Hitachi Data Interactive

Written by Bob Schneider     Posted on May 28, 2010

When Walter Hamscher talks, people listen – or at least they should. The presentations by the Manager, Technology and Taxonomies in the SEC’s Office of Interactive Disclosure (OID) are uniformly informative, entertaining, and, not infrequently, eye-opening.

His speech last month at the Rome XII conference was no exception. Standing in for OID Director David Blaszkowsky — who, like many others, was unable to attend because of Europe’s (literally) ashen skies — Walter made the following useful observations. (Let me add his caveat that the opinions he expressed are his own and not those of the SEC or his colleagues at the agency.)    

(1) The vast majority of questions the SEC receives from companies on the interactive data mandate have “absolutely nothing to do with XBRL…it’s not about tags, line items, presentation linkbases, etc…”  Instead, because of the mandate’s complicated phase-in schedule and its nuanced rules on when and what companies must file, managers are mostly asking “How does this affect us?” To reduce the confusion, he recommends that regulators adopting XBRL produce simpler phase-in rules and publish them well in advance of implementation.

(2) About 1,400 XBRL filings have been received, including annual reports (about 500 thus far), quarterly statements, “a few” registration statements, and an “increasing number” by foreign companies using US GAAP.  Altogether, the filings represent about 500,000 data points, a “tremendous explosion” in the amount of data available to SEC analysts.

(3) Walter noted that, while most of the attention has focused on company filings, major parts of the XBRL mandate affecting investment companies (mutual funds) and Nationally Recognized Statistical Rating Organizations (NRSROs) have yet to go into effect. So while there is a feeling among some that the SEC’s XBRL implementation efforts have “quieted down,” in reality, they continue in full gear. (Interestingly, XBRL filings done by NRSROs won’t be received by the SEC; they will only be posted on their websites.)

(4) The OID is no longer part of the SEC’s accounting area, but rather a section of the new Division of Risk, Strategy, and Financial Innovation. As such, it is now within the broader scope of the SEC’s data collection activities, providing information to the agency’s economists, analysts, statisticians, etc.  Walter observed that, while during the Bush years the emphasis was on the market, in the new Administration, there’s much greater stress on “what can the agency itself do with the data.” Overall, he thought the OID’s new position in the SEC’s organization chart, with the information customers it now serves, was “a very good idea.”

(5) At several points, Walter indicated that the SEC mandate was proceeding smoothly, and that it’s absolutely possible to have a data repository system that accepts XBRL data with extensions. He said that when people are disdainful of the SEC’s XBRL data, it’s because there’s only three quarters’ worth, which would satisfy no financial analyst.

(6) About 20% of companies are now doing their own tagging, as opposed to using a service provider. This move toward in-house processing has been “faster and earlier than expected.”

(7) In Walter’s view, the first filing of a company of XBRL data is hard. It’s a novel experience and an awful lot of tagging decisions have to be made on a taxonomy that is very large and very granular.

(8) XBRL filing is changing traditional financial statements. Data that may have originally appeared in a few tables in the traditional financials can sometimes be consolidated and better represented in XBRL by using a single table.  In turn, the company may decide to use that single table next time for the traditional financials. Overall, XBRL is helping to reduce text and narrative in the traditional statements.

(9) The quality of thought going into XBRL statements is high. Walter finds it encouraging that, informally, early filers are mentoring later filers. In addition, working groups are expanding the number of tags for certain industries, like oil and gas.

(10) The voluntary filing program (VFP) was of tremendous benefit, allowing the agency to get feedback throughout the information supply chain. Within government, the VFP helped to smooth the path of implementation.

(11)  Walter is “very excited” about Inline XBRL and the promise it holds for improving presentation of financial information. He is “very heartened” by its acceptance by HMRS, the UK taxing authority.

(12) Great strides are being made by the International Taxonomy Architecture Working Group, comprising Japanese (EDINET), American, (US GAAP) and European (IFRS) members, in coming up with a common architecture.

Walter’s speech, along with those of the other keynote speakers, can be found at the XBRL website. At least for me, the files worked erratically, and I had difficulty in moving to specific parts of his presentation (thus the absence of time stamps in the above points, for which I apologize). But try to listen to Walter’s talk (preferably in IE, which seemed to be a better browser option than Firefox). It will be an extremely well spent half hour.

Written by Bob Schneider     Posted on May 20, 2010

Solvency II is a new regulatory structure for Europe’s insurance industry being developed under the direction of CEIOPS. The framework’s primary goals are (1) to facilitate the development of a single European market in insurance services, and (2) provide an adequate level of consumer protection. Among other objectives, it seeks to improve product development and pricing, increase the transparency of risk reporting, raise industry standards of risk management, and upgrade companies’ internal controls. Toward these ends, Solvency II comprises three so-called pillars:

• Pillar 1 consists of quantitative requirements (including rules relating to the calculations of capital requirements)
• Pillar 2 sets out qualitative requirements for governance, risk management, and effective supervision, including internal controls
• Pillar 3 focuses on disclosure and transparency requirements

Europe’s insurers, supervisory agencies, and other industry stakeholders are now gearing up for adoption of Solvency II, which is scheduled to go into effect in October 2012. Discussions are under way concerning the implementation of information systems, including the harmonization of reporting standards and formats. Among the possible candidates for a data standard are a flat-file format, such as comma-separated value (CSV); XML; and XBRL. A basic flat-file format has substantial shortcomings, however, for data of some complexity; for example, it would not permit syntactical validation. The more realistic choice is therefore between XML and XBRL.

In his Financial Reporting Using XBRL (pp. 56-65) and XBRL for Dummies (pp.33-34), Charlie Hoffman contrasts XML with XBRL and enumerates the latter’s advantages. He points out that:

• While XML articulates only syntax, XBRL expresses meaning XBRL can express business meaning or rules, called semantics, such as Assets = Liabilities + Owners’ Equity. (Charlie recently wrote a great post about this topic.)
• XBRL allows content validation against the expressed meaning “With XBRL, you can exchange [across business systems] both the information itself and the business rules that support creating accurate information, allowing you to effectively communicate business information.” Business rules enforce the integrity of information, which is key for ensuring its usefulness along the business reporting supply chain.
• XBRL separates concept definitions from the content model, which allows you to express multiple hierarchies of explicit relations This feature increases XBRL’s flexibility and allows it to better express complex dimensional disclosures often contained within business reports.
• XBRL provides organized, prescriptive extensibility, whereas XML is endlessly extensible “XBRL provides flexibility where you need it, whereas XML provides too much flexibility where you don’t.”
• XBRL provides a multidimensional model “Online analytical processing (OLAP)-type systems can use XBRL’s multidimensional model to provide flexible information presentation and the ability to ‘slice and dice’ information.”  
• XBRL enables intelligent, meta-driven connections to information “With XBRL, business users can connect information by adjusting metadata rather than by requiring technical people to write code. As such, rather than build multiple-point solutions, XBRL enables the creation of effective and efficient solutions that allow extensibility and that don’t require programming modifications to connect to new information or new information models.”

Taken together, these advantages provide valuable benefits for the business information supply chain:

• Semantic meaning from existing taxonomies that enhance comparisons, benchmarking, and analysis
• Standardized formulas that increase data and validation quality
• Standardized references that allow explicit relationships between regulated disclosure elements and the relevant regulations, laws, instructions, or solvency rules

The upshot is that XBRL improves company reporting processes, helps regulators enhance analytical processes, and permits both to share references to relevant regulations and rules in ways that XML cannot.

In his paper Solvency II and XBRL: New Rules and Technologies in Insurance Supervision, Professor Enrique Bonson notes that the EU has already supported the XBRL standard in having the Committee of European Banking Supervisors (CEBS) adopt it for both financial reporting (FINREP) and common reporting (COREP), which includes capital requirements. Summarizing his analysis, Professor Bonson has three arguments for implementing XBRL for Solvency II:

• The standard possesses proven technological quality;
• The organizational qualities of the XBRL consortium have been demonstrated to be of great help in the implementation of analogous regulatory frameworks (eg, FINREP/COREP);
• Previous experience represents a background of inestimable value, with a substantial number of persons and entities ready to give support in this venture, from the XBRL consortium itself at the European and international levels, to the myriad entities that comprise the consortium in their individual capacities.

Importantly, Professor Bonson notes that it is IFRS that “…will  really provide the financial information support to enable the effective application of Solvency II; of particular relevance is IFRS 4, which specifically addresses contracts of insurance.” The XBRL taxonomy framework for IFRS is designed to implement each of its standards, and thus there is an XBRL taxonomy specific to the reporting needs of insurers.

This XBRL taxonomy will no doubt be extended for IFRS Phase II, which will modernize the insurance accounting reporting framework. In a paper prepared by Deloitte titled IFRS Phase II and Solvency II: Heading in the Same Direction, the authors state:

Although there is still uncertainty around the final outcomes of SII [Solvency II] and Phase II, we believe that the calculation of the core components of an insurance liability can be used carrying out similar bases and models, with the possibility to develop adjustments that reflect the differences as they emerge from the parallel refinement of the detailed requirements…We believe, regardless of the differences between the two regimes, there are already tangible opportunities for synergies and companies should consider the requirements of Solvency II  and Phase II in an integrated way to minimize implementation costs and maximize benefits.

It would certainly seem that if companies will be tackling Solvency II and Phase II together, then adopting a common data standard of XBRL would make sense for both the insurers and their regulators.

Some benefits for XML over XBRL could be suggested, such as initial start-up cost and the availability of both human and nonhuman resources.  But XBRL has been adopted extensively by business registrars throughout Europe, and the pool of available XBRL talent and software products is continually increasing.

Indeed, as XBRL Planet’s World Wide Adoption Survey documents,  the key trend of all business reporting in Europe is toward XBRL. Standard Business Reporting (SBR), which incorporates XBRL, is being adopted in the Netherlands for the electronic filing of financial, tax, and statistical statements for all companies. XBRL is being implemented in Spain for banking, local governments, financial reporting, and other reporting needs. In the UK, both Companies House and HMRC is working toward implementations for company accounts and tax information.

If XBRL is becoming the data standard in Europe for company registrars, banking, tax, and statistics – and is also gaining favor in areas like sustainability reporting and government budgeting –  wouldn’t it make sense to harmonize all forms of  reporting, including insurance, on XBRL as well?  

Written by Bob Schneider     Posted on May 8, 2010

A few days ago, Jeff Henson of the XBRL USA blog published a highly useful post on the pluses and minuses of the data standard. Listing the disadvantages, he writes:

XBRL facilitates near real-time disclosure. The potential to quickly report information in automated ways is a double edged sword. On the one hand, near real-time disclosure improves transparency and sharing of information for a variety of beneficial purposes. On the other hand, near real-time disclosure may emphasize short-term results at the expense of long-term objectives. Some argue that financial information shared in a real-time way may cause undue volatility in stock prices and impulsive decisions by investors, suppliers, customers and business managers.

A few years ago, the audit chiefs of the big accounting firms published a paper that offered their vision of the future of financial reporting. In discussing a new paradigm of real-time reporting that includes nonfinancial indicators, they offer a different view than the one Jeff describes:

Finally, and perhaps counter-intuitively, more frequently reported information may reverse some or much of the “short-termism” about which corporate managers and others have long complained. Once investors have almost real-time access to financial and other information about companies, forecasting “quarterly” profit numbers will no longer be relevant, while forecasts of daily or weekly profits will be pointless. As a result, by having more frequent information, investors and their companies may begin looking over longer time horizons. The disclosure of more useful, non-financial forward-looking information should reinforce this outcome, along with continued compensation reforms by public companies themselves that reward long-term performance.

Note the “perhaps counter-intuitively” in the first sentence. American companies have long been accused of “short-termism,” which includes a focus on managing earnings to meet quarterly targets (and hence analyst expectations) at the expense of long-term goals and the overall good of the firm. If, as some have argued, reporting quarterly is an important reason for the “short-termism” of American managers compared with their counterparts in Europe (who still typically report semi-annually), won’t continuous reporting merely exacerbate this tendency?

It is conceivable that reporting a continuous stream of information will give some managers the perspective of day traders, and they will give all their energies to polishing whatever bit of data will next be made public.

