the eBook]
The authors discuss the problem of comparability of nonfinancial information across XBRL reporting frameworks — a challenge similar to that faced in financial reporting, which Piechocki recently described in an interview with this blog. The authors believe the work of the ITA project in helping to ensure cross-border interoperability of IFRS, EDINET (Japan), and US GAAP taxonomies will yield important lessons for a similar alignment in integrated reporting.
In their essay “Bringing Order to the Chaos: Integrating Sustainability Reporting Frameworks and Financial Reporting into One Report with XBRL,” Monterio and Watson affirm the view that, as the de facto standard for financial reporting, XBRL is the logical choice for integrated reporting. They note two key challenges, however:
First, ESG reporting requires “commercial strength” taxonomies developed by “neutral, trusted” organizations. As yet, there are no such entities in the ESG field that can fund and maintain these required taxonomies.
Second, just as key stakeholders drove the adoption of XBRL for financial reporting, “many more influential leaders in the ESG community” must urge development of nonfinancial taxonomies and promote their adoption. [p. 165]
As the book’s 62 other essays well demonstrate, the number and breadth of issues raised by ESG reporting generally and integrated reporting specifically are enormous. One major problem noted by Ralf Frank in “Success Factors for Integrated Reporting: A Technical Perspective” is that
…unlike US-GAAP or IFRS, which are legally endorsed… the extra-financial reporting criteria are voluntary frameworks that, given their nature, allow companies a significant amount of leeway, including the ability not to report under these frameworks at all. [p. 226]
Another huge challenge is the extent to which the environment — economic, social, and, not least, political — for many ESG issues varies among countries. One prominent area is climate change: my Japanese friends are always amazed to learn that the role of human activity in global warming is far from being a settled issue in the US. As reported in the November 24 issue of BusinessWeek, the number of Americans who think the earth is warming because of man-made activity dropped to 34 percent in October 2010, from 50 percent in July 2006. The article goes on to note that recent US elections put into office 47 new lawmakers skeptical of climate change; any Congressional action on cap-and-trade, and even some less ambitious environmental legislation, appears dead for now.
In this light, the “cautionary note” on XBRL that Adam Kanzer offers in his essay “Toward a Model for Sustainable Capital Allocation” is interesting:
It seems to me to be somewhat ironic, however, to be discussing the concept of One Report and XBRL in the same breath. XBRL may be a very positive development, but it is also likely to accelerate the atomization of corporate reporting, undermining the integrity of the report itself. Investors will have even less incentive to read the corporate report as published, preferring to extract the data points their models call for. What gets lost is context, and context is critical to understanding corporate strategy and performance, particularly with respect to those sustainability factors that cannot generally be reduced to a data point. [p. 56]
I don’t know whether Mr. Kanzer’s concern that XBRL reduces the incentive to read the corporate report as published has validity. But it does seem that — in a world where there’s so much debate on just what the key ESG issues are, let alone how they should be reported — a data standard that can extract from a much larger report individual data points has distinct advantages for comparison and analysis. An atomized ESG scorecard is highly preferable to none at all.
Corporate responsibility and integrated reporting remain the exception rather than the rule: Michael Muyot of CRD Analytics states that of more than 75,000 multinational companies, only 3,500 (less than 5%) produce a sustainability/CSR/integrated report [p. 170]. But the essays in this book demonstrate that the trend lines for both corporate responsibility and integrated reporting will continue to slope upward – and that XBRL will have a vital role to play in their adoption.
XBRL: The View from Europe
Written by Anne Leslie-Bini Posted on November 23, 2010
Anne Leslie-Bini is a Paris-based freelance consultant who began her career in capital markets, working for major international banks such as BNP-Paribas and ABN Amro Group. Since 2009, Anne has been acting as an international business facilitator, accompanying European companies who wish to join the XBRL community and take advantage of the many opportunities offered by the technology. She can be contacted by email.
In one of his recent blog posts, Dan Roberts referred to Europe as “the quiet revolutionaries.” It is certainly true that there is a feeling in financial information and business reporting circles that the “old order is being swept away” and that XBRL is stepping in to the fill the breach.
Unfortunately, what is sorely lacking in Europe is a harmonized pan-European equivalent to the SEC mandate for the disclosure of financial statement information in XBRL format or, as Dominic Jones so succinctly put it, “will Europe ever get its own EDGAR?” Vested interests, legacy investments, and the difficulties inherent in arriving at a binding Union-wide consensus mean that, while commendable progress can be made, the US experience has shown that a top-down regulatory mandate is indispensable in giving the jumpstart needed for the widespread adoption of XBRL.
Within Europe, while national initiatives are extremely important, their scope and effect tend to be limited by their jurisdiction. The recent blog post by Bob Schneider highlights the danger that institutional myopia holds for the development of XBRL, and more generally, for the future of financial disclosure in Europe. What is needed is a high-level, cohesive and visionary initiative with sufficient resources and political clout behind it to propel it through the bureaucracy.
With 50 XBRL projects currently underway in 15 European countries, XBRL is clearly becoming increasingly pervasive with such large quantities of XBRL data circulating in Europe. Each of the three regulated sectors has its own views on XBRL, but the European banking regulator, CEBS, has been the first to make a positive move towards harmonization, with the FINREP/COREP framework project on prudential reporting scheduled for finalization in 2012.
As with every area of pan-European policy-making, national interests can often override the supranational Union-wide interest; XBRL is no less affected. However, in this instance, lack of harmonization and cohesion is ultimately detrimental to all. The weight of the administrative burden and other internal barriers still serve to keeps costs unnecessarily high and – despite the Transparency Directive — the ensuing opaqueness inevitably diminishes confidence in reported financial information.
The main stumbling block has been identified as being the diverse accounting standards and disclosure requirements currently in existence throughout the European Union. XBRL Europe has recommended that the EU designate or create an official body to harmonize national accounting standards in line with the IFRS or to adopt a common set of accounting standards. XBRL Europe recently made a tentative proposal suggesting that EFRAG and the European National Standard Setters (NSS), in collaboration with the IASB, should take the lead on this, encouraging other European stakeholders such as CESR, CEIOPS, CEBS, the European Commission, and FEE to be involved in the effort to reach consistency throughout the EU.
In light of this, the press release concerning the meeting held on November 12 between EFRAG and the IASB sends a positive signal. Representatives of both organizations emphasized their continued support for a single set of high quality global accounting standards, and noted the role that the EU’s adoption of IFRS has played in encouraging other jurisdictions to adopt international standards. They also highlighted the importance of broad engagement in the standard-setting process to ensure high quality standards that reflect input from all stakeholders.
At this juncture, the words of former SEC Chairman Christopher Cox resonate more than ever, when he said that “corporate reporting is not an end in itself, but a means to achieving our missions”. Projects abound that focus on furthering the adoption of the XBRL standard; however, the adoption process, although essential, is just a step towards the final goal of having timely, accurate, and accessible interactive data that facilitates business decision-making. Long-range vision is the key, with the ultimate objective of creating and providing better information for better decisions being the guiding light. Internationally, the interactive data “genie” is out of the bottle; Europe must not be found laggard or isolated by failing to harness and coordinate its existing internal momentum.
An Interview with Maciej Piechocki on the Global Filing Manual
The Interoperable Taxonomy Architecture project (ITA) recently published The Global Filing Manual (GFM), the first set of aligned XBRL filing rules for global use. The GFM provides guidance on the preparation, filing, and validation of XBRL filings created using the IFRS, EDINET (Japan), or US GAAP taxonomies.
Maciej Piechocki kindly agreed to answer a few questions about the GFM and the ITA’s work. Maciej is a Project Manager at the IFRS Foundation, responsible for the development of the IFRS Taxonomy as well as coordinating other global IFRS and XBRL initiatives including the ITA project. He is also a member of the XBRL International Standards Board.
[The IFRS Foundation is an independent, not-for-profit private sector organization working in the public interest. Its main mission, through its standard-setting body, the IASB, is to develop a single set of high-quality, understandable, enforceable, and globally accepted international financial reporting standards — IFRSs. The opinions expressed here do not necessarily reflect the views of the IASB or the IFRS Foundation.]
1. Could you tell us about the ITA project, including its origins, participants, and objectives?
The ITA is a joint initiative between the European Commission, the Financial Services Agency of Japan, the IFRS Foundation XBRL team, and the SEC. The project was established in 2007 and it aims to converge the XBRL architectures of three taxonomies: EDINET, IFRS, and US GAAP. It is hoped that this architectural convergence will support the analysis and comparison of financial data reported in XBRL format, by enabling software vendors to develop applications for IFRS, Japan GAAP, and US GAAP reporting based on a single XBRL architecture.
The ITA project has made significant progress in aligning the architectures of the EDINET, IFRS, and US GAAP taxonomies, and has also published guidance on how to prepare, file, and check (validate) XBRL documents created using these three taxonomies. The GFM is the first significant effort to align XBRL filing rules for global use and is intended to encourage the consistent implementation of the aligned framework.
Collectively, IFRS, Japan GAAP, and US GAAP are used by 85% of worldwide market capitalization. The bodies involved in the development and implementation of these taxonomies — whether regulators or standard-setters — have the responsibility to ensure the cross-border interoperability of corporate reporting, especially while XBRL adoption around the world is growing. A single, consistent XBRL taxonomy architecture will lead to greater interoperability, which will support global software developers and lead to improved efficiency and a higher degree of acceptance in international markets.
