Great article in Accounting Today about the status of XBRL adoption worldwide and its use to reduce business and regulatory reporting burdens (using Standard Business Reporting) and enhance analytics because tagged data is in a machine-readable structured format as discussed by John Turner, CEO of XBRL International.
IMA is one of the original founders of the XBRL global data standard (Ms. Liv Watson, IMA member and Mother of XBRL) for structured data used by the accounting profession for public disclosure, business and financial reporting so data can be in a machine-readable format. Because XBRL tagged data is structured – data tagged in XBRL is perfect for extreme data analytics allowing currency and language linked to XBRL to be immediately converted and analyzed. XBRL allows management accountants to not only review their own company’s financial operation but also look at peers for data analytic comparisons and exceptions. XBRL allows smaller companies to be seen by analysts because data tagged in XBRL can be consumed by analysts in a machine-readable format instead of normalization and review of extensive financial reports by humans which takes lots of time and energy in PDF format.
Why XBRL makes financial analysis much easier – Morgan Stanley and others
Some key discussion points in the article worth mentioning by John Turner:
“There’s about 140 regulators around the world in 70 countries that use this stuff,” said Turner. “It’s mandated in just over 100 of those, and there are tens of millions of companies that file in XBRL around the world. (Many of these companies are private companies that involve the preparation of management accountants outside the USA)
John Turner sees the biggest uptake of XBRL globally among financial regulators in the banking, insurance and pension industries, particularly in Asia and Europe. “Post-crisis there was the Basel III framework for banks,” said Turner. “That means there are enormous and pretty onerous reporting obligations imposed on banks, and through the Solvency II framework on insurance companies. They provide tens of thousands of data points every quarter to their regulators.”
Moving from formats such as PDF and HTML to XBRL, which can be consumed in a structured way which enhances data analytics since data is in a machine-readable format and doesn’t require normalization of data by humans.
The macro trend that we see at the moment is one that we have been waiting quite a long time for, and that is really that the securities regulators are beginning to come in a new wave.” Data can be moved into a machine-readable format for instant diagnostics to determine exceptions for review to protect investors and the capital markets with minimal paperwork.
Turner would like to see the SEC require companies to use machine readable business rules in their filings, such as ensuring that the balance sheet actually balances. “The SEC is more or less an isolated case in not obliging companies to run a set of machine executable business rules in their filings before they come to the SEC, and for the SEC to run them themselves,” he said. “Most regulatory environments oblige people to do that.”
Japan and China have also been using XBRL in their financial markets. Financial markets in several Central and South American countries have also been using the technology, including Chile, Columbia, Mexico, Panama and Peru. Brazil is also moving toward using XBRL, and Turner recently heard from Argentina expressing interest.
There has been progress in other countries as well in areas beyond financial reporting. Turner pointed to the increasing popularity of Standardized Business Reporting, which ties in with XBRL.
Using XBRL for Standard Business Reporting is a great tool to reduce regulatory reporting by companies and organizations to the government using XBRL -- “SBR is an effort in about five countries, but the flagship country is the Netherlands, and this is forcing government agencies to work together to reduce red tape,” said Turner. “Not by reducing regulation necessarily, but recognizing that multiple agencies deal with individual businesses and they all require information from those businesses, and the definitions that they all use are different. The poster child for that is there were 17 different definitions for the term ‘full-time employee’ across the Netherlands. It took a long time, but now there is only one. They moved to simplify their definitions and thereby lower the cost of production of that data in a business-to-government context. What that led to is an ecosystem in that country where every company has got the ability to produce XBRL, pretty much at the push of a button. It’s sitting there in their accounting packages.”
Extending XBRL to the JSON programming language, a variation of Java that has been growing more popular. XBRL is built around older XML technology and linking to JSON is a positive move for XBRL Adoption.
For more information about XBRL for securities, banking, insurance, tax, sustainability and government reporting will be discussed at the upcoming Data Amplified Global Conference in Paris, France on November 6-8, 2017.