But it seems much more likely that, as the audit chiefs imply, the sheer futility of this exercise will make managers unconcerned about individual data releases. Because investors are being constantly updated on company performance, quarterly reports won’t be the headline events they are today, and they will contain far fewer upside or downside surprises. Managing quarterly earnings will be not only less necessary but more difficult: reporting stellar net income will raise suspicion if you’ve been giving the market mediocre numbers on a host of indicators for the past twelve weeks.

This new world of financial reporting was envisioned in a CFO.com article Back to the Future: What the SEC should really do about earnings management that was published more than ten years ago, before the first international XBRL conference:

…There are those who say the only way to stop earnings management is to render the quarterly earnings release obsolete. In fact, these forward-thinking accounting experts argue that most current rules and reporting practices have outlived their usefulness, especially with the emergence of new knowledge-based industries. They contend that layering on new guidelines and new disclosures only further encumbers a system whose artificiality encourages earnings management… Instead, they envisage something completely different — a real-time financial reporting system in which analysts and investors have continuous, networked access to a wealth of disaggregated corporate data.

What about the charge that continuous reporting will increase the volatility in stock prices, which occurs when new, relevant information is released to markets that surprises investors? Here’s what KPMG partner Bob Elliott said about volatility in the CFO.com article I cited earlier:

To the extent that you disclose more corporate information on a more-frequent basis, it seems to me that uninformed volatility would be reduced. You’d still have volatility when exogenous events occur that change the real value of the company, but you’d have less volatility from lack of information or misinformation in the marketplace.

It does seem possible to me that continuous reporting could increase intraday volatility slightly, as some trading becomes geared toward that particular day’s release. But as Mr. Elliott expresses, the substantial volatility often associated with quarterly reports would decline significantly. 

Quarterly reporting for US companies has been around for many decades, and it is part and parcel of the investing environment. But there is nothing sacrosanct about it, and if new technology makes better alternatives feasible, they should be adopted. That XBRL can be the facilitator for this new era of financial reporting should be counted among its advantages, not one of its minuses.

Written by Bob Schneider     Posted on May 1, 2010

About three years ago, I wrote a post on why retail investors are entitled to XBRL-enabled statements. At that time, the S&P 500 stood at 1,474; a few months later, it peaked at 1,562. By the time the index bottomed in March 2009, it had fallen more than half to 683. The index currently stands at 1,186, up 73% from the trough, but still down about a quarter from its top.

Former Chairman of the SEC Chrisopher Cox often extolled the virtues of XBRL for the individual investor, making these comments in early 2006:

The retail market is where the SEC also has high hopes, because we’re focused on the average investor. We’d like to see the democratization of financial information and analysis, and the empowerment of individual investors. Software that consumers can use to help make wise investment choices, designed either for their personal use or integrated into websites, will run the gamut from RSS feeds about companies and funds to analysis tools built into personal financial software.

Given the extraordinary gyrations of stock markets in the past few years and the heavy losses individual investors have incurred, their response to Mr. Cox’s offer of democratized data (at least with respect to equities) may well be “Uh… let’s wait.” 

Investment data for 2009 reflect this attitude. Last year, individual investors poured money into bonds and international equities, while avoiding US stocks, despite their impressive gains later in the year. People are seeking safety: according to Investment News, first-quarter 2010 sales of life insurance policies at major independent broker-dealers (including whole term policies, which have a significant investment component) were up by at least a third. 

Nevertheless, there may be some signs that small investors are finally showing some interest in domestic equities: in recent weeks, some money has begun to flow into US stock funds and investor sentiment has turned up.

It is not the purpose of this blog to dispense investment advice. Riding better economic news and rising investor confidence, stocks may push higher…or, as bearish forecasters argue, future inflation from accommodative monetary policy, persistent high unemployment, and precarious finances at all governmental levels will, separately or in combination, limit any stock market gains for years to come.

With respect to the SEC’s effort to make XBRL-enabled data available to the general public, however, I still see significant trends that support that decision – even if current investment conditions do not.

The first is the healthy – and, given the experience of the past years, surprising – optimism of the so-called Millennials, young Americans 18 to 29 years of age. Pew Research has found that:

Millennials are actually slightly more optimistic about their future earning potential than they were in 2006, before the recession. What’s more, the portion of young people who are satisfied with the way things are going in this country increased from 30 percent in 2008 to 41 percent in 2010. In the aggregate, Pew concluded that Millennials are "confident, connected and open to change.”  

Some of that optimism may simply reflect the change in Administrations and the political tendencies of that cohort. But it’s still remarkable and encouraging that young people should be so optimistic about themselves and the country’s future, given the economic headlines and the job market they have faced in recent years. 

Equally significant, almost a quarter of young people see technology use as their generation’s distinguishing characteristic. One particularly stunning statistic: some 75% of this age group now use social networking sites, compared with just 7% in 2005.

Of course, right now much of this cohort is just trying to pay the bills, not invest for the future. But as these investors move into their 30s and 40s, they will be quick to adopt new online technologies for managing their portfolios; in fact, they will expect technologies to be available to meet their needs. As evidenced by the meteoric rise of Twitter, which wasn’t even around in 2005, we don’t know what those technologies will be. But whatever form they take, young people, in both their outlook and capabilities, are well positioned to take full advantage of the democratization of data that Mr. Cox talked about, specifically the XBRL infrastructure for data delivery and analysis of US equities.   

In conjunction with a new generation of optimistic, technologically savvy investors, we’re also seeing rising interest in international investing. As I indicated earlier, overseas equities have become popular with investors discouraged with the US market, and financial firms are making it easier and cheaper to trade them. Country allocations will always fluctuate with investment conditions; but it’s likely that, as US investors become more comfortable trading internationally, participation levels will rise. The main avenues for overseas investing should continue to be funds and ADRs; however, investors will also be better able and more willing to buy individual foreign stocks denominated in local currencies.

Anthony Fragnito, CEO of XBRL International, recently stated that “Markets representing two-thirds of the world’s total market capitalization have mandatory or voluntary XBRL filing programs in place.” It is only natural to forecast that younger investors — who have come of age in a “smaller” world of increasingly faster and cheaper international communications; who are technologically savvy; and who will be seeking returns they cannot achieve in domestic markets — will be eager consumers of this data.
 

Written by Javi Mora Gonzálbez     Posted on April 22, 2010

Javi Mora Gonzálbez is Manager at XBRL Spain.

XBRL momentum continues in Spain, as we can see from these recent developments:

Business Register: Spanish GAAP 2007
As announced at the recent 5th XBRL Spain Conference, Spanish business registers have more than 600,000 annual financial statements in XBRL format, which is approximately 70% of the total submitted, as required by the order JUS/206/2009. At the end of 2009, culminating the efforts begun several years ago, the Mercantile Registers made XBRL-based annual financial statements available to users and the public on the website of registrars. These documents and the annual financial statements can be downloaded in PDF format. This is the result of the combined effort of the Ministry of Justice, the creator of the General Accounting Plan 2007, and the Ministry of Economy, in charge of the annual financial statements through the Mercantile Registers (Companies House). The taxonomy PGC2007 is available online.

XBRL for Reporting Data of General Identification (DGI) from Economic Agents
The DGI taxonomy was created by a working group comprising the leading Spanish supervisors, disseminators of information, and a number of the major Spanish technology companies. Its purpose is to report non-financial business information identifying entities using a varied range of information, as well as to report documentation information on the XBRL report itself, such as who wrote the document. Its broad scope, modularity, and bilingual labels, as well as its acknowledgement by XBRL International, allows its use in other European or Latin American countries. The DGI taxonomy has been extended by the GAAP 2007 taxonomy; the DGI v2.3.2 taxonomy has been acknowledged by XBRL International, and approved by XBRL Spain. More information is available at XBRL Spain.

XBRL for Central Balance Sheet Data Office
One of the missions of the Bank of Spain is to collect, process, and store the financial information of nonfinancial companies in Spain, with the objective of increasing knowledge of each Spanish sub-industry. A GAAP 2007 XBRL extension is used to model an annual questionnaire, according both to the normal and abstracted formats. Using this XBRL Annual Questionnaire, it is possible to collect, on a voluntary basis, information about the entity’s annual balance sheet, income statement, features, activities, and other data, including a complete identification with the DGI taxonomy. The taxonomy ES-BE-CB v4.0 is available online.
 
XBRL for Municipalities and Local Governments — LENLOC and CONTALOC
In Spain, more than 17,000 reports from approximately 8,000 local governments and subsidiaries can report budget information to the Central Administration using the XBRL-LENLOC Taxonomy. In 2006, only 5% of municipalities used this procedure; the percentage increased to 25% in 2007, and 49% in 2008. The LENLOC Taxonomy will soon evolve into a new taxonomy, CONTALOC, covering most of the main local financial statements. More information can be found online.   

XBRL at the Securities Commission
In July 2005, the Spanish securities regulator CNMV (Comisión Nacional del Mercado de Valores) made reporting in XBRL mandatory. Since that date, the CNMV has received and made available at its website more than 23,000 XBRL reports submitted by 441 entities (listed companies and mutual fund managers). More information can be found at the CNMV site.

XBRL in Banking Supervision
More than 2,743 entities are filing yearly 109,554 reports in XBRL format to the Bank of Spain. The Bank of Spain gathers information from Spanish financial institutions as part of its role in overseeing the country’s banking system, collecting statistics and reporting data for all companies to the European Central Bank. The introduction of XBRL for this reporting has enabled automatic data validation, better quality data, and reduced manual effort. The Bank of Spain is now pushing ahead with plans for the expanded use of XBRL, such as the use of formulas in the new taxonomies: Solvency Information (COREP), Financial Statements (FINREP), Mutual Guarantee, and Exchange Offices & Appraisal companies. More information is available at the Bank of Spain site.

XBRL for Corporate Social Responsibility (CSR)
This concept emerged in the official discourse of the EU in 2000. It represents an integrated approach for external reporting on economic, social, and environmental issues, among others. CSR can be seen as a competitive advantage in 21st century business environments, such as for the growing use of green stock market indexes.

CSR is expressed in different formats (presentations, PDF, MS Excel spreadsheets, video, and so forth) which lack usability for automated processing. Much work is needed to process and audit CSR information in an efficient manner As a result, CSR lacks a certain degree of clarity, is too industry-specific, and the format in which it is based is not suitable for making comparisons. To address this challenge, the Spanish Association of Accounting and Management’s XBRL taxonomy offers a two-pronged solution: an efficient digital format and a semantic, internationally valid consensus that addresses more than 20 quality standards in the environmental, financial, social, human rights, and labor arenas. This taxonomy has been recently acknowledged by XBRL International; we are now starting the international implementation stage, where feedback will be crucial. More information about the XBRL-RSC report repository is available online.   

Written by Bob Schneider     Posted on April 15, 2010

The website of the Office of Interactive Disclosure – the SEC’s XBRL unit — is an essential XBRL resource, with avenues to filings, news, taxonomies, tools, and so forth. Among its many parts, a particularly revealing page is the SEC Speeches and Public Statements Related to XBRL and Interactive Data. It has links to such discourses for the years 2005, 2006, 2007, 2008…and suddenly stops there.

Given the bureaucratic venue, this premature termination reminded me of a decades-old cartoon from a MAD Magazine series called “road signs we’d really like to see” that took a slap at the ways of government. A gleaming new highway abruptly ends in a swamp with frolicking brontosauruses; the sign at highway’s end reads “Road Stops Here (because so did Federal funding).”

That punch line, however, is not appropriate here: construction of the SEC’s XBRL infrastructure is on schedule and proceeds apace. Given that steady progress, I found it curious that no one at the SEC had bothered to mention interactive data in any public pronouncement for more than a year. Another, perhaps more likely reason for the 2008 terminus could simply be that, as often happens on the Web, nobody had bothered to update the page recently.

I did a search on both XBRL and interactive data for all News and Public Statements from January 1, 2009, to date to see if that was the case. Compared with preceding years, there were indeed few hits, and, at the Commissioner and Chair levels, only three records. Kathleen Casey mentioned XBRL in a November speech; Troy Paredes raised the subject in May and October orations. Notably, Ms. Casey gave the keynote address at the 15th XII Conference and Mr. Paredes has written for this blog; both Commissioners have long been enthusiastic interactive data supporters.

In terms of both quantity and executive level, the recent history is a far cry from the heady days a few years ago when, in one 12-month stretch between September 2006 and August 2007, Chairman Cox discussed interactive data in 16 of his 42 speeches. He even extolled the virtues of XBRL to audiences like the National Italian-American Foundation, where he might have been expected to devote his time instead to, say, Frater Luca Bartolomes Pacioli, whose Summa de Arithmetica… was the first to chronicle the Venetians’ pioneering system of double-entry bookkeeping.