The ITA does not aim, however, to ensure global comparability and alignment for all XBRL reporting. The focus of the ITA is reporting for financial statements where companies provide filings and not just instance documents. The fundamental use case that guides the ITA’s alignment efforts is the publication of a company’s financial statements and the consumption of those financial statements by a broad range of users and software applications.
2. To the extent possible, can you express in layman’s terms the interoperability problems among taxonomies, and how implementing the GFM solves these? What improvements will be seen primarily by XBRL technologists, and which will be apparent to users of financial statements?
Because XBRL is a robust and flexible technology, it can be — and often is — applied to a number of purposes by tailoring its architecture to meet the reporting needs of various information chains. However, this flexibility also poses risks. One drawback of such an adaptable technology is that this adaptability can lead to inconsistencies between different information chains. In the worst case, differences in XBRL frameworks can lead to incomparability.
The ITA project is working to try to mitigate this risk by aligning the architectures of the taxonomies used for IFRS, Japan GAAP, and US GAAP reporting. Put simply, the aim of the ITA project is to support information comparability by removing technical obstacles and frameworks differences that might hinder this comparability. The rules in the GFM aim to facilitate the analysis and comparison of XBRL financial reporting data by computer applications and human readers.
If you imagine trying to compare two sets of XBRL financial statements, one from a US company and one from Chinese company, you have a few hurdles to overcome:
First, there are differences in the architecture of the two taxonomies used to generate the instance documents. If one taxonomy uses tuples while the other taxonomy uses dimensions, you will need to establish a kind of “technical translation” layer, which could be costly. However, if the two taxonomy developers follow the same, agreed-upon, architecture, there is no need to resolve differences in technical frameworks because there are none.
Second, there are differences in filing rules. Even with aligned taxonomy architectures, differences in filing rules can lead to inconsistencies in company-specific extensions and instances, and they present XBRL technologists with a challenge when trying to pool financial information in XBRL from different sources.
Any improvements from this alignment may not be immediately obvious to users of financial statements. The benefits will first be recognized by technology providers, because they will be able to develop applications based on a single XBRL architecture which avoids the development of heterogeneous platforms and software.
Only then will the benefits to others begin to emerge. Preparers of financial information, in particular those managing underlying multi-GAAP reporting requirements, will not have to deal with multiple, heterogeneous filing formats. Receivers and users of this information will be able to use fewer software solutions for cross-border analysis without the need for transferring reported information between different tools.
3. What authority does the GFM have? Will the GFM require significant changes and additions to the EDGAR Filer Manual (EFM) and other authoritative documentation?
The GFM is not really a new document as such, because it leverages existing rules contained in the EFM from the US SEC, the EDINET Corporate Extension Taxonomy Creation Guidelines from the Japan FSA, the IFRS Taxonomy Guide from the IFRS Foundation, and the Financial Reporting Instance Standards (FRIS) from XBRL International. These existing rules were reviewed, aligned, and discussed from a global filing perspective and then amalgamated and documented into the GFM.
Use of the GFM is based on the assumption that filers in a disclosure system will provide their filings by extending a standard taxonomy that is recognized in the disclosure system. The GFM must be tailored for each specific disclosure system.
From the perspective of the IFRS Foundation, the GFM is provided for information purposes only and is intended for use as guidance and not as an authoritative document. Authoritative filing rules should be provided by regulators.
Nonetheless, it is hoped that regulators will recognize the resource and interoperability benefits of aligning their filing rules on existing, publicly available rules where a significant degree of convergence has been achieved.
4. Improving data comparability is one of the three strategic goals underpinning the six initiatives recently announced by the XSB. How does the work of the ITA in general and the GFM specifically align with these efforts of the XSB?
As a member of the XSB I actively participated in the strategic discussion and the setting of the objectives for XBRL as a technology over the next few years. The outcome of this effort by the XSB effort was the discussion document Preserve. Promote. Participate.: Moving XBRL Forward. Although the ITA does not link directly to the six proposed initiatives, it is my expectation that it will make use of the outcomes of the initiatives. The ITA will also be able to contribute to a number of areas, in particular the “Enhance the Comparability” initiative. As noted, by publishing the GFM the ITA seeks to support comparability.
5. With respect to the cross-border comparability of financial statements, how would you assess the significance of differences in the underlying technology of taxonomies versus those in accounting standards? In other words, given the considerable variations that exist among international accounting standards — including various national flavors of IFRS — how much impact can improvements in taxonomy architecture have on cross-border comparability?
Obviously, the ITA cannot resolve issues related to the convergence of accounting standards and how these differences are represented in taxonomy content structures or taxonomy extensions. These differences are the responsibility of the accounting standards setters. Nevertheless, aligned architectures are a necessary prerequisite to recognizing and dealing with such differences.
For example, the latest extension to the IFRS Taxonomy, the Chinese Accounting Standards (CAS) Taxonomy, leveraged the knowledge accumulated by the ITA, and the CAS Taxonomy development team did a fantastic job of following the aligned architecture. This alignment creates a situation whereby software that can analyze XBRL filings from the EDGAR system should also be able to analyze filings created using the CAS Taxonomy. The effect should be the same for taxonomy extensions if they created using the aligned architecture.
6. You say that the ITA does not aim to ensure global comparability and alignment for all XBRL reporting. But do you believe the ITA’s work can have a broader impact beyond financial reporting?
While the efforts of the ITA project are focused on reporting for financial statements where companies provide filings, the lessons of framework comparability and global filing rules learned from the projects could be applied more broadly to general business reporting. Furthermore, preparers, regulators, software vendors, and users who have invested time and resources to understanding and implementing a globally-aligned reporting framework and set of filing rules would struggle to accommodate another architecture and another set of rules, whether for financial or non-financial reporting. Therefore, for other types of reporting, existing systems and principles — and in particular those that have achieved significant convergence — should be leveraged where possible.
7. Where do you go from here? What problems remain in interoperability? What work remains to be done?
The work of the ITA is far from finished. The ITA is currently discussing whether it is possible to develop a conformance suite for the GFM to ensure its proper implementation in software. Furthermore, there may be lessons learned from the SEC filings submitted with detailed tagging, which may require amendments or additions to the rules in the GFM. The ITA has already received a number of comments on the published rules.
Another area which the ITA will be observing with interest over the next year is the implementation of Inline XBRL (iXBRL). Currently, regulators are starting to realize the potential business benefits for iXBRL in financial reporting. The IFRS Foundation recently published a set of illustrative examples demonstrating the use of the IFRS Taxonomy in iXBRL, which is a useful addition to the XBRL technologies.
8. What can the XBRL community do to support you in your work?
Read the GFM and maybe even try to implement the aligned architecture in their own taxonomy. If it works, let the ITA know. If it doesn’t work, still let the ITA know. The ITA is not a regulatory body; it is a group aiming to achieve XBRL convergence for financial reporting for IFRS, Japan GAAP, and US GAAP. Attention, support and emulation from other jurisdictions will broaden this convergence, which can only be a good thing.
However Slowly, XBRL May Become a Reality in Portugal
Written by Joel Vicente Posted on November 11, 2010
Joel Vicente is an XBRL Taxonomist at CoreFiling Limited and a leading participant in the establishment of a new XBRL jurisdiction in Portugal. He can be reached by email.
My “day job” is designing and building XBRL taxonomies. Despite my eight years of evangelizing through conferences and regular meetings with the major regulators and institutions in Portugal, XBRL remains little-known in my country. There was an expectation that the OTOC (Chamber of Chartered Accountants) would become the XBRL facilitator in Portugal, but now that seems to be on hold.
In some ways, it is surprising that XBRL has been slow to take off in Portugal. Regulators and institutions have heavily used XML in their filing programs. For example, a project called IES, developed by Bank of Portugal, Ministry of Justice, Ministry of Finance and Public Administration, and Statistics Portugal, is collecting financial, business, and accounting information through a form-based application or an XML file sent from companies’ ERP systems. This is one of the most successful IT projects in Portugal.
Many of us think that bringing XBRL to IES would be a natural next step in XBRL adoption for Portugal. As it stands, financial institutions that are unfamiliar with overseas XBRL filing regimes remain worried that XBRL has to evolve more before it can add value for analysts and investors. Some hope that Portugal will follow the lead of the UK’s HMRC and mandate Inline XBRL (iXBRL). Inline XBRL hides machine-readable concept tags behind the legible captions, so that, for the first time, XBRL can be displayed in a browser exactly as the originator intended. This cuts out the middle-man between the reporting company and the investment analyst’s website. Inline XBRL allows the original financial report to be analyzed directly without the time, inefficiency, and errors related to cutting/pasting or transcribing company data into analysts’ spreadsheets.
As it happens in many countries, the ultimate drive for adoption may come from America’s SEC. The SEC’s requirement for XBRL financial statements is forcing the larger Portuguese companies to address XBRL; in 2011 those companies with SEC filing obligations will also need to file their financials in XBRL. This is already encouraging interest among the Big 4 in Portugal, and I am hoping that local software vendors will follow suit.
However slowly, whether from internal or external pressures, it appears that XBRL may become a reality for Portugal.
XBRL: An Update on Recent Developments
Written by Bob Schneider Posted on November 6, 2010
It was a busy October (and early November) in the XBRL sphere, with management changes and new initiatives among other significant developments. I’ve collected and summarized these items below, along with (what I hope are) useful links. Please let me know if I’ve left out anything of importance.
Leadership
(1) With the Republican takeover of the US House of Representatives, Rep. Darrell Issa will assume the chair of the House Committee on Oversight and Government Reform. Mr. Issa is expected to “reinvigorate the committee by embracing new technologies for analyzing and disseminating government data,” among which, given his past support, will surely be XBRL. Meanwhile, on the Democratic side, Kim Wallin — well-known for championing XBRL in Nevada — was re-elected State Comptroller. Interactive data seems to be one issue on which there can be bipartisan agreement.
(2) In more specialized elections, new members were chosen for the Steering Committee of XBRL International. Arleen Thomas of the AICPA is the new Chair; David G. van den Ende of Deloitte Netherlands was elected 2nd Vice Chair. Five at-large members were also elected: Li Dan, China Ministry of Finance; John Turner, CoreFiling; Caetano Nobre, MZ Consult S.A.; Shiping Liu, Global Business Intelligence Consulting Corporation (GBICC); and Avinash Chander, The Institute of Chartered Accountants of India (ICAI). [Press Release]
(3) This week Campbell Pryde, Chief Standards Officer of XBRL US, was named its President and CEO. He succeeds Mark Bolgiano, who headed the organization for the past four years. Effective December 1, Mr. Bolgiano will lead technology strategy at Howard Hughes Medical Institute. [Press Release)
Initiatives
(4) The XBRL International Standards Board (XSB) released Preserve. Promote. Participate, which details six initiatives to ensure XBRL meets future business requirements. As discussed on this blog, top priority was given to the initiative to build an abstract business model. Accordingly, the XSB has launched the Abstract Modeling Group, which will use the Object Management Group’s (OMG) Unified Modeling Language (UML) to create the model.
(5) XBRL US has created a 17-member Best Practices Committee to focus on data quality. “The committee is charged with identifying and reaching agreement on best practices in the creation of XBRL-formatted financial statements from public companies reporting to the Securities and Exchange Commission (SEC).” The list of members is in the press release.
(6) Following the news in September that Citi would begin working with XBRL US, DTCC, and SWIFT on testing tagging of corporate actions, it was announced in October that GlobeTax and XSP would join the pilot program. [Press Release]
M&A
(7) Clarity Systems, which provides XBRL products and services for SEC filing companies, has been acquired by IBM. Here’s the press release and a variety of commentary from Forbes, TEC, and Miles Jennings at Seeking Alpha.
Guidance
(8) At the 21st XBRL Conference held in Beijing, China’s Ministry of Finance released the General Purpose XBRL Taxonomy. The taxonomy will be used across a wide array of government agencies, including those with responsibilities for industry, banking, securities, and insurance. [XBRL.org Press Release]
(9) The Interoperable Taxonomy Architecture (ITA) project announced publication of the Global Filing Manual, which aligns XBRL filing rules on a worldwide basis. The GFM provides guidance on preparation, filing, and validation of XBRL filings created using the IFRS, EDINET (Japan), and US GAAP taxonomies
(10) The SEC published Staff Review Observations from their review of XBRL filings submitted in the June to August period.
Articles
(11) CFO.com reported that XBRL US had identified 18,695 errors in the 3,400 filings that have been submitted in years 1 and 2 of the SEC mandate. Despite the seemingly high number, most observers noted that the total was actually fewer than had been expected and represented a small portion of the more than 1.6 million tagged facts. Moreover, about two-thirds of the errors were the oft-cited mistake of a negative value for an element expected to have a positive value.
(12) Also worth reading are Mike Willis’s article on supply chain standardization, Daniel Roberts’s post Is XBRL Like Blood?, and this piece from Semanticweb.com on the work of Dr. Graham Rong.
How Companies Present XBRL Data on Their Websites
Written by Bob Schneider Posted on October 26, 2010
The final rule on interactive data requires companies to post the XBRL files they submit to the SEC on their corporate websites (see Section 2B5 Web Site Posting of Interactive Data, pp. 74-79). The rule states that the data be made available through the website address the company ordinarily uses to communicate with investors and that it remain posted for at least 12 months. The specific presentation, however – appearance, design, location, etc. — is not prescribed.
To examine how companies were handling presentation, I reviewed the websites of 100 companies selected at random from the XBRL Cloud EDGAR Dashboard. I wanted to know (a) whether the data was indeed available at the site, (b) the area of the Investor Relations section it resided, and, most important, (c) how it was presented.
It did not appear that noncompliance was a significant problem. Of the 100 companies, I could not locate XBRL data for five. As discussed in footnote 206 on p. 75 of the final rule, there are various provisions that extend the grace period for website posting, which may account for the absent XBRL files. I did not research each of these five exceptions, although I did note that three of the companies were recent first-time filers.
Of the remaining 95 filers, 61 – or about two-thirds – provided XBRL data in a format of which PetSmart provides a typical example. Drilling down from its Investor Relations gateway page to find the XBRL files for, say, a recent quarterly (10-Q) report, the user will:
1. Click on SEC Filings
2. Open the Groupings Filter dropdown and select Quarterly Filings
3. Click Search
4. Locate the needed 10-Q and click the Interactive Data icon at the far right of the Downloads column (see image below)
From there, the user can click on the files (such as instance document or linkbases) to download them; typically, there is also a link to XBRL Viewer where the user can open the View Reports dropdown and choose to see various parts (e.g., balance sheet, accounting policies) of the report.
Note that the URL for many of these companies’ SEC filings begins with http://phx.corporate-ir.net/, a Thomson-Reuters page; apparently most (if not all) of this data is provided through an information intermediary.
An additional 14 companies use a similar format where Steps 1 to 3 are basically the same. In the list of 10-Q’s, users click the Quarterly Report link for the report they wish to access, and it opens in HTML format. The user can access the XBRL files by clicking the I icon at the far right of the icon bar (see image below).
The two "add-on" methods — i.e., the XBRL filings are simply added to an existing scheme of Word, Excel, and PDF formats — account for more than three-quarters of the sample.
The remaining 15 or so sites provide and present XBRL data in a variety of ways. At Adobe, XBRL files are prominently displayed and clearly labeled; click the link for any XBRL quarterly report and a page opens where you can access all XBRL files. In its Investor Relations section, Eaton has a separate link under Financial Reports for XBRL filings; it opens a page with commentary on XBRL and links to download files. Legg-Mason has a dedicated page for its XBRL filings (see image below). East Group Properties provides examples of integrating XBRL exhibits with other financial data. (Note that in some cases, companies may use one of the “add-on” methods and also have additional links on selected pages for XBRL data.)
Overall, it appears companies are complying with the posting requirement by providing the XBRL data required. However, I couldn’t help but be a little disappointed by the popular use of “add-on” methods. Visitors who want to find XBRL data at these sites may have difficulty locating it; they may also be confused by the icons used for interactive data, which to varying degrees are not intuitive. With companies already making the investment to create XBRL exhibits, we can only hope that they will come up with ways to present XBRL information in a fashion that highlights the value and opportunity it provides.
Moving XBRL Forward: A Call for Action on XSB Strategic Initiatives
The XBRL International Standards Board (XSB) has reached another milestone in its effort to make the XBRL standard easier to develop, use, and compare. On October 6, it released Preserve. Promote. Participate. Moving XBRL Forward, which details six initiatives that aim to (1) protect current investments in XBRL; (2) encourage the adoption of XBRL worldwide; and (3) prepare XBRL for new opportunities in the future.
The proposals follow the XSB’s publication of the discussion document XBRL: Towards a Diverse Ecosystem in February. As John Turner and Chethan Gorur, former and current XSB Chairs respectively, explained in an interview with this blog at that time, the discussion document explored the future business requirements of the data standard and set forth a set of goals that would help ensure those needs.
In that interview, John and Chethan emphasized two points:
(1) There is no uncertainty about the stability of the existing XBRL standard, which works well and is being used successfully in dozens of countries by millions of companies. The purpose of this XSB effort is entirely about doing the long-term planning that will ensure XBRL is a lasting and sustainable success.
(2) Although the XSB had come up with specific goals and proposals for each, it was just at the discovery phase of the process. The key element in evaluating and refining this plan would be the feedback they received from developers, filers, analysts, investors, and all other XBRL stakeholders.
Now, based on the many comments, constructive criticisms, and suggestions it received from a broad spectrum of respondents, the XSB has developed the six initiatives detailed in Preserve. Promote. Participate. The support of the XBRL community, in the form of active participation, will be absolutely essential to ensure the success of these initiatives. None of these strategies can be executed, or even initiated, without the commitment of skilled volunteers. Financial support is also critical. Individuals and company representatives can express interest in one or many initiatives using the application form on page 23 of the document or the online registration form.
Chethan Gorur, John Turner, and Raymond Lam, XBRL International’s lead on the strategic initiatives, kindly agreed to answer a few questions about the six initiatives.
1. The discussion document that the XSB issued in February made proposals for the future of XBRL in three main areas:
- To make XBRL easier for developers
- To make XBRL information more comparable across taxonomies
- To facilitate the consumption of XBRL information for a wide range of existing and potential users
Did the feedback the XSB receive confirm that these were indeed the goals on which it should focus? Were the comments about what you had expected, or were there any surprises?
The XSB was pleased with the level of feedback that was provided. There was good representation from both a geographic as well as end-user perspective. Many of those who responded not only answered the default survey questions, but also took the time to provide additional written details to accompany their responses to the questions. This level of detail was very useful and demonstrates that there are many people around the world that are concerned about the future of the XBRL standard.
Many of the responses received echoed the theme of the three primary goals set out by the XSB, i.e., the XBRL standard needs to be made easier – easier to develop, easier to compare, and easier to consume. Hence, the XSB received positive affirmation that they were on the right track in terms of identifying the three primary goals.