Needless to say, Mr. Cox’s hard work was greatly appreciated by the XBRL community. It can be debated whether XBRL would eventually have been made mandatory for financial reporting in the US without his support. But it’s difficult to deny that his efforts accelerated implementation. Some XBRL supporters may be disappointed that, as exemplified by its silence on the standard, the SEC’s current leadership has not had the same focus (even allowing for the necessary shift in priorities because of the financial meltdown).

A few weeks ago, columnist Charles Krauthammer made an interesting point about American democracy that I find applicable to the current environment for interactive data at the Federal level. Krauthammer is, of course, a man of the right, but I think it is fair to say his argument here is non-ideological. He writes:

The rotation of power is the finest political instrument ever invented for the consolidation of what were once radical and deeply divisive policies. The classic example is the New Deal. Republicans railed against it for 20 years. Then Dwight Eisenhower came to power, wisely left it intact, and no serious leader since has called for its repeal…True, the rotation of power inevitably results in stops and starts and policy zigzags. Yet for all its inefficiency, it in the end creates a near miraculous social stability by setting down layers of legitimacy every time the opposition adopts some of its predecessor’s reforms — while at the same time allowing challenges to fundamental assumptions before they become fossilized.

I’m naturally hesitant to include interactive data among the landmark government policies that command Krauthammer’s attention. Nevertheless, I do find his words applicable to XBRL adoption in the US.

Skeptics of the SEC’s continued commitment to interactive data can point to the newly proposed rule on asset-backed securities and note that the Commission is recommending an XML, not an XBRL, solution. But consider the discussion the SEC offers on its preference for XML, in which XBRL figures prominently. Post Cox and the SEC’s adoption of XBRL for financial reporting, the terms of the conversation have changed. It’s no longer “Why XBRL?” but “Why not XBRL?”  In Krauthammer’s terms, the current Administration has adopted its predecessor’s reforms, while challenging the fundamental assumption that XBRL is always the solution of choice. 

The SEC has elected XBRL not only for company final reporting, but mutual funds as well. XBRL is being promoted for use in federal financial management: the Comptroller of the OMB has said, according to Federal News Radio, that making the data generated by agency financial offices compatible with XBRL coding is a big priority. NextGov reports that efforts are underway for using XBRL to make it easier for the public to review federal spending and how government uses funds. Interactive data is under discussion for delivering the ratings history from nationally recognized statistical rating organizations. At least at this point, the path toward continued, wider adoption of XBRL in the US seems reasonably clear.

XBRL provides a better, faster, more efficient solution for exchanging business information. Who knew it would provide an excellent civics lesson as well?   

UPDATE 4/20/10: Overall, the best gateway page for XBRL activities at the SEC is not the OID site but rather xbrl.sec.gov. The link-laden homepage makes it easy to find and open XBRL resources. 

Written by Derek Abdinor     Posted on April 8, 2010

Derek Abdinor is a business communications consultant based in South Africa who writes often on XBRL topics. He wishes to thank the South African Institute of Chartered Accountants (SAICA) for their assistance in preparing this post.

Adoption of XBRL in South Africa has been characterised by a bottom-up approach. For this jurisdiction, the approach is highly effective in that it wins well-placed converts along the way and creates a well-knit apparatus that makes it attractive to regulators.

The various regulators (tax, treasury, bourse, etc.) have all indicated great interest, but stopped short of mandating XBRL in their various offices. IFRS was adopted in 2005, and the capital markets are efficient and sophisticated. Therefore, an organic growth of XBRL is well-suited to South Africa, where market participants are not (yet!) exhausted by compliance requirements.

The most successful XBRL projects to date include:

Voluntary Fling Program (VFP)
The Johannesburg Stock Exchange (JSE) is driving a voluntary filing program to the publicly listed environment, accepting the two compulsory periodic financial statements (interim and final), as well as particular JSE listing requirements and the SA Companies Act disclosures. They are marketing the VFP concept as “Digital Reporting”  (XBRL is an acronym daunting enough in a country with 11 official languages!).

The JSE made its own statements available in XBRL early in the decade and is a key figure in the local jurisdiction. They launched a proof-of-concept of some entities that could be compared in the mining and financial services sectors and have taken this to the analyst community. Deloitte has been instrumental in assisting with this project, as well as creating consensus on taxonomy development within the different sectors.

Pension Funds
The Financial Services Board (FSB) is a major regulator and, amongst other duties, receives financial statements from pension fund administrators. These arrive in a variety of formats and were therefore deemed to present a perfect opportunity to experiment with XBRL. Along with a major administrator and a taxonomy developer, the interface and consumption have been very successful. Although wider adoption is planned for 2011, a phased approach is envisaged: key standards in pension administration are changing and most participants are on various technical platforms..

Marketing
South Africa is a full jurisdiction of XBRL International and celebrates five years of membership later this year. The jurisdiction is supported by the South African Institute for Chartered Accountants (SAICA), who lobby key regulators and bring them to international conferences. One could say the movement in South Africa is at that stage where the choir is well-versed in the sermon.

There are opportunities in the market for consultants, vendors, and taxonomy designers, and XBRL SA has been the recipient of interest from many African countries. We believe the VFP will increase the visibility of both XBRL and the companies involved, adding to the demand for in-depth reporting. This should pave the way for a mandate on the JSE and, with some back-office successes by the other regulators, should provide the impetus for XBRL to cross the chasm.
 

Written by Bob Schneider     Posted on April 2, 2010

The stereotype of the timid accountant was established long before Hollywood started taking its shots. Leo Tolstoy captured this apparently timeless stereotype exquisitely in his epic War and Peace. As Napoleon’s soldiers battle with Russian forces, the accountant provides the comic relief: 

Behind Prince Bagration rode an officer of the suite, the prince’s personal adjutant, and…an accountant who had asked permission to be present at the battle out of curiosity. The accountant, a stout, full-faced man, looked around him with a naive smile of satisfaction and presented a strange appearance among the hussars, Cossacks, and adjutants, in his camlet coat, as he jolted on his horse with a convoy officer’s saddle.

"He wants to see a battle," said Zherkov to Bolkonski, pointing to the accountant, "but he feels a pain in the pit of his stomach already."

His reputation for timidity notwithstanding, today’s accountant may well be forgiven for feeling a pang of torment when he first encounters XBRL. Taking a look at the XBRL section of the EDGAR Filer Manual, he finds most of it sounds like this:

The URI content of the xlink:href attribute, the xsi:schemaLocation attribute and the schemaLocation attribute, after XML Base resolution, must be relative and contain no forward slashes…

Told to get a feel of what an instance document looks like, he likely finds even the simplest of examples forbidding:

<HelloWorld:Land contextRef="I-2007" unitRef="U-Monetary" decimals="INF">5347000</HelloWorld:Land>

OK, the accountant rationalizes, XBRL is a markup language, so of course it’s going to have many more <’s and >’s than dr’s and cr’s.  As he navigates the new financial reporting superhighway, the accountant comforts himself that he can remain in the financial reporting driver’s seat, while the XBRL technician slaves under the hood.

At least that has been the assumption. As John Turner recently said in an interview with this blog: 

Since the early days of XBRL, there has been a mantra within the Consortium that XBRL models existing reporting processes, it doesn’t change them. XBRL doesn’t alter GAAP, or impose a standard chart of accounts on companies.

But despite the best efforts and intentions of XBRL’s leaders, I wonder if this powerful technology, like so many others, changes the game simply by being there.

When accountants first learned about XBRL several years ago, they were indeed concerned that it would entail a standard chart of accounts. They were reassured that it did not. Extensiblity is part and parcel of XBRL – it’s even part of the name itself.

But isn’t something like a standard chart of accounts where we’re headed? At the July 2009 XBRL Technology Workshop, Campbell Pryde of XBRL US said that extensions that appear often in instances will be added to the US-GAAP taxonomy – which, if I heard correctly, was reiterated by SEC staff at the SEC’s March 23 XBRL Public Education Seminar.

Fast forward five or eight years. At that point, won’t any extension be viewed with a whiff of suspicion by analysts and investors?  A company must be doing something unusual if the line item it needs to describe has not yet been incorporated in the US GAAP chart of…er, taxonomy. 

Financial analysts are already circumspect about extensions (see page 9 of the most recent CFAI XBRL survey). Perhaps they’ll become less so, but it seems more likely that, as taxonomies are refined, they’ll become more wary. When considering a new item for financial statements, won’t accountants look first to taxonomies for an existing element and try hard – very hard — to find one?

What about XBRL’s impact on accounting processes? In the recent SEC XBRL Seminar, Tony Mealey, Senior Accountant at the Office of Interactive Data, said (beginning at 54:12):

“The third rule, to use the standard element with the narrowest definition, can be illustrated by the following example.

“In the statement of cash flows, the filer reports the payment for common stock repurchases. Instead of selecting the standard element “payment for the repurchase of equity,” the filer should select the element “payment for repurchase of common stock,” because it has a narrower definition.

“I might also point out that, even if the line item label in the traditional format financial statements reads  “payment for the repurchase of equity,” if the transaction represents only the payment for repurchasing common stock, that is the concept that needs to match the element selected.”

This surprised me. I would have thought the SEC’s instruction here would be “pick the element that most closely matches the line item on the traditional format financial statements.” The financial statements are the product of the hard work, debate, and compromise among management, company accountants, and the auditors. In this case,  that process yielded “equity,” not “common stock.”

Well, six of one, half-dozen of the other, right?  But the impact may be more significant. In her post on this blog last November, Chie Mitsui said:

When selecting sales from Japanese financial statements, users just choose the element “NetSales” from the “IncomeStatement”  and the “Current year” period context. All Japanese companies’ taxonomies have the same name for this element, hence users can easily select it.…[But] naming for US XBRL financial statements varies. Each company decides its own names for elements, presentation links, and contexts. For users unfamiliar with US company financials, such inconsistent naming causes confusion during the selection of elements for comparison.

This too surprised me. The item to be mapped and tagged is the top-line, i.e., net sales or total revenue. On traditional financials, the terminology chosen by companies varies little. How many different elements could there be for the top line?

The 3Q 2009 report of Progress Energy, a utility holding company, provides an example of what Chie was talking about. In the instance, the element selected for the top line was UtilityRevenue. The standard label for UtilityRevenue is “Electric and Gas Revenue.” The company extended the taxonomy to overwrite the label with “Operating Revenues,” which matches the top line in the traditional income statement. 

I don’t know if UtilityRevenue was chosen because it was the narrowest definition. I don’t know whether — given the many objectives that financial reporting might have, from international comparability of financial statements to improved company analysis by SEC staff — UtilityRevenue is the best choice or not.

What I do know is that “utility revenue” does not appear anywhere in the company’s  3Q financials (which were reviewed by the company’s auditors). Like “equity” versus “common stock,” perhaps the choice of UtilityRevenue for the top line of a utility company seems like a quibble – in fact, most definitely an improvement.

But suppose it was a forest products company whose business is 92% wood and 8% paper. The traditional P&L has “Net Sales”; the US-GAAP taxonomy offers both TimberRevenue and SalesRevenueNet elements. Which is better? At the least, such choices and the decision-making it requires seem like a non-trivial change in traditional accounting processes (not to mention what additional auditing procedures it may entail).

Perhaps that’s inevitable; perhaps that’s all to the good. But like so many other industries where new technology is introduced, it is reasonable to ask what the impact on accounting will be, and whether XBRL will merely express accounting output, or change it in important ways.  
 

Written by Liz Andrews    Posted on March 25, 2010

Liz Andrews is Technical Marketing Manager at Altova.

There has been a tremendous spike of interest in XBRL over the past year, with the establishment of global mandates and standards, reporting deadlines approaching, and new technologies arising to meet the challenge. But it feels like we are all still treading carefully in the way that we present the promises of XBRL to our key audiences — and why not? Everyone is a little apprehensive about regulations, businesses are often slow to embrace new technologies, and let’s face it, the economy has not bounced back quite yet.