2. What decision process did the XSB pursue in developing the initiatives? How did stakeholder feedback help shape them?
There were many suggestions provided by the respondents as to how XBRL could be improved, and these responses have greatly influenced the six initiatives that the XSB is now presenting in the strategy document. The responses were first analyzed by the XSB, then summarized into discussion points. These points were discussed in detail, in multiple meetings, among XSB members.
This resulted in a high-level framework that served as the basis for the final six initiatives. It was important that these initiatives stacked up well against the three primary goals. The strategy document presents the success of this effort in this table:
Initiative
Address Goal 1 (Make XBRL easier for developers)
Address Goal 2 (Improve XBRL comparability)
Address Goal 3 (Make XBRL data easier to consume)
1. Create an abstract model
Yes
Yes
Yes
2. Produce training materials
Yes
Yes
Yes
3. Define standard API signatures
Yes
Yes
4. Reorganise existing specification
Yes
5. Enhance data comparability
Yes
Yes
6. Develop application profiles
Yes
Yes
Once the final six initiatives were identified, the XSB then spent some time to clearly define each initiative in terms of its high-level description, its benefits, and the recommended approach for executing on the initiative.
3. What benefits do the six initiatives offer?
As shown on page 3 of Preserve. Promote. Participate., here are the six initiatives and their primary benefits:
Initiative
Primary Benefit
1
Create an abstract model
An abstract model provides a conceptual framework for understanding XBRL and gives developers a strong foundation for implementing XBRL solutions.
2
Produce training materials
High-quality training materials lend support to developers and those new to XBRL.
3
Define standard API signatures
API signatures assist developers with their implementation of XBRL solutions.
4
Reorganise existing specification
A reorganisation of the XBRL specification will make the specification easier to understand.
5
Enhance data comparability
Data comparability widens the applicability of XBRL data across project and international boundaries.
6
Develop application profiles
Application profiles reduce the scope of XBRL implementations by breaking up the XBRL specification into components.
A common theme that readers will notice about the initiatives is that many of them are very developer-focused. That was a very important aspect to our decision-making process, as we felt that appealing to the software developer community is in the overall best interests of the standard and the community.
One of the clearest paths to inspiring further adoption is to reach out to those who will be building the XBRL-enabled systems of the future. We need to move from today’s reality, which is that XBRL development requires advanced XML skills and significant time, to a future state in which incorporating XBRL capabilities into software, or indeed developing XBRL software from scratch, is significantly easier for developers from a wide range of different technical backgrounds.
4. Moving ahead on some of the initiatives requires completion of Initiative 1 – Create an Abstract Model. Does that initiative therefore have the highest priority? If so, what are the benefits of focusing on an abstract model first? Were other approaches considered and discarded?
All of the initiatives listed have a great level of importance in moving the XBRL standard forward. But the XSB felt that the abstract modeling initiative was the best one with which to get started. An abstract model will provide the proper foundation for some of the other initiatives, such as the standardization of API signatures. There was also discussion about what the dependencies were across the various initiatives; the abstract model was the one that seemed to be a common prerequisite to others, and hence, it has been assigned the first priority.
The value of providing a standard abstract model should not be underestimated. Software engineers and their development teams are typically well-versed in using abstract models as a means of capturing both the structure and dynamics inherent in complex information systems. These abstract models serve as a vital tool for communication and serve as the blueprint for software construction during implementation.
The fact that the XBRL specification is currently lacking a standard abstract model poses a requirement on XBRL-based projects to engineer an XBRL model for themselves. This not only adds a degree of cost to the project, but it increases the likelihood of interoperability issues further down the road because other projects or vendors may not have formulated a model that is in 100% agreement. This is why we feel that having a standard abstract model in place will lead to a more unified understanding of the XBRL specification. That is an important foundational cornerstone to have in place, not just for the other five initiatives, but for all future work products produced by XII.
5. How do the six initiatives align with the efforts of current XII working groups and task forces? Do you see any danger that the initiatives will compete or overlap with them?
The current XII working groups are focused on new and enhanced XBRL technical specifications, which are the foundation for all XBRL technical development world-wide. Those efforts will continue as per the roadmap published by the XSB and have no immediate connection with the initiatives outlined.
These six initiatives are intended to be complementary to the work currently under way in the working groups. But as these initiatives get underway, we envision that there will be collaboration, as appropriate and if required, between the spec working groups and the initiatives working groups. In fact, some of the deliverables provided by these initiatives will ultimately be supportive of the efforts in the working groups.
6. Preserve. Promote. Participate. discusses how the initiatives will lay the groundwork for the future challenges that face XBRL, including “changing markets, current trends, evolving standards, and emerging technologies.” With these challenges in mind, how will the initiatives enable XBRL to reach its full potential in the years ahead?
As a standard grows and becomes more widely adopted, there are ever-greater challenges and demands placed on that standard. Innovative use cases and new interoperability issues tend to come to the fore. For a standard to meet these challenges, it must have the proper foundations to adapt to the demands presented by such forces.
Initiatives like the abstract modeling effort can provide the proper engineering artifacts to enable a methodical and careful evolution of the standard. For example, as newer technologies emerge and are evaluated for their ability to add value to the XBRL standard, the abstract model could play a key role as a tool for communication, not only for understanding the impact that a new technology may have on XBRL, but also how XBRL itself might impact the design and evolution of that new technology.
Another theme that stands out across the six initiatives is an attempt to make things more modularized; this is apparent, for example, in the initiative to reorganize the specification and in the initiative to define application profiles. With a proper level of modularization in place, the specification will tend to be more manageable, change can be more isolated, and XBRL will ultimately prove to be more flexible and adaptable. These are important characteristics to establish now so that XBRL is well-positioned to respond to future challenges and demands.
7. What skills and experience are you looking for in volunteers? What are the main job titles? Must volunteers have extensive experience in XBRL?
The skill set that we are looking for is quite diverse, and in Preserve. Promote. Participate., the XSB has identified specific skills on a per-initiative basis. If you were to look across the entire cross-section of required skill sets, you’d find that there is a need for everyone from academics to XML technologists.
Volunteers need not feel that having a deep knowledge of XBRL is an essential pre-requisite to contribute. In fact, the XSB would like to see broad participation from the community since a wider perspective is crucial to ensuring that the XBRL standard is flexible enough to meet the needs of all in the community.
8. What can XBRL stakeholders do now to learn how they can contribute? How can individuals and organizations support these strategic initiatives?
The XSB is currently accepting volunteers and support through two channels: (1) volunteers and supporting organizations can complete the registration form in Appendix A of the document and email it to volunteers@xbrl.org or (2) they can go online and complete the same registration form at http://www.surveymonkey.com/s/2010Initiatives.
The abstract modeling initiative is the one initiative for which XII is actively recruiting volunteers, so we would like to especially invite all who have an interest in that initiative to register their interest with XII. It will be an exciting project, and we look forward to working with all those that respond.
XBRL in Canada: The Case for Moving Forward
Written by Chantal Rassart Posted on October 7, 2010
Chantal Rassart is Co-Chair of the Taxonomy Committee at XBRL Canada and an Associate Partner at Deloitte. She can be contacted by email.
My grandmother used to say, for every pro there’s a con, and that’s certainly true of technological progress. Yes, technology speeds up data processing; yes, it automates routine tasks; and yes, it makes information far more accessible. At the same time, now we are overwhelmed by data; simple changes to system parameters require the involvement of specialists; and computer systems within an organization often are incompatible with one another — to say nothing of external systems.
Today, businesses fill out most reports – production schedules to suppliers, financial statements to shareholders, financial ratios to bankers, requests for government grants, and so on — in formats that must be manipulated again and again along the information supply chain. Wouldn’t it be great if a company (or even an individual) could generate financial information and other data only once in a format that allows both internal and external users to integrate it instantly into their systems?
As readers are aware, such universality is precisely what XBRL offers. With XBRL, data no longer needs to be manipulated for each information request. Information is automatically exported into a readable and usable format by each user’s application; all users need to do is automatically import the data that is recognized by their systems without further manipulation.
Since this time- and money-saving solution already exists, the question becomes why it isn’t being used more often. The level of interest in XBRL in Canada among users of financial information is instructive.
Much of the focus has been on the financial reporting activities of publicly-listed companies, as it was expected that securities commissions would adopt regulations similar to those of the SEC, requiring companies to publish their financial statements in XBRL. A voluntary program was introduced in Canada several years ago, but a mandatory requirement has yet to be adopted.
To understand why not, consider that publicly-listed companies are already very busy with the changeover to IFRS, and we can assume that the securities commissions are hesitant to add new requirements until after the transition. At this time, only one requirement affects a limited group of Canadian companies: those firms that prepare their financial statements in accordance with US GAAP (or, beginning in 2011, IFRS) and are registered with the SEC must include XBRL exhibits with their reports. About 400 companies will be affected by this requirement, a relatively low number considering that there are more than 3,800 reporting issuers in Canada.
The potential benefits of XBRL remain compelling, however — so, what will it take? How can XBRL use become more widespread in Canada? In lieu of a legal requirement, sound reasoning that can reduce user apprehension must be made, and the advantages of using this format must be demonstrated.
This reasoning will need to address these most-cited reasons for not adopting XBRL:
Lack of knowledge XBRL is wrongly seen as only a technological matter that falls in the realm of computer experts. Computer experts make sure that security standards are met, the connectivity level is at its maximum capacity, and applications are properly installed; but when it comes to taxonomy and tagging — the driving force behind XBRL — that’s the accountants’ domain. Accountants are the ones who will tag data and assign their accounts to retained taxonomies, so they need to be made more familiar with the standard. Fortunately, the knowledge gap is not insurmountable. In most cases, a half-day workshop is sufficient to become familiar with the basics of XBRL, the relevant taxonomy, and the software that facilitates its application.
Complexity Off the bat, XBRL’s acronym turns off many. Instead, it’s best to describe XBRL taxonomies as dictionaries. The “dictionary” contains a controlled vocabulary to assign to each item of financial information. Doing so becomes a rather simple exercise once we understand the nature of the financial information and its definition within the selected “dictionary” (or taxonomy).
Lack of time The initial exercise of tagging data can be long. Depending on what data a company chooses to tag — financial reports alone, or a portion or all of its source data — the exercise could be very long. It takes several minutes to tag an item of financial information, but the payoff is greater flexibility. It’s important to understand that the more granular the item tagged, the more flexible it becomes for sharing information.
No readers Unfortunately, this is a devastating argument! Today, users of financial information cannot easily read data in XBRL format: they first have to download an XBRL data reader, which can be a serious obstacle even for interested users. As long as we don’t have the equivalent of a web browser (like Internet Explorer, Chrome, Firefox) that is ever-present and allows users to read information on the Internet without getting lost in code, it will be very difficult to increase the number of XBRL users. Regulators including the SEC in the US and the CSA in Canada have moved forward with some data readers, but we have a long way to go.
Chicken-and-egg Even if data preparers create documents in XBRL, their users may not be able to process documents in this format because their systems have not been modified to do so — because not enough preparers create documents in XBRL to necessitate the switch. To make the switch make sense, an entire group of entities – e.g., all the subsidiaries of an enterprise, or all the members of a common-interest network — ought to adopt XBRL together, in order to benefit from its advantages in all their internal information exchanges. The payoff from the transition is that information can be exchanged even if participants do not use the same systems, do not transact using the same currency, or do not express themselves in the same language. All it takes is that everyone’s data uses the same controlled vocabulary, with equivalents for the relevant currencies and languages.
Ultimately, however, what it will probably take to overcome many of these impediments to adoption is a legal requirement making it mandatory to provide financial data in XBRL format. In response to jump-started demand for XBRL compatibility, financial application providers would step forth with updated applications.
Meanwhile, a standard simple XBRL reader similar to web browsers would also be helpful. The goal is demystifying the XBRL format and allowing financial data available in this format to be analyzed.
Several countries are well advanced in this area: Australia, the Netherlands, and Japan are a few examples. The future will tell whether Canada joins this group of innovators or if it will wait to join the trend once the market dictates.
XBRL: The Vision of Former FASB Chairman Robert Herz
Written by Bob Schneider Posted on October 2, 2010
As reported previously in the business press, Robert Herz has retired as chairman of the Financial Accounting Standards Board (FASB). Beginning his tenure at the time of the Enron scandal, Mr. Herz had headed the organization for more than eight years. Effective October 1, Ms. Leslie F. Seidman is Acting Chairman; Russell Golden assumes his seat on the Board.
Mr. Herz is widely recognized as a strong supporter of XBRL, but just how early he saw its value is less well known. In 2000, only a couple of years after XBRL’s inception, Mr. Herz wrote a book with Robert Eccles et al The ValueReporting Revolution: Moving Beyond the Earnings Game. Introducing the then-new technology to readers, the authors state:
It is felicitous [emphasis in original] when a new technology emerges that a revolution can press immediately into service…The new technology for the ValueReporting Revolution has an appropriately arcane name, XBRL…With XBRL, virtually anyone can take information from a company’s website and directly download it to software on any device, including the Internet, for quick and easy analysis in any number of ways.
As I read over the comments in the book concerning XBRL, two themes came into focus. First, the authors envisioned that XBRL would be a catalyst for creating a single set of global accounting standards. Second, despite spending his career focusing on financial information, Mr. Herz recognized its limitations and put great store in nonfinancial indicators. XBRL would be crucial for their dissemination and use:
Current efforts to develop XBRL have focused on definitions relating to the existing accounting standards used in various countries, U.S. GAAP and IAS [the predecessor of IFRS]….Guess what? XBRL could also serve as the Internet platform for the nonfinancial value drivers discussed throughout this book, even for qualitative information. But only when standards are developed for these nonfinancial measures, similar to those for financial measures, can the full benefits of XBRL be realized in the ValueReporting environment. [p. 309]
Speaking at the 11th XII Conference in April 2005, Mr. Herz discussed his vision of what he believed corporate reporting – not merely financial reporting – should be, and the key role to be played by XBRL:
The use and benefits of XBRL can — and I believe should — extend beyond financial information…I think the future might go something like this: At the center of global corporate reporting would be a core reporting product for companies participating in the international capital markets, one containing both financial statements, financial disclosures, and other financial data based on a single set — or at least a substantially common set — of accounting standards, as well as key nonfinancial information and key performance data, hopefully based on common definitions and probably by industry sector…(9:53-11:22)
And as this CFO.com article states, when Chairman Cox began to campaign in earnest for the SEC to adopt XBRL, Mr. Herz was a firm ally:
The Financial Accounting Standards Board appears poised to significantly increase its role. FASB Chairman Robert Herz has repeatedly expressed support for XBRL. Indeed, while it is clearly Cox’s initiative, he and Herz have both been beating the drum for XBRL as part of Herz’s much broader public campaign to reduce accounting complexity.
A KPMG report on IFRS issued in 2007 provides further evidence of Mr. Herz’s support for the data standard:
[Mr. Herz] was enthusiastic about XBRL and the use of such technology. ‘The big question over all of this is if XBRL really takes off and gets driven down into companies’ internal reporting systems what influence would that have on IFRS’, he said. ‘You could have a core set of financial standards and then a set which are technology-driven’…Narrative reporting and financial reporting becomes much easier with tagging’, he said. ‘Turnover? Would you like to see the six different components of turnover? Click! And so on’.
Mr. Herz’s vision for corporate reporting has, of course, yet to be fully realized; but his efforts toward that goal have been well rewarded. As work proceeds toward adoption of a single set of global accounting standards and implementations of XBRL spread, his impact on both financial and nonfinancial reporting will be felt for many years to come.
XBRL: The Comments on the SEC’s Proposed Rule on ABS
Written by Bob Schneider Posted on September 25, 2010
In response to the highly-criticized lack of transparency in asset-backed securities (ABS) – often cited as a key cause for the recent financial crisis and subsequent recession — the SEC issued a proposed rule in April. Totaling some 677 pages, the Rule covers a multitude of complex issues concerning the offering process, disclosure, and reporting.
The purview of this post is far more narrow, limiting itself to the relevant text in the SEC proposal — and, especially, the Comments to it — regarding the use of XBRL. I believe the research and links provided will be useful to those who want to explore the possible use of XBRL for ABS reporting.
With respect to XML/XBRL, the Rule contains these proposals:
For each loan or asset in the asset pool, we are proposing to require disclosure of specified data relating to the terms of the asset, obligor characteristics, and underwriting of the asset. Such data would be provided in a machine-readable, standardized format so that it is most useful to investors and the markets. Under our proposal, issuers would be required to provide the asset-level data or grouped account data at the time of securitization, when new assets are added to the pool underlying the securities, and on an ongoing basis.
We are proposing to require the filing of a computer program (the “waterfall computer program,” as defined in the proposed rule) of the contractual cash flow provisions of the securities in the form of downloadable source code in Python, a commonly used computer programming language that is open source and interpretive. The computer program would be tagged in XML and required to be filed with the Commission as an exhibit. Under our proposal, the filed source code for the computer program, when downloaded and run (by loading it into an open “Python” session on the investor’s computer), would be required to allow the user to programmatically input information from the asset data file that we are proposing to require as described above. (pp. 16-17)
In its proposal, the SEC describes its reasons for choosing XML over XBRL:
We are proposing to require asset-level information and grouped account data (with respect to credit cards) related to an offering and ongoing periodic reporting be filed on EDGAR in XML as an asset data file….For asset-backed issuers, we believe that XML is the appropriate format to provide standardized asset data disclosure… XBRL allows issuers to capture the rich complexity of financial information presented in accordance with U.S. GAAP. In contrast, the proposed asset data file will present relatively simpler characteristics of the underlying loan, obligor, underwriting criteria and collateral among other items that are well suited for XML. We are proposing XML, rather than XBRL, because there are many commercial products that can be used with XML including parsers that would allow investors to insert data into a relational database for analysis, data extensions available in XBRL are not applicable to this data set, the nature of the repetitive data lends itself to an XML format and the schema could be easily updated. (pp. 190-2).
I performed a search on the Comments for keyword XBRL. Of the more than 140 Comments the SEC has received on the Rule, 15 mention XBRL. Six of the 15 — Association for Competitive Technology, DTCC (Depository Trust and Clearing Corporation), JPMorgan Chase, TickLab partners, ABA Business Law Section, and Ariel Blumencwejg (structured credit trading professional) – make only in-passing and generally insignificant references.
Of the remaining Comments, those of XBRL US, UBmatrix, PwC, and MERS (Mortgage Electronic Registration Systems) generally support the use of XBRL. Mortgage Bankers Association, Mortgage Industry Standards Maintenance Organization, and Real Analytics are, to varying degrees, negative about the use of the data standard for ABS purposes. Risk Management Association and Microsoft are mixed or neutral in their assessments.