To help us get a better understanding about what XBRL can do, we need to comprehend its underpinnings. In this post, I want to take a closer look at what XBRL can do from a more technical perspective.  So let’s meet the wizard behind the curtain:

eXtensible Markup Language (XML) is the enabling technology behind XBRL. Not only does it provide XBRL with its extensibility (i.e., the ability to build extensions to augment base taxonomies), but it also exposes it to a whole family of related technologies that facilitate validation, intelligent search/query, data mining, data analysis and aggregation, transformation to different formats, localization, processing by other programming languages, automation… the list goes on. Here’s just a few of these languages and how they can help us work with XBRL.

eXtensible Stlyesheet  Language (XSLT) 2.0 is a language for transforming XML documents (like XBRL instances) into HTML/XHTML pages, other XML documents, or even simple text files. This lets us render XBRL reports for presentation on Web pages and also to other output formats. XSLT lets us keep the actual back-end financial data intact, eliminating any need for re-keying or any other error-prone human interaction; thus XML data is "repurposed" rather than rewritten, allowing many different presentation formats from a single source. XSLT is also very powerful technology for intelligent data search and analysis, as it can be used to return a subset of the source data based on style sheet requirements.

XML Query (XQuery) is also used to extract data from XML documents, and was designed to open XML to querying in the same way that SQL can be used with databases. XQuery is an ideal language for manipulating structured and semi-structured data and can perform complex operations, such as (1) on-the-fly result-set transformations, (2) record selection based on FLWOR expressions, (3) joins, and (4) recursion based on built-in functions.

XPath, another member of the XML family, empowers both XSLT and XQuery with a standard for easily navigating through files to extract specific data. XPath provides flexibility through wildcards, variables, data filtering, and many other built-in features.

XML’s inherent ability to provide an open, flexible, and programmatically accessible medium for developers to work with provides an ideal foundation for XBRL to be built upon.  XML has such a widespread presence that most companies already have several XML-savvy employees lurking among their numbers. The opportunity here for many companies is that XBRL – while it may seem initially daunting – may be easier for companies to adopt, simply because their existing resources understand how XML works.  

Written by Hyungwook Yoon, Hangjung Zo, and Andrew P. Ciganek     Posted on March 23, 2010

Hyungwook Yoon and Hangjung Zo are, respectively, a Doctoral Candidate and Assistant Professor at the Korea Advanced Institute of Science and Technology. Andrew Ciganek is an Assistant Professor at the University of Wisconsin-Whitewater.
        
With the increased use of XBRL, we are finding new opportunities to research this technology.  Based on the popular belief that XBRL adoption within the financial industry leads to reductions in the costs to both obtain and integrate what was once disparate financial data, we decided to examine whether such benefits were actually occurring.

We examined data from 550 companies in the Korean stock market. All publicly-held Korean firms have been required since October 2007 to electronically file their periodic and other financial reports in XBRL format through the DART (Data Analysis, Retrieval and Transfer) system, which is equivalent to the EDGAR system in the U.S.. Therefore, the Korean stock market presented an opportunity for us to examine the influence that XBRL adoption has for organizations.

The primary objective of our research was to determine whether XBRL adoption leads to a corresponding reduction in information asymmetry, where a select few investors have better access to information. We did this by investigating the bid-ask spread of those Korean companies, which is often used as a substitute for information asymmetry.  Monthly relative spread data was collected for seven years from September 2001 to August 2008, since this period was the most recent stable period in the Korean stock market. (The Korean market was extremely unstable for nearly four years before September 2001 because Korea experienced a severe economic crisis.  Korea officially escaped economic turmoil in August 2001.) The period after August 2008 was not included as a target period because the global financial crisis, caused by the collapse of major investment banks in the U.S., severely affected the Korean financial market.  

The result of a multiple regression analysis showed that XBRL adoption did reduce the information asymmetry of the Korean stock market, creating a more balanced system of transactions. In particular, this study confirmed that the effect of XBRL adoption on reducing information asymmetry is significant only for large companies. This relationship between firm size and information asymmetry was expected since previous research has shown that larger companies are likely to have more trading transactions, attention from analysts, and media coverage than smaller companies.  

XBRL adoption increases the transparency and quality of corporate information in the capital market and reduces the time and cost to circulate corporate information in stock markets, as well as enhances the compatibility of this information for integration among different information systems.  By facilitating corporate disclosure, information asymmetry of the capital market is notably reduced.

Our research paper with our methodology, findings, and conclusions can be purchased online.   

Written by Bob Schneider     Posted on March 16, 2010

In 2007, I wrote a post titled My XBRL Reading List. Take out my window dressing, and you had a pretty short list. Two years ago I did a post that added more materials, but it was still relatively scanty.

Since then, as XBRL adoption has expanded, resources both on and off the Internet have increased substantially. I wouldn’t call it an embarrassment of riches — for example, there are still few XBRL books — but certainly there is a healthy flow of information and commentary on interactive data developments from numerous sources. 

As I noted in my post on social media, monitoring Twitter Search results for XBRL will keep you up-to-date on most XBRL-related blog posts, articles, and events — an objective that can be aided by creating a Google Alert for XBRL or a search on that term at Google Blogs.

One resource these searches may easily miss, however, is the Yahoo Group XBRL-Public.This is one of the the oldest XBRL resources on the Internet, and it still offers the best forum for debating XBRL issues. The recent thread on Building an Inhouse XBRL Viewer is a vigorous clash of opinion among the best minds in the field. The thread’s title doesn’t do any sort of justice to the robustness of a debate that centers on Inline XBRL, but ranges from the potential of the Semantic Web to the perverse utility of white fonts for information camouflage.

At the same time, XBRL novices can expect courteous assistance from this group. Just yesterday, Charlie Hoffman provided a list of sources for someone who does not know “the first thing about it.”

I’ve provided Internet and print resources below that offer the latest XBRL news and commentary, as well as more permanent content such as taxonomies and primers. Relative newcomers will probably find it most useful, but I hope long-time practitioners also discover one or more entries worthy of subscription or bookmark.  I’m sure I have omitted useful resources through oversight or ignorance; readers should feel free to suggest their favorites in a Comment.

Blogs
The writers at these blogs are passionate about XBRL and do a great job of exploring news, ideas, and trends.

CPASuccess This blog from the Maryland Association of CPAs often has stories on recent XBRL developments.

Financial Reporting Using XBRL Probably better known as Charlie Hoffman’s blog, the Father of XBRL writes prolifically and provocatively on both technical and nontechnical interactive data issues.

CoreFiling’s Insight Blog CEO John Turner doesn’t blog often, but whenever he does, it’s must reading. Recently, he and his staff have been doing a series on Inline XBRL.

FEI Financial Reporting Blog often has posts about XBRL-related news and events.

PaulWilkinson.com The senior adviser to former SEC Chairman Chris Cox writes on big-picture financial issues, often from an XBRL perspective.

Random Thoughts Dan Roberts, former National Director of Assurance Innovation at Grant Thornton, provides his thought-provoking take on XBRL issues.  

Rivet Software Blog Stuart McKie and others offer interesting commentary from this leading software vendor.  

The XBRL Canada Blog Gerald Trites’s focus is XBRL use in Canada, but he covers other interactive data topics as well.

Trintech Chethan Gorur (Director, Interactive Data at the firm) has begun posting technical but clearly-written XBRL articles at this new blog.  

Out of the Clouds and Into Reality: XBRL for the Business User Rob Blake of Bowne & Co. (slated to be acquired by RR Donnelley) doesn’t post often; but whenever he does, his remarks on the XBRL filing process are revealing.

Aggregator Sites
These sites collect and publish materials from various Internet resources; to varying degrees, they also include original content from the webmaster.

XBRL Blog Magazine  Ilija Šuša aggregates XBRL commentary, announcements, and tweets; he also writes posts and conducts interviews.    

XBRL Network Among other content, Miles Jennings, Jr. provides loads of links to XBRL companies, blogs, organizations, etc.

XBRLSpy Articles and announcements from XBRL Evangelist Dianne Mueller, as well as other articles from XBRL resources.  

Books
As I mentioned, books on XBRL are still few and far between, and the economics of publishing computing books these days doesn’t augur well for many more. The Hoffman/Watson XBRL for Dummies listed below is certainly a welcome addition to the list.

Building XBRL Into Accounting Information Systems As I stated in my review, this book provides readers “…with an outstanding introduction to XBRL — one they can finish on an airplane ride from New York to Atlanta.” 

Financial Reporting Using XBRL: IFRS and US GAAP Edition This reference work by Charlie Hoffman is for the technically minded.

XBRL for Dummies Charlie Hoffman and Liv Watson, two XBRL pioneers, provide an excellent, wide-ranging introduction in easy-to-digest language.

XBRL for Interactive Data: Engineering the Information Value Chain This book is not a comprehensive primer but it does provide useful information.

Websites
The sites listed below have important resources and archives, such as taxonomies, speeches, specifications, etc.  For sites of XBRL providers, see the XBRL Products and Services page at XBRL.org. and the vendors page at XBRL-US. All of the big accounting firms also have XBRL pages: PwC, Deloitte, KPMG, EY,and GT.

AICPA XBRL resources from the leading organization of US accountants.

CoreFilingTaxonomy Library You can open and explore taxonomies ranging from Australian SBR to XBRL GL.

International Accounting Standards Board This page at the IASB website has XBRL news and provides access to IFRS taxonomies.

SEC’s Office of Interactive Disclosure (OID) This essential website from the SEC’s XBRL unit  offers links to XBRL filings, staff interpretations, FAQs, transcripts, and roundtable discussions.

XBRL Education Resource Center Sponsored by Bryant University, the site offers links to articles, news, and tutorials about XBRL.

XBRL International First stop for learning about both XBRL the standard and XBRL the organization.

XBRL Planet Great place for learning about XBRL developments across the globe. There’s also a late-2009 update for Europe.

XBRL.US: The site of the US jurisdiction of XBRL includes the most recent release of the US GAAP taxonomies as well news, events, announcements, etc.

 

Written by Peter Bortiz    Posted on March 4, 2010

Peter Boritz is the architect and chief technical officer for Snappy Reports XBRL and can be reached via e-mail.

In one of my recent posts, I mentioned the problem of handling changes to labels between filings to the SEC. I noted that:

An element contains a label which provides human readability for spoken languages. There can be only one label for any given language and label category combination. A problem occurs if the label changes from filing to filing…For example, the label “Property Plant and Equipment net of Accumulated Depreciation” is a static label. Typically, however, a label may more likely resemble “Property Plant and Equipment net of Accumulated Depreciation of $x and $y”. This label is no longer static, because the values of $x and $y are tied to the filing based on data facts within the filing.

An optimal reporting solution to this problem would minimize changes to the extension as much as possible; this would provide maximum reusability and minimizes labor costs and time. Three solutions present themselves: cloning, footnotes, and formulas.

Cloning
One solution is to clone a new extension for each filing and then change labels for each clone. Utilities may be used to clone one filing to another. This gets cumbersome, however, and it requires manual operations and extensive quality control review. This solution is not scalable and is the most primitive of the options presented.

Footnotes
Another option is to keep the label as a constant and use a footnote to denote the variable portion. This solution works nicely. The taxonomy label remains “Property Plant and Equipment” for all filings, but each filing would footnote the variable portion of the disclosure as “net of accumulated depreciation of $x and $y”.

The problem with this solution is that many viewers do not display footnotes – most notably, the SEC’s. Their viewer may be the yardstick with which your clients and peers are measuring the quality of your work. The reality is that your clients and peers need to see a complete rendering that includes everything. The use of footnotes to disclose the variable portion of labels works nicely, but it is missing a mechanism for quality control purposes.

Formulas
The best choice is to use the same extension without the use of footnotes to accent labels. This can be done with variables.

A variable in a filing pulls the instance value for a specific element and context combination. This is particularly handy with labels and disclosures. Variables are defined in the XBRL functions and formulas specification. However, the specification does not apply variables to labels. We can use a subset of functions and formulas for processing labels.

Our goal is to derive one or more instance values based on variables. For a specific element, we may want to obtain the current instance value for the current period or previous period. A previous period may be a year, semester, or quarter for an equivalent period in the previous year.