Comments Generally in Favor
XBRL US provides a detailed analysis that is well worth reading in its entirety. Here is an (oversimplified) summary of its main points:
1. XBRL US supports the use of the waterfall model, adding that “…Any such automated model must be consistent with the prospectus…It is important that the results of the Waterfall model match the prospectus as closely as possible.” (pp. 5-6)
2. It believes, however, that the output of the model is not clearly defined in the Rule. That output “should be in XBRL and, at a minimum, XML…XBRL is preferable over XML as the semantics associated with a cash flow are already incorporated into the XBRL standard….” (pp. 1-2)
3. The output should form part of a bond remittance file that represents the information about the cash flows associated with each bond. XBRL US has created a draft taxonomy to assess the feasibility of using XBRL for this purpose. (p.3)
4. XBRL is preferred to XML for capturing details of the loan file; in its Comment, XBRL US counters the argument that the sheer size of mortgage loan files makes XBRL impractical (bottom p.3).
UBmatrix has also provided a thoughtful and compelling response which deserves to be read in full. Summarizing its argument, UBmatrix states that:
The SEC proposal offers some key insights into how to help investors make sense of ABS filings. However, ultimately the proposed approach is undermined by a simple implementation detail — the intent to use a Python-based computer program as the issuer’s vehicle of delivery.
After outlining objections to a Python-based computer program (pp. 3-5), the Comment presents XBRL as “…a viable alternative, both as a mechanism for submitting ABS data and as a platform for modeling cash flows for investor analysis.” It enumerates five characteristics of XBRL — data accuracy, data comparability, data transparency, extensibility, and sufficiency (i.e., the ability to offer a single solution that adequately meets issuer and investor needs, without the need to build or acquire from third party vendors) – that make it the better choice.
As part of a longer response to various ABS issues, PwC addresses the use of XML for the asset data files and states:
Adopting XML without also adopting an additional framework – be it XBRL, OAGIS, UBL or some similar public standard – means that numerous data file design decisions will have to be made by each reporting entity for the ABS disclosures. This may increase, not decrease, the variety of reporting formats and practices to the market…Some of the ABS disclosures, particularly those related to credit ratings (e.g. credit ratings, financial information on underlying properties, etc.), already exist in publicly available XBRL Taxonomies or dictionaries of common disclosure definitions. It would enhance the consistency of market use to enable the reuse of these definitions by all entities reporting and using ABS information.(p. 5)
Regarding cash flow waterfalls, the PwC Comment says:
We believe that providing a standardized basis for reporting waterfalls is useful, but that any programming language, no matter what the reputation is for readability, may be too technical to be easily understood by all potential users. Python is not a standardized information reporting tool. As such, it is possible to create Python code that returns correct results but is coded in such a way that may be very challenging for users to understand how the provided code creates the end results. The use of existing standards for the data (such as the use of the XBRL Specification to define appropriate taxonomies and instances for such data) and the formulas and business rules (such as XBRL Formula, RuleML, FPML or similar standard formula and rules languages) would facilitate the creation and population of waterfalls that are more easily understood and widely used by third parties while still allowing the standardized publication of online tools that work with these models. (p. 5)
MERS (Mortgage Electronic Registration Systems) includes this response to one of the SEC’s questions from the proposed rule:
SEC Question We note that there are several different standards under which asset-level data is already required. Would our requirements impose undue burdens on ABS issuers?
MERS Response MERS supports the creation of a common reporting requirement, and urges the SEC to work with other government agencies to harmonize the reporting requirements and move towards a common set of definition and data reporting requirements, optimally employing MISMO XML standards and XBRL. (p.6)
Comments Generally Against
The Comment of the Mortgage Bankers Association includes this section:
SEC Question In what format do issuers currently provide asset data information to investors (as may be required, for example, under transaction agreements)? Do any market participants currently provide asset data in accordance with a technical specification or schema commonly used across a particular asset class? If so, would our data points cause divergence from current practice? Please tell us which specific proposed data points would be of concern and why. How can we address those concerns? Is another format preferable, such as XBRL?
MBA Response …XBRL is designed for the financial accounting industry and would require significant modification to be adapted to the U.S. mortgage industry. (p.54)
Mortgage Industry Standards Maintenance Organization, which is a not-for-profit subsidiary of the MBA, responds to the same question:
Issuers currently provide investors with information using multiple types of formats. There is no single format used for all disclosures across all ABS industries. Given that the type of data requested under the Proposal is very detailed, MISMO believes that XML is the better solution [emphasis added]. Within the real estate finance industry, MISMO XML standards represent the broadest implemented base of open, nonproprietary data standards in the real estate finance industry. (p. 19)
The Comment of Real Analytics offers this analysis:
Use of XML and Mortgage Data Standards
A central proposition of the SEC’s proposed regulations is to require that data pertaining to mortgage-backed securities and their related collateral be reported in XML. This proposition is consistent with the SEC’s similar existing requirement for financial reporting using a version of XML known as XBRL. Industry-specific versions XML are widely used in U.S. industries and throughout the world’s financial markets. While XBRL was developed for financial accounting purposes, it is not well suited for mortgage data or real estate. (p.1)
Other Comments
Risk Management Association includes this text in its Comment:
XML is a suitable format for asset data files and we support the use of XML schemas, specified either with the XSD language or the more specialized XBRL, to describe the required input structures.…We recommend that the SEC avoid using XML altogether in the representation, storage, or transmission of Python source code…Instead, we recommend that the SEC require that the waterfall computer program be submitted in the form of a text file, also known as a plain text or ASCII file. (p. 9)
Microsoft does note in its Comment that it is a founding company and ongoing supporter of XBRL. It is unenthusiastic about the waterfall proposal. It suggests a “data-oriented approach” similar to the Open Government Directive issued by the OMB on December 8, 2009; it does not mention XBRL in its recommendation.
In closing, let me reiterate that the XML versus XBRL question is only one part of the much larger debate of what disclosures and processes should be implemented for ABS. As this blog post indicates, the waterfall proposal itself has been subject to much scrutiny and is deeply controversial. How these larger reporting issues are resolved will inevitably determine what role either XML or XBRL will have in ABS reporting.
XBRL Developments in Brazil
Written by Caetano Nobre Posted on September 15, 2010
Caetano Nobre is a Partner at MZ Consult – an investor relations, technology, financial services, and communications consulting firm — where he focuses on adoption of XBRL by Brazilian companies. He is a member of a working group, joint with the Brazilian Federal Accounting Council, for developing the XBRL Brazil jurisdiction. The views expressed in this post are solely his own and do not necessarily reflect the opinion of any commission, council, government body, or XBRL working group in which he participates.
Everyone knows that Brazil’s importance in the global scenario has grown substantially in recent years. That includes its capital market: between 2005 and 2009, hundreds of companies went public, raising funding for their expansion, most coming from foreign investors. As a result, Brazilian firms were forced to mature rapidly and adopt exemplary corporate governance practices.
Today, it is safe to say that the country maintains exceptionally high standards of transparency. Still, despite the rapid development of new corporate communications practices for the dissemination of financial information, XBRL has still not gained the attention it deserves from Brazilian companies. Some of the main factors responsible for its delayed acceptance are the lack of public regulation, the absence of standardization, and low demand from users of financial information.
Currently, there is no Brazilian government body obliging listed firms to disclose their financial statements in XBRL. Despite having signaled its interest in the new format, similar to what the SEC did in the US, the CVM (Brazil’s SEC) has still taken no concrete steps in this direction. However, there is a government fiscal body studying the use of XBRL for the exchange of financial data between two or more government institutions. From a global perspective, this would certainly be an atypical situation, given that XBRL is generally adopted by listed companies or banks.
Even though Brazil possesses no formal regulations governing the use of XBRL in the country and, for this reason, there are no approved taxonomies for official use, such regulations are expected to be adopted soon as part of a process led by the Federal Accounting Council (CFC) and public and private partner institutions.
The first version of a Brazilian taxonomy, in line with local accounting practices (BR GAAP), was submitted for approval to XBRL International in 2007 by a group of academics and IT professionals at the University of São Paulo. Currently, this taxonomy is being revised in order to incorporate a series of changes to the country’s accounting practices introduced by the Accounting Pronouncements Committee (CPC), a subdivision of the CFC, and by Law 11638/07. The latter was promulgated in 2007 and became effective in 2008, and was designed to bring BR GAAP closer to International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).
One important factor is that users of corporate financial information know absolutely nothing (or almost nothing) about XBRL. Coupled with the absence of tools for its use, this ignorance is one of the main reasons why XBRL acceptance is low. Shareholders, buy- and sell-side analysts, and risk rating agencies still do not use XBRL to analyze the financial statements of the companies they track. This means that the main users of financial information are not requiring companies to produce data in the new format.
Among those Brazilian firms which possess Level I or II American Depositary Receipts (ADRs) and are obliged to periodically file financial statements with the SEC, only five are included in the first phase of the final rule requiring that such information be reported in XBRL. The great majority will be reporting in XBRL in 2012 (2011 data), owing to the migration from US GAAP to IFRS, also adopted by BR GAAP.
There is no doubt that Brazil’s adoption of XBRL will be gradual, relying more on the regulatory bodies and local jurisdiction than on the companies themselves. This is very similar to other countries where XBRL is being implemented; however, given Brazil’s history of adopting good international practices, the process is unlikely to be protracted or unduly arduous.
For a country still heavily dependent on foreign capital and undergoing such rapid growth, delays in accepting such a pertinent technology as XBRL are unthinkable. In a country like Brazil, where most publicly-held companies are small/mid caps, the transparency, data precision, and comparability provided by XBRL can make a vital contribution to their international exposure… a factor almost as important as meeting revenue expectations.
The XBRL Mandate for German Corporate Tax Filings
Written by Bodo Kesselmeyer Posted on September 8, 2010
Dr. Bodo Kesselmeyer, CPA, is managing partner of anuboXBRL GmbH & Co. KG, Munich. He has been a member of the board of XBRL Germany since 2008, and he is actively involved in the E-Bilanz project and its working groups jointly organized by the German tax authorities and XBRL Germany. The views expressed in this post are solely his own and do not necessarily reflect the opinion of any XBRL jurisdiction or any XBRL Working Group he chairs.
In December 2008, a law was signed in Germany to reduce the administrative burden of taxation (Steuerbürokratieabbaugesetz, or SteuBAG). Processes that used paper must now be replaced by electronic media.
In compliance with SteuBAG, Germany’s tax administration selected XBRL as the mandatory data standard for filing income statements and balance sheets. This requirement applies to all companies independent of size and industry. (However, companies that use cash-basis accounting – mostly small entities like restaurants, beauticians, etc. — are not required to file in XBRL.) In some situations, XBRL filing will start in 2011, but the majority of companies will begin using XBRL in 2012 for filing 2011 financial statements to the tax authority.
To prepare for this transition, Germany’s tax administration has worked closely with the German XBRL jurisdiction to establish an appropriate taxonomy, including several industry-specific modules. The tax administration has invited all relevant German associations to join the working groups from the beginning to develop this taxonomy, a project called E-Bilanz.
During 2009 and 2010, the German local GAAP taxonomy was extended by positions and functionality to be in line with German tax law and regulations. One example of this work was identifying concepts that are mandatory for all companies. Subsequently, in February 2010, the tax authority announced that companies may choose to file either their local GAAP financial report plus reconciliation to tax values, or just the tax financial report.
Notably, the taxonomy contains both GAAP reporting positions and tax reporting positions as XBRL concepts. The legal context is that, in Germany, national GAAP has to be used for taxation purposes so long as no tax rule requires something different. This affords companies the opportunity to use XBRL with the same taxonomy for dual applications, i.e., filing to the business register and tax filing.
Using XBRL with the same taxonomy for both purposes aims to achieve a favorable cost/benefit relationship for the German economy, but there is the opportunity to improve this cost/benefit relationship further if XBRL is used for supervisory (i.e., regulatory) reporting too. As an example of one opportunity, consider that the reporting concepts for taxing insurance companies are based on supervisory reporting regulations. This could make it comparatively easy for insurance companies to file XBRL to their supervisory authorities in the future. It is a possible, next logical step, though it will depend on other developments, including those in the broader European context.
Within the next few weeks, German companies expect the tax authority to publish the draft taxonomy together with a proposed ruling about its usage.
(Editor’s note: Readers may also enjoy Mr. Kesselmeyer’s post The Use of XBRL for the German Business Register, published last week.)
The Use of XBRL for the German Business Register
Written by Bodo Kesselmeyer Posted on September 1, 2010
Dr. Bodo Kesselmeyer, CPA, is managing partner of anuboXBRL GmbH & Co. KG Munich. He has been a member of the board of XBRL Germany since 2008 and chairs the IFRS Working Group of XBRL Germany and the IFRS Working Group of XBRL Europe. The views expressed in this post are solely his own and do not necessarily reflect the opinion of any XBRL jurisdiction or any XBRL Working Group he chairs.
Whether listed or not, incorporated firms in Germany must publish their annual financial statements and consolidated financial statements. The same rule applies for partnerships that do not have at least one individual acting as general partner. Small- and medium-sized companies do not have to file the full set of information — i.e., no profit and loss statement, no disclosures, and so forth.
Sending financial reports in XBRL format to the German business register
Prior to December 31, 2006, companies filed their financial statements to local courts using paper. Courts received annual accounts, but they did not regularly send reminders to companies that did not submit annual reports. Local courts were responsible to grant physical access to this information.
In November 2006, the German parliament passed a bill about the electronic business register, about a register of cooperative associations, and about the company register (Gesetz über elektronische Handelsregister und Genossenschaftsregister sowie das Unternehmensregister — EHUG, November 10, 2006). The new law reorganized the collection and dissemination of annual financial statements effective January 1, 2007:
- Local courts are no longer responsible. Responsibility for receiving financial statements and granting access to them moved to the German business register. (In 2006, a German private publishing house became the 100% shareholder of the German business register’s provider.)
- Electronic data formats must now be used, following a transition period in which paper was allowed until December 31, 2009. Companies pay fees to the German business register for filings, based on file format: the register charges the lowest filing price if XBRL is used, and charges more to accept Word/Rich Text Format or Excel. PDF was not allowed then.
- Listed companies must now file to the business register within four months of the end of the fiscal year, not 12.
- The German business register transfers XBRL filings to HTML. Financial reports are available free for anyone online, but in HTML format only. The German business register’s website does not offer XBRL data.
In the beginning of 2007, most companies and German XBRL experts were surprised that XBRL became the reporting format for business register filings and became the cheapest format for filing. There was no voluntary XBRL filing program in place, but alternative electronic formats were accepted from the beginning.
Datev, the large software and service company for German tax consultants, began offering XBRL exports to the business register. During the first year of this program, Datev filed about 220,000 XBRL reports to the German business register. However, during that time companies faced another challenge.
Unacceptable taxonomy extensions and reduced legal flexibility in structuring financial statements
In the new system, the German business register did not allow taxonomy extensions (changes of labels included), even though German local GAAP (i.e., HGB) allows companies great flexibility to prepare financial statements that consider the aggregation and generation of reporting positions (XBRL concepts) and company-specific labels of reporting positions.
Because of this contradiction, a great number of large companies, especially those being audited, were unable to transfer their original local GAAP financial reports into an XBRL format that is accepted by the German business register.
XBRL mandatory for listed companies… but impossible to comply
Listed companies became subject to the new German law TUG (Transparenzrichtlinie-Umsetzungsgesetz, January 5, 2007), which transferred the European transparency directive into German law. With this law, XBRL became mandatory for quarterly financial reports and semiannual financial reporting of listed companies. This group of companies faced a list of challenges in 2007:
- There was neither a voluntary filing program nor a pilot filing program in place.
- German labels for the IFRS 2006 taxonomy were generated by the IASC Foundation and were of low quality. (Later, at the beginning of 2008, the new IFRS working group of XBRL Germany would suggest label changes for 80% of all labels of the face financial statements to the IASC Foundation’s 2006 IFRS XBRL Taxonomy.) Listed companies had to use these low-quality labels because the business register did not allow taxonomy extensions in 2007.
- The original IASCF IFRS 2006 General Purpose Taxonomy had to be used. This taxonomy does not contain any industry-specific reporting positions (concepts), even though German commercial law allows listed companies great flexibility in structuring face financial statements and naming reporting positions (labels). Listed companies must file quarterly and semiannual financial reports to the company register (Unternehmensregister) using the business register as vehicle, but the German business register prescribed XBRL as the only and mandatory format for this purpose in March 2007 while not allowing taxonomy extensions. Consequently, it was impossible for listed companies to transfer their traditional financial reporting to XBRL.
- XBRL had to be used not only for the face financial statements but for all quantitative disclosures and narrative disclosure (that is, XBRL block text was not allowed). At the U.S. Securities and Exchange Commission, tagging of narrative disclosures is optional. Compared with the U.S. SEC tagging requirements, the German business register initially required more detailed tagging in companies’ second year of filing.
Summing up, the process of implementing XBRL for listed companies entailed a number of major material weaknesses and mistakes in Germany. German-listed companies were unable to convert their interim reports from paper to XBRL even while being forced to do so.
Reactions and the introduction of XML-layout format for listed companies
To solve this situation, listed companies contacted their associations. Two organizations started talking with the German business registrar. The German Association of Investor Relations Officers (Deutscher Investor Relations Verband e.V — DIRK) and the German Institute of Listed Companies (Deutsches Aktieninstitut e.V.) finally reached an agreement with the Bundesanzeiger about a new XML-layout format:
- Reporting submitted in this XML-layout format received the same price reduction as XBRL. The Bundesanzeiger began accepting the new formats in September 2007.
- Business content is not structured by using this XML-layout format, however. This author holds the view that this XML-layout thus violates a regulation of the Ministry of Justice (Verordnung über das Unternehmensregister, URV, 26. January 2007, §§ 1, 10) which requires that data be structured in an electronic format like XML or a similar format. The XML-Layout format used does not provide any structure for data, but offers formatting functionality only.
German listed companies and their investor relations departments do know the term XBRL very well, but with a very negative connotation. Some consider XBRL technology as not having been ready in 2007. It is evident to everybody, even non-XBRL experts, that the XBRL introductory process as such did contain major material weaknesses and mistakes in 2007.
2nd Quarter 2008: taxonomy extensions accepted
Starting in the second quarter of 2008, the German business register accepted taxonomy extensions for both local GAAP (HGB) and IFRS. In addition, the procedures regarding disclosures with XBRL have been simplified by a rule that is very similar to the U.S. SEC’s block text rule.
German IFRS taxonomy extension missing and European harmonization challenges
One open issue is that a German extension of the IFRS taxonomy is still missing. A German extension is going to contain additional disclosures in annual reports and quarterly reports.