Our label problem with may be solved with pseudo syntax similar to:

Labor Expense including stock-based compensation of
{ GetValue(us-gaap:StockBasedCompensation,CurrentDuration<12>):$#,###,##0 } and
{ GetValue(us-gaap:StockBasedCompensation,CurrentDuration<12> – 12):$#,###,##0 }

The above is a fabricated syntax for display purposes only. We are telling an XBRL processor to make two substitutions in our label. Based on a given element, we are getting the data facts for a specific reporting period. The syntax is:

    GetValue(Element, Reporting Period<Length> – months)

For example, we are taking the current 12-month duration (current year) and comparing it to the equivalent reporting period in the previous year (Period – 12 months). If our current period is year ended 2009-12-31, then year minus 12 months would be 2008-12-31. The beauty of this is that our syntax is relative to our filing and it is totally reusable.

In the first instance, we are taking the value of stock-based compensation for the current period and placing its value in the label labor expense. For the second portion, we are asking for the equivalent value for the previous year; it could also be for the prior quarter, or an equivalent quarter in the previous year.

The “funny piece” I have included is $#,###,##0. We need a way to tell the processor how to format the number. In this example, I am using standard Microsoft formatting code to format the value with a preceding dollar sign, thousands comma separated, and no decimals.

The processor makes the required substitutions and places them into the label at run time. This means the same functionality always pulls applicable values based on your current filing period. Once you set the label, you never have to change it from filing to filing. This solves scalability issues and makes our life easier.

The instance or report would display the label similar to the following.

Labor Expense including stock-based compensation of $1,000 and $1,200.

Function is an important aspect to dynamic labels. We are not always looking for the value of the data fact. We may also be looking for a date value based on context — for instance, cost of sales of $1,000 as of 12-31-2009.

A formula for obtaining a date may look something similar to the following.

{ GetDate(CurrentDuration<12>.– 12,End):MM-dd-yyyy }

GetDate returns a binary date/time. You can format it any way yhou want. The format yyyy would return the year only, as in 2010. European dates are dd-MM-yyyy. Another option is to use localization. This would set the date format according to the localization set in the computer. GetDate requires either an End or a Start parameter for duration periods. You need to know if we are requesting the date at the start or end of the period.

The use of formulas may also be handy in disclosures where the text block makes reference to the value of an element elsewhere in the taxonomy. For instance, if a numeric value within a disclosure refers to an element, a formula could be used for populating the numeric fact within the disclosure. This not only provides reusability and scalability within your filings over a span of time, but it also sets you up for detail tagging. The formula not only obtains a value, but it also identifies that the element from which the data is being pulled is a detail tag for that disclosure.

If force of habit requires you to always use formula based numeric facts within your text blocks rather than static text-based numbers, you would have fairly high assurance that your detail tagging is complete and reliable for all detail tagging within the filing. The detail tag would be the element referenced in the formula.

Written by Margot Brandenburg     Posted on February 25, 2010

Margot Brandenburg is an Associate Director at the Rockefeller Foundation in New York City, where she leads the social and environmental performance component of their Impact Investing program initiative. 

Much has been made over the past year and a half of the outsized (and, it turns out, unsustainable) returns being made on Wall Street, and the negative externalities of those investment decisions for taxpayers and the public. This phenomenon, enabled by opacity, non-disclosure, and ill-purposed “creativity” in accounting and reporting, is itself a reminder that XBRL and related pieces of information architecture have  a critical role to play in the standardization, transparency. and exchange of information about company and investment performance. Perhaps greater implications for the future of XBRL, however, come from a countervailing trend: the rise of impact investing and related strategies for integrating social and environmental impact in investment decisions. 

There are a number of ways investors can incorporate social and environmental considerations into the due diligence and management of their investments. For purposes of simplification, it is perhaps easiest to group these into two categories: helping or requiring companies to do “less bad,” and helping or requiring them to proactively “do good.” The line between the two is arguably a blurry one, and may lose its distinction entirely in certain cases. Nonetheless, it is a helpful starting point for understanding the multiple applications of non-financial information in investing.

Activities that fall into the first category – helping companies do less bad – are typically employed with respect to large, publicly traded companies. They may take the form of shareholder resolutions or divestment strategies at the company level, or investment screens at the fund level, where fund managers avoid investments in whole industries or geographies (e.g., tobacco, Darfur) or in the worst-performing companies within a given industry (such as the coal company that pollutes more than its peers, etc.). According to a recent study by the consulting firm Booz & Co, 7% of all global assets are now screened. In the US, the US Social Investment Forum estimates this figure to exceed 11%.

Screening and related strategies for encouraging corporations to do less bad received a huge boost last month, when the SEC issued a rule providing interpretive guidance to companies for reporting on the climate change-related dimensions of their activities. The role of XBRL in facilitating the communication of climate change-related data has already been codified through the Global Reporting Initiative, a framework for sustainability reporting that became the first of its kind to utilize an XBRL taxonomy (see Sean Gilbert’s post on this blog). Additional frameworks, such as that of the Carbon Disclosure Project, may soon migrate to an XBRL standard as well. The recent SEC ruling may also pave the way for mandating the disclosure of additional dimensions of non-financial performance, such as those related to water, human rights, etc. – all of which would be usefully reported and communicated using XBRL.

While smaller in size than screening, impact investing — investments in companies and funds that actively seek to generate a positive social and/or environmental impact while providing a financial return – is also poised to play an important and growing role in the coming years and decades. Impact investing includes sectors like microfinance and clean technology, where it has penetrated mainstream investment activity, as well as emerging sectors like water, health, and agriculture. A 2009 report by the Monitor Institute, Investing for Social and Environmental Impact, describes the rise of activity in this area and estimates that it could grow to 1% of total assets under management (estimated to be $30 trillion at the end of 2008).

Impact investing lies somewhere between philanthropy and purely commercial investment activity, in a ‘murky middle’ that is often still sub-scale, confusing, and fragmented. However, there are powerful indications that it is growing in size and coherence. Within the past few years, investment banks have launched social sector finance units, pension funds and insurance companies have created dedicated social investment funds (often alongside of negatively screened funds), and a proliferation of foundations and family offices have concentrated their assets in this area. The diversity of impact investors is matched by the range and creativity of business models that are putting this type of money to work, from microfinance banks in Cambodia to solar panel manufacturers in Ohio to agricultural cooperatives in Tanzania. In between them, a number of specialized fund managers, investment vehicles, and service providers have emerged to facilitate the intermediation of capital. The participants in this marketplace are primarily still private actors, and the mainstay of its activity remains largely outside the purview of the SEC and other regulators. However, investors, funds, and company managers active in impact investing all require extensive information on social and environmental — as well as financial — performance, and thus represent a large source of demand for new applications of XBRL.

The Microfinance Information eXchange (MIX) became the first organization to publish an XBRL taxonomy in service of the impact investing industry, and it was recognized by XBRL International in 2009. The MIX’s Microfinance Taxonomy 1.0 is (as one might expect from the name) specific to microfinance, which is but one sector within the broader impact investing industry. The Global Impact Investing Network (GIIN) recently published v1.0 of an XBRL taxonomy called IRIS (Investment Reporting and Impact Standards), which is designed to service a broad range of sectors and activities within impact investing. IRIS includes microfinance – and incorporates relevant elements of the MIX taxonomy for this purpose – as well as domains such as environment, community development, health, and agriculture. Like the broader impact investing industry itself, IRIS lies at the intersection of profit-making and social-purpose motivations: it emerged as a partnership between non-profit organizations whose mission is to find and scale solutions to the world’s most pressing problems, and for-profit companies with expertise in the areas of accounting, auditing, and business reporting. [Disclosure: Hitachi Consulting is one of the for-profit companies – ed.] 

The creation of the IRIS taxonomy enables the industry-level data aggregation and benchmarking that are crucial for setting performance standards for this hybrid area of investment activity. These activities are being undertaken by the GIIN, with a combination of support from private and non-profit partners. The IRIS taxonomy is also being embedded in a number of related products and information services, such as portfolio management software and rating systems (notably the Global Impact Investing Rating System, or GIIRS). Standard definitions and data elements, which form a common language, must serve as the basis for the myriad pieces of infrastructure that the emerging impact investing industry requires.

The diversity of activity represented within impact investing will also require the exchange of batch data between sector-specific aggregators of information and industry-wide stewards such as the GIIN. Here too XBRL has a critical role to play. The IRIS and MIX teams are currently collaborating on the development of technological infrastructure to communicate data, using XBRL as the means of exchange. They are, moreover, doing so in such a way as to maximize the scalability and extendibility of the solution so that it can, in a future phase, support exchanges with other organizations and in additional sectors.  

More information on impact investing is available on the Rockefeller Foundation’s website or on that of the Global Impact Investing Network.

 

On February 15, the XBRL International Standards Board (XSB) released “XBRL: Towards a Diverse Ecosystem.” This Discussion Document seeks feedback from all XBRL stakeholders – developers, filers, analysts, investors, etc. — on the future business requirements and technical roadmap for the data standard. The feedback form beginning on page 17 of the Document can be completed online; a comment letter can also be sent by email. The deadline for all submissions is March 19.

The following Q&A provides details about the XSB’s proposals and the input it seeks. It is based on written and oral interviews with John Turner, chair of the XSB for the past three years, and Chair Designate Chethan Gorur, who will take the reins in April.

1. Let’s start with just a few basics on the XSB. When was it created, who sits on the Board, and what is its mission?

Established in 2006, XSB is a dedicated group within XBRL International tasked with overseeing the production of all technical work products (like XBRL technical specifications) and ensuring all such materials are of uniformly high quality. Its nine members represent a wide cross-section of the XBRL community, representing technical architecture, product management, program management, and business reporting domains. Their biographies and additional information about the XSB can be found on the XBRL website.

2. The Discussion Document “XBRL: Towards a Diverse Ecosystem” that the XSB released last week seeks input from software developers, filers, end users (eg, investors), and others to ensure the standard’s technical evolution over the next decade and the continued pace of XBRL adoption. What circumstances led the XSB to initiate such a dialogue at this time, and what does it hope to accomplish?

There are two things we need to emphasize. First, XBRL has been a very successful and stable standard over the last decade or so. Dozens of countries have adopted XBRL, not only for financial reporting but for a broad range of business and regulatory information.

So we’re not talking about changing things. We’re not suggesting that people should stop using XBRL the way it is. What we’re doing is long-term planning — our time horizon is five to ten years. And that’s why we’re reaching out to all XBRL constituencies. We’re in an information-gathering mode, seeking to find the best ways of building on a very sound base to get more value out of XBRL for everyone.

Second, we are just at the discovery phase of this process. We’ve come up with specific goals and proposals for each, as described in the Discussion Document. But they’re not set in stone; there’s no fait accompli. It might be that the various XBRL communities want us to focus on these areas, or it might be that they have different ideas.

So what we’re looking for is confirmation about whether the goals we’ve come up with make sense. And the best way to do that at this stage is to try and expose those goals as much as possible, then get as many people as we can to tell us what they think of them: let us know whether we’re on the right track or not. We’ve talked to a lot of people, but not nearly enough.  

To put a point on it: We’re not just going through the motions of asking for feedback as a PR exercise; we’re really interested to hear what people think.

3. OK, let’s talk then about specific goals. As the Discussion Document details, the XSB seeks feedback for its proposals in three main areas:

• Ease of use for developers
• Enabling information comparability around the world
• Simplifying the use of XBRL data for analysis
  

Could you briefly describe the main challenge in each area and the proposals the XSB is contemplating to meet it?

Ease of Use for Developers
The Challenge:  For those of us who deal with XBRL every day, working with it comes naturally. But the XSB is very aware there are plenty of technologists – whether they’re inside accounting and business systems vendors, or working at enterprises, governments, and regulators — who are much more comfortable using technologies like SQL, Java, and .NET, rather than the XML-based standards that underpin XBRL.

Developers that use XML do so in a variety of ways, ranging from the very simple to the highly sophisticated. XBRL takes advantage of many of the most sophisticated mechanisms contained in the XML standards, which can be challenging. We want to work on ways to make it easier for a broader group of developers to access the standard, and to benefit from the power of XBRL-based reporting – a way to easily move performance reports, which are often inherently complex, across systems and across organizations. We need to introduce these improvements in a way that protects (indeed enhances, via the network effect that more users provides) existing investments.

Proposals: There are a number of ideas that the XSB has set out in the Document. But to choose one, perhaps the area to focus on is the idea of producing a new abstract model (a UML model in all likelihood) of XBRL that provides a way to interact with the standard using a range of alternative methods, including via SQL, via API signatures that would allow interoperable .NET and Java APIs to be constructed, and probably via enhanced interoperability with the W3C’s Semantic Web technologies. This is, obviously, a long- term project, and XBRL as a syntax would continue to be an important component in the mix. Please read the Document (p.12) for some of the other ideas that the XSB is putting forward in this area.

Enabling Information Comparability Around the World
The Challenge:  Since the early days of XBRL, there has been a mantra within the Consortium that XBRL models existing reporting processes, it doesn’t change them. XBRL doesn’t alter GAAP, or impose a standard chart of accounts on companies. The language merely allows, for example, US and Japanese GAAP to be encapsulated inside a taxonomy that can be used to enable electronic reporting of financial statements that conform to those local reporting standards. XBRL doesn’t provide a way to compare information that conforms to different taxonomies, as these are based on different reporting norms.

In effect, while XBRL allows you to move information around at the speed of light, avoiding rekeying and complex transformation processes at every step of a business reporting supply chain, it doesn’t currently allow you to move data between information supply chains. The challenge is to see if XBRL can do more, and provide common standards for the comparison of data for specific purposes.

Proposals: Again, there are a number of ideas in this area, but perhaps the one that we are most interested in gaining feedback on is the potential to use registries to allow the creation of specific comparators between taxonomies. These registries could be used to drive the automated comparison of information across different countries and accounting systems. An example: Petrochemical companies obviously exist across the world, but comparing their financial statements is complicated by the various accounting standards in use. An XBRL registry could be used to declare that, for the purposes of credit analysis, a concept like “cash on hand” under IFRS is the same as “cash on hand” under US GAAP as well as Japanese GAAP. Notice that this would be for a specific purpose and users would need to be aware of the way that purpose is defined. It would not allow an oil company that has to report under US GAAP to suddenly use a Japanese accounting concept. However, users of that information might be prepared to use the registry to line up the performance of many different companies around the world.

Taxonomy profiles, another of our proposals in this area, are a rather different idea. XBRL is a language, a powerful and flexible language that can help you express any kind of performance information imaginable. Its very flexibility can be a problem for some environments, so the profile mechanism is all about narrowing the way that you want XBRL to work in certain circumstances. For example, we could devise a profile that is designed to optimize data collection for prudential regulators. Another is that for internal reporting. The idea is to limit the design choices that are available for certain kinds of reporting models, making it easier for users to embrace XBRL and for software professionals to ensure that their information will be interoperable across systems. It’s not a new idea, but its one that has proven itself in multiple standards environments. Why not XBRL too?

Simplifying the Use of XBRL Data for Analysis
The Challenge: Quite simply, importing XBRL into modern analytical systems can be a chore. The key problem is that wherever extension taxonomies are used, you end up with, in effect, a set of overlapping Venn diagrams, which make managing your analytical models tricky, to say the least.

Proposals: Once again, this challenge is a product of the complexity of financial and performance reporting, rather than XBRL per se – you have this exact same problem if you have companies reporting using CSV files that refer to different definitions in say Word documents (something we’d strongly recommend against, by the way!). We believe it should be possible to develop a number of techniques that make the consumption of XBRL information a simpler exercise. Fundamentally, we want to make it easier to access information in XBRL documents using techniques such as SQL, Sparql, and XQuery. The tricky bit will be to define how consuming applications should deal with the semantics of overlapping taxonomies that define data from multiple source documents.

It should be obvious that much of what we are talking about in this and other areas are not exactly overnight tasks. The XSB is thinking along the lines of a 5-10 year timetable. Agreeing, as a community, exactly what we want to tackle and in what order is the first step.

4. What kind of feedback would be useful from nontechnical and general business users, who may feel hesitant to make recommendations on a complex technology like XBRL?

One thing business people can do is to describe how they would they like to use this technology. There may well be ways they would use the technology that we on the XSB don’t know about, maybe several we had not envisioned. That kind of information is very useful and will help form our long-term strategy, which builds on the existing success of XBRL and is done with a view to compatibility and the existing investments that entities around the world have made in this technology. We want to enhance the return on those investments by making the right decisions now about XBRL’s future direction.

5.  What should XBRL stakeholders do now to inform themselves of the XSB’s proposals and provide the feedback it needs to evaluate them?
 
Start by reading the Discussion Document! Also, be on the lookout for the webinars we are organizing to educate the community about it. Speak to your colleagues in the community, or speak to a member of the Standards Board, but most important, respond to the questions we set out in the paper, either by responding in the form of an email, or via the electronic survey. To get your viewpoint noticed, responding to the survey is by far the most effective mechanism. We want to know what your priorities are, what you think of the ideas that we’ve described in the Document, and we want to hear about your own ideas.

6. And once again, the deadline?

March 19.

Many thanks to John and Chethan for the interview. While they strongly recommend that feedback about the Discussion Document be provided through the channels described above, both are happy to answer any questions about the survey itself that readers post in the Comments section of this blog.

Christopher Whalen is co-founder of  Institutional Risk Analytics (IRA) and provides consulting services for auditors, regulators, and financial professionals. He edits The Institutional Risk Analyst, a weekly commentary on the institutions and financial markets that comprise the global political economy. He contributes often to publications like the New York Times and Barron’s and appears regularly on CNBC. He has testified before the US Congress on a variety of financial issues.

1. In an interview with this blog about a year ago, Neal Hannon said:

The biggest underreported story about XBRL in the US is the FDIC. During the recent financial crisis, the almost two years’ worth of quarterly data collected in the XBRL format has given the Treasury Department valuable insight into which financial institutions have suspect holdings.

Others have taken a more skeptical view, which at the extreme may be stated as “If the FDIC implementation was so great, why didn’t it do anything to stop the financial crisis?”

What do you think? What are reasonable expectations for the role data standards in general and XBRL specifically can play in providing stability to financial systems?

Neal Hannon is entirely correct that the implementation of XBRL and other technologies by the FDIC has revolutionized the collection, validation, and distribution of bank Call Report information. But as my partner Dennis Santiago often notes in XBRL discussions, information collection is only half the job. Analysis, judgments, and decisions still need to be made downstream of the data repository. Whether or not regulators and politicians in Washington do the right thing when it comes to public policy choices has no direct relation to using XBRL to increase data transparency and accessibility, which is still the exception rather than the rule in most countries. The FDIC’s data collection effort inclusive of XBRL is the finest such public data resource in the world and is virtually free of errors. Sadly, this is the exception to the general state of non-disclosure in many industrial nations,  even major nation states in Europe and Asia, where there is no public right to know. The FDIC data is a very unique resource, and XBRL is just one of many tools employed by the FDIC to make it truly world class. 

I don’t understand the objections raised by people that say “XBRL didn’t do anything to stop the financial crisis.” Such statements reveal an uninformed and self-serving world view that is refuted by the facts. Dennis and I have been looking at and analyzing superbly collected and disseminated FDIC bank data since 2003; but it must be said that the FDIC’s attention to data quality has been around a long time, decades in fact. Anyone who follows our work knows that we, along with many others, have been calling attention to the problems in data quality in many financial markets. Not everyone was deluded by the sloppiness. Nassim Taleb rightly accused the financial community of this in his “Black Swan” indictments. The reality is the community conspired to make the markets even more opaque and less transparent, thwarting the basic premise behind efforts such as XBRL, namely that everyone wants greater transparency.

For example, had the data tagging, collection, and distribution protocols of XBRL been adopted in areas such as residential and commercial mortgage loan securitization and OTC derivatives, they might indeed have been made more apparent and large portions of the financial crisis might have been averted. But that wasn’t in the business interest of the purveyors of these instruments. Remember, virtually all of these toxic securities were brought out as “private placements” via Rule 144A and are thus not registered with the SEC. So criticisms of XBRL for not helping to prevent the financial crisis in this respect are quite outrageous. My hope is that in the future, perhaps through the adoption of new regulations on bank securitization by the FDIC, we will see mandated public disclosure of all OTC securities and derivatives.

These problems of opportunistic opacity continue to this day. Look at the way that the International Swaps and Derivatives Association (ISDA) and the OTC dealers are dragging their feet on the standardization of FPML, the XML dialect chosen for tagging OTC derivatives transactions, and you can see the root of the problem. We have created a culture of deception and concealment in our financial industry that seeks to hide price and other data from the public to maximize monopoly profits from trading OTC securities and derivatives. The entire retrograde construct of OTC derivatives and securities is ripe for revolution when it comes to using XML dialects such as XBRL to make these data sets available to investors and the public. I think that is a very exciting and positive message for the XBRL community and for public policy in general, but this great technology is also a threat to many entrenched constituencies in the banking world who hate transparency and fear greater openness. 

2. In a post you wrote for this blog about three years ago, you did discuss the benefits of the FFIEC implementation of XBRL for Call Reports and noted that “…the data collection and validation tasks are clearly a big winner and have saved [the FDIC] enormous amounts of money and man hours in terms of collecting financial statement data from US banks.”

But you also said that the argument for XBRL was strongest at the “upstream,” agency level; in relative  terms, the business use case at the “downstream,” end-user level was “not yet mature enough and powerful enough to withstand the critical scrutiny of business case needs.”

With respect to the FDIC, do you still hold that view?

Yes we certainly do continue to hold to the view that the use case optimization of both “upstream” and “downstream” technologies follow separate discovery paths. This point is borne out in the real world. There is absolutely nothing wrong with insisting that regulatory reporting and data collection continue to become more structured via some organizing construct like XBRL while at the same time insisting that the downstream delivery of information from those central libraries to the many types of analytical engines used to support decisions remain as diverse and multilingual as possible.
 
The actual operational implementation of the Central Data Repository (CDR) by the FDIC validates our judgment about the benefits of XBRL to the process of collecting, validating, processing, and then distributing this data to a myriad of different consumer groups. If we trace the production and use case process, those benefits become obvious. Upstream the benefits are equally dramatic. They manifest as efficiency and quality improvements.

First, think of the FDIC-insured banks using the XBRL template to submit their Call Reports to the FDIC. The logic in the XBRL taxonomy allows the supervisory personnel at the FDIC to identify and correct any errors that may be made in the filing process.  Anomalies are flagged and, where appropriate, are then subject to additional supervisory review. The process is transparent enough that we can observe it in real-time on the FDIC web services system. The benefit of XBRL has been to greatly increase the productivity of the review process and decrease cost in terms of personnel, and also improve accuracy to the point where input errors are basically eliminated. This issue of accuracy is of crucial importance to our firm, because we serve more than 20,000 retail consumers who use our automated bank ratings to inform their individual and corporate asset allocation choices in terms of bank depositories. It’s even more critical for bank counterparties who need to determine whether to extend business credit to a bank or demand payment in cash. And finally data completeness and timeliness at one regulatory agency, the FDIC, is what enables us to deliver powerful benchmarking services to other agencies, such as the SEC, to perform their mission.

Next, there is internal processing to meet a variety of internal and external consumption needs. The data in the XBRL files is parsed into numeric data to support several dozen internal supervisory and reporting applications within the FDIC and other agencies in the FFIEC. Some of these use cases involve modern desktop applications for data analysis, while others feed legacy mainframe data applications that literally go back a quarter of  a century and often feed single use case needs that are driven by law and regulation. Then we have several version of the data, including XBRL documents and legacy CSV outputs that are tailored to meet the specific commercial needs of external rating agencies like us as well as the research and policy needs of government agencies and educational institutions. The FFIEC CDR downstream service layer supports PDF, CSV with a filename suffix of .SDF, and XBRL.  Of interest, my partner Dennis notes that the downstream delivery standard evolving across the multiple government agencies we keep track of these days is steadily headed in the direction of PDF for reading by humans and flavors of CSV for interfacing machine-to-machine. Additional popular flavors include XLS for small data sets, SAS XPT for statisticians, and plain vanilla-XML as a verbose substitute for CSV.  In all cases, the downstream analyzers have little need for the perfect accounting compliance and categorization constructs of the XBRL collection layer. These users quite reasonably demand the data is cleaned of such overhead before it ever gets to them so they can perform their work with optimum productivity.

Finally, there is public distribution. If you look at the way in which a firm like ours consumes the FDIC data, the point regarding upstream versus downstream benefits becomes clear. Our primary need regarding the use of FDIC data is the calculation of arithmetic relationships and metrics to drive our bank performance and ratings model, The IRA Bank Monitor. We consume the FDIC data in two ways. 