Listed companies filing IFRS reports are subject to German laws, too, which require additional information (compared with the IASB’s bound volume). This situation is similar in various countries in Europe, although not always the same. Legal sources for such information come from national commercial codes, national corporate governance codex, national stock corporation laws, national securities trading acts, and national accounting standards boards.
For XBRL to replace traditional reporting media like paper and PDFs, the IFRS XBRL taxonomy extension must contain elements of national law. However, to maintain the advantages of XBRL, like compatibility, national laws’ IFRS taxonomy extensions need to be harmonized.
For example: Germany may generate 300 up to 400 new concepts in the German IFRS taxonomy extension. This would equal 10,800 new concepts for the 26 member states of the EU — a several-fold increase in the number of concepts to the original IFRS taxonomy. This leads to a risk that users and investment professionals will experience extreme difficulty if they attempt to compare disclosures of listed companies in different European member states.
The IFRS working group of XBRL Europe is addressing the issue while talking to European authorities like CESR (Committee of European Securities Regulators) and EFRAG (European Financial Reporting Advisory Group). Meanwhile, modeling the German IFRS extension has been slowed for a while in order to coordinate its technical structure with European needs.
Conclusion
In short, German-listed companies actually are using the XML-layout for filing their financial reports to the business register/company register. The IFRS XBRL taxonomy is virtually unused for filing to the German business register or business register/company register.
XBRL is used by several hundred thousand companies for filing financial reports to the German business register, but these filings are provided by a few service providers, led by Datev, who file several hundred thousand XBRL reports per year.
The business register is just an intermediary, however, and does not represent the users of financial reports — banks, investors, customers, competitors, and the like. Thus, even though XBRL has arrived at the business register, until now it largely has not arrived at financial reports’ actual users, and XBRL’s ultimate benefits are yet to be fully realized.
(Editor’s Note: Reader may also enjoy Mr. Kesselmeyer’s post on The XBRL Mandate for German Corporate Tax Filings.)
XBRL: Is It Too Cheap?
Written by Michael Alles Posted on August 26, 2010
Dr. Michael Alles is associate professor at the Department of Accounting and Information Systems at Rutgers Business School and editor of the International Journal of Disclosure and Governance. His specialties are continuous auditing, XBRL, and governance.
You get what you pay for, goes the old saying, which came to mind when I recently attended the 2010 annual meeting of the American Accounting Association in San Francisco and listened to a large number of paper presentations and panel discussions on XBRL.
What in particular prompted my thoughts was the revelation that Microsoft’s latest XBRL filing to the SEC cost $100,000. Even for only the second-largest (!) technology company, this strikes me as a trivial amount.
Certainly a business innovation that is too expensive poses problems and controversy — consider the supposed $30 billion cost of implementing Section 404 of the Sarbanes-Oxley Act — but I think we have yet to fully understand what it means for something to be too cheap for its own good.
To return to an old question, consider auditing the now-mandated XBRL statements.
Stephanie Farewell from the University of Arkansas at Little Rock along with Roger Debreceny from the University of Hawaii at Manoa presented a fascinating teaching case on attesting to the XBRL filings of a (fictional) airline with SOP 09-1 Performing Agreed-Upon Procedures Engagements that Address the Completeness, Accuracy or Consistency of XBRL Tagged Data released by the Auditing Standards Board in 2009 (ASB 2009).
This is a wonderful accomplishment by the authors, providing students with “engagement file cover sheet, signed engagement letter with attachments, client representation letter with attachments, client interview, third-party communications, rendered XBRL files, mapping and extension reports and validation reports” — in other words, all the complicated information necessary to even begin an assessment of an XBRL filing, and this only for an agreed-upon procedure, not a full-blown XBRL audit, whatever that might look like.
At the conclusion of her presentation, I asked Stephanie, “So, would you agree to do an audit of Microsoft’s XBRL filing for $25,000?” She bravely said “yes,” but she is not a partner at a Big 4 firm facing the ever-present risk of litigation and the constant pressure to get the next large revenue engagement. I seriously doubt that any Big 4 auditor would be willing to assume the risk of auditing an XBRL filing from any Fortune 500 company for so piddling a sum as $25,000, even assuming that this sum covered its outlay costs.
Then again, why would a client pay even as much as 25% of the cost of an original filing to audit it? To be blunt, doing so is an entirely non-value-adding activity to the filer.
The other major implication of XBRL’s being so cheap to implement is that few market opportunities exist for developers of XBRL software. In particular, software only designed to prepare SEC-mandated XBRL filings has a market of a few thousand accelerated filers at most. Furthermore, in practice the number of potential customers for this software is smaller still, perhaps eventually being restricted to the handful of commercial printers who appear to be doing most of XBRL filings’ preparation. Given this small size, it is very difficult to imagine major software firms finding this market large enough to be worth entering. Notably, Microsoft has not released an XBRL product despite being one of XBRL’s earliest and most significant corporate proponents.
My main concern in this regard concerns academic research into XBRL.
At the AAA meeting, there was a great deal of it presented, and much of it was highly innovative and insightful. Diane Janvrin from Iowa State University and Won No from Iowa State University, for example, presented an interesting field study in which they detailed the steps that several first-time XBRL filers undertook in preparing their filings. As a result of this investigation they posed a long series of research questions about the XBRL process which they felt deserved further study.
I entirely agreed with Janvrin and No that their questions were interesting and perhaps even important. Nonetheless, would devoting academic effort to investigating them really be worthwhile when the entire process costs no more than a few tens of thousands of dollars? At some point, doesn’t research into the minutiae of a process with trivial cost become an exercise in academic navel gazing?
Among Janvrin and No’s more surprising findings was that in many instances the entire focus of senior management was in making sure that renderings of XBRL instance documents exactly matched paper annual reports. As long as they matched in that way, managers did not really care what underlying tags looked like. This obviously demonstrates a total lack of understanding about the purpose and benefits of XBRL — namely, to liberate financial data from its paper-based format. At the same time, however, it’s difficult to blame these managers when the SEC also places so much emphasis on matching XBRL renditions with paper-based filings.
Incredibly, Janvrin and No also found in several cases that the commercial publishers on which their sample firms relied to make the actual submission to the SEC promptly re-entered company data using their own filing software, totally ignoring the company’s laboriously-prepared instance documents. Apparently no one from the company complained about the procedure, perhaps because they didn’t realize what was happening, but also, I suspect, because they didn’t want to increase the cost of the operation by making a fuss. (Once again, remember that you get what you pay for.)
As one looks forward to fully-tagged footnotes in the next filing year, it may well be the case that management will pay more attention to the tagging process. Then again, perhaps not: if expenditure decisions are delegated once they fall below a certain (very large) threshold, is seems unlikely that a CFO will personally supervise tagging in its second or third year, when the costs have fallen even further from what they are today.
The logical outcome of this process is that XBRL will come to be considered part of the infrastructure of a company, something that can be outsourced as secondary to its core competency. If that sounds fanciful, consider that this is precisely why companies hire commercial publishers to undertake their SEC filings. XBRL is simply an optional service today for these publishers — a service that will become part of the standard package in the future.
Before asking whether XBRL can avoid this fate, consider whether that would be such a bad outcome. PDF remains a highly valuable tool for document publishing even if no one outside Adobe knows or cares how the conversion process is undertaken. Perhaps those who have been so intimately involved with creating XBRL have a distorted view of the importance of the means of tagging rather than simply focusing on its outcome.
That is not to say that XBRL cannot enhance its value added. At the AAA many interesting examples of the use of XBRL in non-financial applications were presented, from bill collection by the state of Nevada to Standard Business Reporting in Europe and Australia, while Glen Gray from Cal State Northridge and Rick Hayes of Cal State L.A. discussed the synergies between XBRL and continuous assurance. In a similar vein, Marlon Attiken and Santosh Nair from IBM Global Business Services have advocated the use of XBRL to accomplish nothing less than saving the US financial system!
These examples of innovative uses of XBRL are interesting, and many are, in fact, already in operation. This demonstrates the versatility of XBRL as a tagging tool that helps aggregate disparate data systems. That is the point: these applications use XBRL generically as an already-developed and readily-available tagging mechanism. If XBRL did not exist, they would use some other taxonomy for that purpose rather than inventing XBRL in particular. While the utility of XBRL in these examples should not be minimized, it also has to be acknowledged that XBRL was not designed with these purposes in mind, which surely has to imply that in at least some circumstances XBRL is not as well-suited as a custom designed taxonomy would be. After all, XBRL is meant for tagging income statements, not tax forms or accounts payable.
There is, of course, one variant of XBRL that is precisely meant for a much wider application than financial reporting, and that is XBRL-GL. At least at the AAA, however, not many examples of the use of XBRL-GL were presented. Perhaps that will change as the value of XBRL outside financial reporting becomes apparent.
In fact, I think this is the only way that XBRL can avoid the trap of being too cheap for its own good: become a multi-purpose tool despite having been conceived and designed with one very specific task in mind. Just as one could not have imagined every application for the telephone or the computer until they were invented, perhaps XBRL’s unintentional versatility as a cost-effective tool to bring together legacy data systems will prove to the real source of its value.
This subject deserves further exploration some other time. Let me just close with another old chestnut of a saying, that something that remains a bargain is no bargain. XBRL has turned out to be a lot cheaper than anyone ever imagined only a few years ago, but for its own good, it has to be worth more than it costs.