First, we gather the bank Call Reports dynamically from the FDIC CDR facility in real time and harvest the data into a database structure that allows us to calculate preliminary ratings for a particular bank unit. The enablement by XBRL-based data collection has an enormous benefit here in terms of accuracy and timeliness, and has cut several weeks off of the waiting time for accessing many bank Call Reports. The preliminaries appear in the same timeframe as the SEC K/Q filings. We actually use the CSV output format from the FDIC.  It’s purely a machine efficiency decision. Given known good data, one is actually indifferent to the format in which it’s delivered.  The processing time is easily an order of magnitude faster for database injections with CSV than with XML. Remember that our firm is running individual and peer group level analytics on thousands of banks per quarter in an SQL environment, so the efficiency of the data transport and calculation regime is critical to providing a data analytics product that is up to commercial grade for both institutional and consumer users. 

The second part of our data collection process involves the importation of the entire body of data from the FDIC in a legacy format which essentially recapitulates and confirms the CDR data we have already collected. We process all of the data, metrics, and ratings for the entire universe of FDIC-insured banks and then finalize the results for that quarter.  As I write these comments, it is the first week in February 2010 and we have collected about 7,500 Call Reports from the FDIC CDR. Of interest, the CDR also enables us to calculate and publish a preliminary Bank Stress Index (BSI) rating for all of the banks which have reported to far, providing our clients and readers of our free commentary with access to data about the condition of the US banking industry several weeks before the FDIC press conference. Since timeliness is the key data consumption priority  for most investors, the decrease in wait time due to the implementation of XBRL by the FDIC is a huge win for consumers of bank data and ratings.

IRA Preliminary Bank Stress Index (BSI) Grade Distributions — Q4 2009

Quarter Ending 12 09

  A+

  A

  B

  C

  D

 F

PRELIMINARY
Sample count =7,278

Average BSI
8.00

2,066

1,421

704

810

64

2,108

Prior Quarter Ending 09 09
sample count = 8,543

Average BSI
4.44

3,308

1,481

410

429

77

2,337

Source: FDIC/IRA Bank Monitor

3. What is your overall opinion of the SEC’s XBRL mandate in terms of the burden it places on business and its usefulness to both agency personnel and end users?  

My view of the current tagging regime at SEC is that this is still a work in progress. As a bank analyst who covers over 20 publicly traded financial institutions, I don’t find nearly the same level of utility in the XBRL-tagged documents on the SEC website as I do using the bank level data from the FDIC, which as I’ve explained we have implemented into a complex model of metrics and ratings. In essence, all of my work in terms of bank unit analysis is “ready to eat” because of the way in which my partner Dennis has leveraged the upstream tagging and characterization power of XBRL to enable our downstream analysis systems. But by the time we reach the consumption phase, we are using tools like SQL to analyze subsets of the XBRL submissions, primarily the numeric values and pre-calculated metrics provided by the FDIC, instead of consuming the entire XBRL document.   

When my analysis work turns to looking at the SEC filings for Citigroup or Goldman Sachs, for example, the tagged documents on the SEC website are fun to play with and provide some utility in terms of display. Ultimately, however, the tagging of footnotes and data elements in the XBRL files on the SEC site are not yet saving me much time in terms of overall work process. Compared with the highly automated analytics possible with the FDIC data, the SEC disclosure is what we call “chopped salad” in the financial data world. The key issue here is that XBRL and the related accounting taxonomy have not changed the fact that each bank I cover is allowed under GAAP rules to vary their presentation of results in some very significant ways. Whereas the FDIC bank unit data is tightly defined and reasonably consistent, the presentation of bank financials under GAAP is far more subjective – and deliberately so! Public disclosure is not a photograph or x-ray of a company’s financial performance, but instead is closer to an oil painting, with or without XBRL.   

So if I were to line up the most recent 10-Qs from Citi, Goldman, and Morgan Stanley side-by-side, you will find some very significant differences in how key elements are described, defined, and presented, such as off-balance-sheet vehicles and the way in which losses from these activities are disclosed. Some banks charge-off loss via the loss reserve account, others bury the losses as non-interest expense.  The fact of tagging of footnotes always is several quarters behind the current state of the art of investor relations at my banks. So since we cannot yet seem to keep the XBRL taxonomy current with the ways in which banks are allowed to disclose (or not disclose) material aspects of their financial performance in the current reporting period, the human brain and the Excel spreadsheet remain the most effective tools for working with SEC filings.

4. In his January 2009 whitepaper Bringing Transparency to the Mortgage-backed Securities Market, Philip Moyer of EDGAR Online describes the benefits he believes XBRL in a centralized MBS reporting system would bring, including better data quality, historical comparability, and reduced reporting costs (see pp. 17-18).

How useful do you think XBRL can be in bringing transparency to the MBS and other securities markets that have been at the heart of the financial crisis?

As I indicated in my earlier comments, the use of XBRL or perhaps another XML dialect is obviously attractive. My partner Dennis, who started his career in finance in the fixed income modeling world by installing an MBS software package in the Pasadena offices of Countrywide in 1991 after a decade at Rockwell International, thinks XBRL might be both overkill and undergunned for this purpose. He thinks a simpler XML structure suitable for easy integration by servicers would suffice for collateral data reporting in MBS.  And he thinks deal rule modeling — that can involve complex mathematics – might be better served by adapting from techniques pioneered by the Department of Defense community. Like most of his peers in the world of data operations, Dennis is pragmatic about using the right hammer for the right nail, because (1) cost and (2) production efficiency are the two key criteria in the world of big time securities clearing and data processing. 

Given the relatively less complex nature of the information to be gathered, you could probably develop an XML-variant that was both complex in its vocabulary but relatively easy to transport compared with say an XBRL document filed with the SEC by a public company. In fact, there are already a number of well-tested XML dialects in use in the world of securities trading and clearing, so my guess is that the DTCC and other financial institutions would default to the version of XML with the least overhead cost.  Remember that the Fedwire and private processing systems are part of a highly developed, highly-automated market where XML is very familiar and timeliness and per unit processing costs are the overwhelming priorities. So I would not suggest that XBRL US spend a lot of time trying to sell itself to the clearing community. 

5. Your December 2009 paper Is It Possible to Re-Privatize the US Financial System? traces the growing role of government in US banking over time and discusses the creation of an “Alliance of Convenience”:

  “…Our spendthrift government, the Federal Reserve System and the TBTF [too big to fail] banks together now comprise the paramount political tendency in America today… Until we break the Alliance of Convenience between the Congress, the Fed and the large, TBTF banks and force our public officials to embrace core American values regarding transparency, insolvency and accountability, we will not in my view find a way out of the crisis.

Clearly this muddle requires much more than an XBRL solution. But do you see a role for XBRL in helping to provide the required transparency?

No, the data from the Fed and Treasury is pretty transparent and is actually tagged already with some relatively simple versions of XML. The Fed, for example, makes all of its financial data available in a statistical version of XML. The one area where an XML dialect like XBRL might be useful is the OTC dealer community, but as already noted, the FPML dialect of XML has already been selected by the dealers for tagging OTC derivatives and complex structured securities.

The real trouble here has nothing to do with the data itself or the structure. The problem is that the data is not public and the dealer banks do not want to standardize these financial instruments nor the XML-dialect used to report on them because doing so would impair their monopoly power over the OTC market. As in the case of SEC disclosure, it is always important to remember that the predominant tendency on the part of human beings is to limit disclosure and thereby increase pricing power. Increased disclosure is always bad for monopolies and this must be fought every step of the way. This is why I have been such a consistent critic of OTC derivatives. The lack of transparency and disclosure in OTC derivatives is unfair and violates the most basic American standards of openness in financial markets. The OTC derivatives market of 2010 is like a bucket-shop from the 1920s, but few Americans seem to appreciate such distinctions today.

6. In your speech last year to the American Enterprise Institute (AEI) and Professional Risk Managers International Association, you said:

Believe me when I say that we have seen the wild eyed, "don’t you get it" look from…our colleagues in the XBRL community. We love their idealism and their vision, and we share same. But we at IRA also live in the real world of operating and delivering decision support systems for investors and fiduciaries.

Could you expand on these thoughts? In what ways do you think the XBRL community is being “other worldly” in its goals and activities?

New technologies have an allure of transformation and value creation that makes people very excited until you actually try to implement and integrate it into the real world.  The creation and implementation of XML, for example, has been relatively successful in that regard.  We’ll see how it goes now that the initial invention phase has finished and — like all technology — the proof of the pudding turns to the tradeoffs of efficacy versus the cost of operations and maintenance.

At IRA, we like to always be mindful that there is nothing really new in technology. The basic building blocks of today’s software and hardware tools trace their legacies back to the origins of computing. Each step of the way, in terms of innovation, there are choices and tradeoffs. We like to always look at the technology innovation process as a quilt, where data and business case needs interact and the best choice, depending upon those business needs, makes itself apparent as part of the diligence process.  Each one of the client silos we serve – consumer, institutional, B2B – have different technical needs and business objectives, and different consumption requirements. We see the world of XML as important building blocks that enable data collection and interoperability between systems, but they do not address the entire solution in terms of consumption. We would not be so bold as to pre-judge how our consumers use the data and ratings we supply.  We prefer to listen, add our perspective, and then give the user the solution that makes the most sense for their needs.

7. In comments made to CFO.com back in 2006, you agreed that an XBRL mandate for financial reporting would expand coverage of smaller companies. Are you still optimistic that this will happen? Overall, given the difficulties of the equity research industry, how do you see the impact of XBRL on its business? Do you believe that, as advertised, XBRL will help the industry cut costs and expand coverage?

Possibly, but not because of the way the SEC or big accounting has handled the implementation to date. What we’ve heard from the smaller SEC registrants community is that XBRL is an extra step that one’s filing vendor does for you as part of preparing and submitting to the SEC. The tagging has not been internalized by the filer nor made part of their internal data collection and reporting process. 

The question about the data vendors that article addressed turns on whether the implementation at SEC results in a useful repository to power an operational downstream analysis solution like the FDIC’s architecture or will just be a demonstration facility. Or to put it in very blunt commercial terms, when I can download the XBRL documents or a subset thereof containing the numerical information in SEC filings, then the existing data vendor monopoly on structured financials will be near an end. The SEC has always taken an evolutionary approach to data collection and dissemination. I suggest that it is time for the SEC to target the distribution of full tagged financials, starting with income statements, balance sheets, and statement of cash flows, as the next practical goal in terms of EDGAR modernization. While the SEC data is still “chopped salad” in terms of accounting presentation, having the data in a consistently structured, “as filed” form would be helpful. Today analysts go to each corporate web site and download disparate Excel and Adobe files to perform analysis. 

8. In addressing the problem of extensions in taxonomies, Gerald Trites of XBRL Canada said:

….Too many extensions by different companies contribute to noncomparability, because each company is likely to do an extension for basically the same problem in a different way. So the results become difficult to compare. One way to address this is to develop very robust taxonomies, such as those in the United States. However, the problem this creates is that the more robust the taxonomy, the more difficult it is to do the mapping required. So robust taxonomies can be an impediment to adoption.

What are your thoughts on the extension issue? What do you see as the relative positives and negatives of a core US GAAP taxonomy with roughly 17,000 elements?

I agree with Mr. Trites’s statement. The way to make XBRL relevant to investors and analysts would be to start with the basic reporting template available from the commercial data vendors and build a very simple data delivery function that expands the completeness of numeric data from income statements, balance sheets, and cash flows. The current SEC data implementation leaves the data monopoly of the large commercial vendors intact, thus no progress in terms of innovation by downstream users.  

The other point that must be made is that complexity of the XBRL taxonomy is a function of the business case needs of the audit profession and has very little to do with how institutional investors consume data. Remember that most of the people who work on Wall Street are focused on quantitative analysis and don’t have a clue how to perform the fundamental analysis of a bank or company. When you look at the size of the XBRL taxonomy, the only reasonable conclusion is that the audit firms are trying via stealth to turn the relatively subjective world of public company reporting into a more deterministic exercise requiring the constant services of a FASB rulings subject matter expert. Anyone who has read the Securities Act of 1934 and is familiar with the legal mandate of the SEC vis-à-vis public company reporting knows this result, apparently sought by the audit firms, is impossible in practical terms, unlikely in political terms, and conflicts with the SEC’s mission of making it possible for ordinary people to actually see and understand what’s happening in the public securities markets.

9. There has been much discussion about the potential of XBRL for internal management reporting.  Actual implementations, however, are few. As the SEC’s XBRL mandate proceeds, do you think XBRL’s use for internal reporting will increase substantially?

No, as my previous comments suggest. The audit firms would like to see XBRL extended to internal reporting, but for many practical reasons companies are going to fight creating an explicit link between internal management systems and external reporting. In every bank that I cover, there is a set of GAAP books and a set of “managed” books. The two worlds only meet in the CFO’s office when it is time to make public disclosure. The same goes for commercial manufacturing, retail, and service businesses. The reality is that management systems technologies such as ERP are light years ahead of accounting innovations like XBRL. There’s a strong case for CFOs of companies to internally opt to tack on reporting modules to their existing ERP instead of replacing these mission critical solutions with an auditor recommended one that changes both internal forms of corporate governance and control. 

10. XBRL initiatives are now being pursued in a wide range of areas, including corporate actions,  sustainability reporting, and microfinance. What uses of XBRL that go beyond the usual sphere of financial reporting and company accounting systems seem most promising to you?

All of these are promising areas, but the two key questions to ask are: (1) is the data collected going to be made public, and (2) is there any standardization of the data to make it useful in terms of downstream analysis?  In the US, for example, there is a push among many states and municipalities to make property records electronic.  But there is no state-by-state or national template for this effort. This is a huge potential opportunity, but getting the states, the realtors and the courts to agree on a standard is another matter.

11. XBRL has now been implemented for financial reporting in most or all of the major economies, including Japan, France, and Italy, as well as smaller nations like Chile and Denmark. What can the US learn from other countries in implementing XBRL? What can other countries learn from the US adoption?

There are big lessons to learn from the two “wins” in terms of US adoption, FDIC and SEC. The FDIC effort is a success because it represents a standardized, tightly defined implementation that meets specific, legally mandated public reporting requirements.  In the case of the SEC, the benefits are less clear because the task is so much more diffuse and the ability of the SEC to impose standardization is non-existent under GAAP.  That is the key difference between the FDIC and SEC business case paths for XBRL adoption.

Making SEC reporting as deterministic and standardized as FDIC bank reporting is neither possible nor desirable, but that does not lessen the utility of XBRL at the SEC.  Once we accept that reality, then the utility and development path for the SEC adoption of XBRL will become easier and the necessary choices will become much clearer.  The world of public company reporting is always changing as the economy and markets change.  

Staying entirely current with the state of the art in terms of GAAP reporting and investor relations spin is a daunting and probably impossible task given current law and resource constraints. Indeed, it is impossible. The effort to describe and add to the XBRL US GAAP taxonomy reminds me of Franz Kafka’s 1917 essay, “The Great Wall of China,” where he describes how generations of people over hundreds of years worked on sections of the Great Wall, but most never saw it completed nor knew the enormous extent of the entire task. Just as public company reporting evolves continuously and in response to many different internal and external forces, so too the adoption of XBRL will need to remain flexible and be aware that the target is constantly moving. 

 

Written by Chethan Gorur     Posted on February 11, 2010

Chethan Gorur is the Director of Interactive Data at Trintech, Inc. He is also Chair-Designate of the XBRL International Standards Board.

For many businesses filing their financial statements using XBRL to comply with the SEC mandate, the phrase “extension taxonomy” is a largely misunderstood term.  There is a narrow view that it is only about adding brand-new company-specific elements which do not exist in the base taxonomy (Ex: US GAAP 2009). While adding new elements is definitely one of the purposes for creating extensions, there are many other drivers for creating an extension taxonomy. Even though some of the principles apply for other scenarios, this blog post specifically refers to extension taxonomies as they are used to meet the SEC XBRL mandate for operating companies.

The reality is that almost all of the XBRL filers to date have created a barebones extension taxonomy. Because you’ll be delivering your own unique extension taxonomy to the SEC – and a slightly modified version of the taxonomy with every quarterly and annual financial statement you certify – it’s important to understand the component parts of the document, and some basic rules to help guide you in developing it.

An extension taxonomy is not just about a new set of tags (or elements). Elements are actually very specific pieces of information, and the XBRL US GAAP Taxonomy Preparer’s Guide advises preparers to first determine if it is possible to use more general – and less specific – extension tactics.These higher-level tactics can be re-used in future periods, resulting in much less effort over time.

You can tackle creating an extension taxonomy by thinking about it as an upside-down pyramid: begin with the most general set of extension tactics, and see if that suits your purposes. If not, move to a lower level, where more specific information is required. For the purposes of this blog post, we’ve grouped the twelve methods of extending the taxonomy under four, easily remembered headings, listed mostly by the increasing levels of impact that the tactic will have upon future re-usability.

1. Relationships Help Present Your View

It is recommended that companies perform the following at a minimum: (1) create new Relationship Groups, and (2) change the Ordering of existing relationships defined in one of the Industry Entry Points. These methods of extending the XBRL US GAAP Taxonomy have the most capacity for future re-use.

A new Relationship Group allows preparers to assemble custom presentation relationships between already existing elements, tables or existing groups.

Changing the Order is as simple as reordering the children in an existing list.

In some cases, simply modifying relationships within one of the existing Industry Entry Point taxonomies can be sufficient for a business to complete their own extension taxonomy. For example, you might need to modify the order of a list as follows:

Industry Entry Point Cash Flow Statement –
US GAAP Taxonomy Order

Your Company’s Cash Flow Statement –
New Extension Taxonomy Order

Net Cash Provided by (Used in) Investing Activities, Continuing Operations

Net Cash Provided by (Used in) Investing Activities, Continuing Operations

…

…

• Payments for (Proceeds from)
  Mortgage Servicing Rights

• Payments for (Proceeds from)
  Investments

• Payments for (Proceeds from)
  Investments

• Payments for (Proceeds from)
  Mortgage Servicing Rights

…

…

It is also possible to (3) add New Relationships between existing elements. An example would be creating a new calculation for multiple elements.

Preparers can also (4) suppress or change a Parent-Child Relationship; however, this is typically done only to resolve a validation error or calculation inconsistency.

Adding New Relationships or suppressing Parent-Child Relationships both have slightly more impact on future re-use of the extension taxonomy, and should be investigated only after determining if the labeling methodologies below can first do the job.

2. The Role of Labels

The SEC recently presented its findings from a review of the Year 1 XBRL filings recommending that an “element label should match its line item caption”. It is recommended, especially for any kind of tabular data, to modify the labels on elements (especially tabular information) to match your financials.

There are three ways labels could play a part in your extension taxonomy: change the Preferred Label on a Presentation Relationship, add a new Abstract Heading Element, or simply add or change Element Labels.

• Changing a Presentation Relationship’s Preferred Label helps dictate how data is displayed. An example would be to change the preferred label on a line item’s presentation relationship from “Terse” to “Negating”, ensuring that the numerical data displayed for that line item has its sign flipped.
• Adding a new Abstract Heading Element simply provides a new heading, under which child items can be grouped. Preparers should first determine if they can modify the label of an existing abstract element prior to creating a new one.
• Adding or changing Element Labels does not modify the element’s definition or references, both of which are the crucial pieces of data used to define that element. This is always preferable to creating a new element, which is described below under the section on elements, and has less future potential for reusability.

Of all labeling methodologies, the Preferred Label on a Presentation Relationship concept is the most difficult for people to understand, and warrants further explanation. Every tag or element has several different types of display labels, each of which can be used in different places throughout your financial statement without modifying the underlying data.

Element or “Tag”

Possible Labels for the
Element or “Tag”

Element or “Tag” Preferred Label
(as defined in the Presentation Relationship)

Displayed On Your Financial Statement

 

 

 

 

 

[Goodwill]

Label Type

Resulting Label to be Displayed

Standard

Goodwill

Period Start

Goodwill, Beginning Balance

Period End

Goodwill, Ending Balance

Terse

Goodwill, Additions

Negating

(Less) Impairment

…

…

 

 

 

 

 

Period Start

 

 

 

 

 

Goodwill, Beginning Balance

Different parts of your financial statement can reference different label types using Preferred Labels, changing the information displayed on your financial statement without actually changing the tag itself, or the underlying data. In one section of your financials, you might want to change the preferred label for [Goodwill] to “Period End” in order to display “Goodwill, Ending Balance” on your financial statement.

3. Extensions and XBRL Tables

XBRL Tables are powerful constructs, allowing you to group, display and reformat data – all without changing the underlying relationships between the data included in the table itself. For the purposes of this blog post, we will assume that readers have a basic understanding of XBRL tables and terminology, which can be found in Chapter 5 of the XBRL US GAAP Taxonomy Preparer’s Guide.

There are three ways to extend using tables, add a new (8) Domain Member to an Existing Table Domain, add a new (9) Axis to an Existing Table, and add a (10) New Table.

• Adding Domain Members is one of the most common ways of extending taxonomies, especially as you get into detailed tagging. As an example, the Domain “Major Types of Debt and Equity Securities” might be composed of the following Domain Member Elements: “U.S. Treasury Notes”, “Corporate Debt Securities” and “Equity Securities”. Adding a new Domain Member Element to an existing Domain essentially adds a new table column, into which you can add financial data.
• A table Axis contains one or several Domains. Adding an Axis to a table allows you to group Domains together for more complicated reporting requirements. Imagine that you are reporting “Assets by Type” (your Axis) and need to also break them out by “Assets by Location” (your new Axis). Adding the new location Axis would allow you to create a master column by asset type, under which assets by location could be individually reported.
• Before adding a New Table, first determine if you can modify one of the tables available in the existing XBRL US GAAP Taxonomy Industry Entry Points, either by adding Domain Members or Axes as described above. Adding a new table is more difficult than modifying an existing one – requiring that you modify, create or define additional elements, attributes, and relationships. But in some situations it will be necessary.

The example below illustrates how adding a new Axis can help you group data for more detailed reporting situations than the standard taxonomy might allow. In this scenario, the Axis “Reporting Segment” was added to the original table, facilitating this grouping:

(In thousands)

Custodial
Services

Office
Furniture

<< Axis 2

“Reporting Segment”

US Federal Government

State of Maryland

US Federal Government

State of Maryland

<< Axis 1

“Major Customer”

Entity-Wide Revenue, Major Customer, Amount

$$

$$

$$

$$

<< Line Items

“Entity-Wide Revenue, Major Customer”

4. Add New Elements Only When Required

So far, so good. We’ve made it through nine of twelve methods to extend the existing taxonomy to suit your unique business situation – all without creating new elements or tags. But in some cases, you’ll need to do just that. As we’ve already said, creating new elements or tags has the most impact on future re-use, so do your best to repurpose what already exists prior to extending using the methods below. This is one of the areas which has the highest impact on comparability of data across companies – and will be one which regulators will watch very closely.

Adding new elements should only be done once the existing taxonomy has been completely reviewed, including documentation on existing elements, to determine if one of the methods above can first suffice. If not, there are two ways to add a new element: adding a new (11) Numeric Element, or adding a new (12) String,Text Block or Other Non-Numeric Element. The scope of this post is not sufficient to cover the ins-and-outs of creating new elements, the details of which can be found in Chapter 6 of the XBRL US GAAP Taxonomy Preparer’s Guide.

There are some good rules of thumb to follow:

• You will usually need to add a new Numeric Element in two situations: if you need to combine two or more line items into a single element or if you need to introduce entirely new financial reporting concepts which are not covered in the existing taxonomy. Every new Numeric Element requires both a definition, and a presentation relationship to at least one other element. When you are adding new elements it is very important that you take the time to document the purpose and reasoning behind the same. It’s usually a good idea to go ahead and develop at least one calculation relationship to one or more other elements for all Numeric Elements you create.
• Adding a Non-Numeric Element (such as a text block or string) is performed when the existing tags don’t meet your needs, especially for block tagging of complete notes, individual accounting policies or tables/schedules. Non-Numeric elements do not participate in calculation relationships and you cannot validate content inside it using traditional calculation relationships.

Conclusion

Extension taxonomy documents are as important as the Instance documents you submit to the SEC. Special attention must be paid to the contents of the extension taxonomy. Extension taxonomies are much more than just about adding new elements; they include changes to Relationships, Labels, XBRL Tables, and more. Even if you have completely outsourced your XBRL preparation, it’s important to work with your outsourced provider to understand what goes into your extension taxonomy since it is one of the documents that you will be filing with the SEC.