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TechTalk Blog -- XBRL, BLOCKCHAIN AND NEW TECHNOLOGIES: HOW FINANCIAL REPORTING IS EVOLVING TO INCLUDE NON FINANCIAL DATA AND USING XBRL TO GET BETTER DATA ANALYTICS

By David Colgren posted 01-04-2018 10:54 AM

  

JANUARY 2018 STRATEGIC FINANCIAL MAGAZINE ARTICLE: XBRL, Blockchain and New Technologies

The global business reporting process is going through a major transformation as securities regulators and companies are enhancing disclosures to include additional data sets critical to the interests of investors and the public worldwide. The Internet has created a global platform requiring global standards for global comparison to address interests from a global capital markets. Enhancing business reporting demonstrates how a company is more effectively creating value over time and reaching greater stakeholders supporting this effort via allocation of capital on a global basis. 

Consequently, business reporting is moving beyond only financial information to also include human, natural, intellectual and social capitals for disclosure to assure that a company stays relevant to society -- that the company is "sustainable" creating "value" over the short, medium and long-term and how this is mapped to the stakeholder interests it produces.

Regardless of whether a company discloses this non-financial information -- social media outside the company is investigating various data sets and reporting information that may or may not be accurate to interested stakeholders. Companies can be proactive or allow others to "tell their story"... using a universal, data standard so this data is in a machine-readable format. 

COMPANIES GET ADDITIONAL INVESTOR ALPHA BY REPORTING NON FINANCIAL INFORMATION TO EXTERNAL STAKEHOLDERS

As a result, for example -- companies are disclosing information on policies, risks and results as regards environmental matters, social and employee-related aspects, respect for human rights, anti-corruption and bribery issues, and diversity on the boards of directors. By doing so -- this companies gain additional ALPHA -- 20 to 25% from the capital markets. 

ADDITIONAL ALPHA EXAMPLE

XBRL is playing a critical role in taking this reported financial and non-financial data and tagging it at the data level linked to accounting definitions, capital definitions, currency conversion, financial calculations, languages and assurance from an independent party so the reported data is in a machine-readable format for instant global comparison and usability by stakeholders around the world. Linking business reporting with XBRL supercharges disclosed data so that it can be immediately consumed and analyzed for better decision making by all the stakeholders in the business reporting supply chain. This allows more effective capital markets operation in transitioning capital to meet the needs of both consumers and society by building a better society. The disclosed data - because of this linkage to XBRL - provides a more accurate representation of the companies activities that is relevant to external stakeholders using global reporting frameworks. It allows companies with a "great story" to better reach interested parties (including investors) on a global basis because the data is in a machine-readable format in a universal format. KEY POINT: Why not make this disclosed data more consumable to stakeholders using a global data format for comparison that is in a machine-readable format -- especially if a company is looking for investors around the world? 

VIDEO ON HOW XBRL HELPS NON FINANCIAL REPORTING

FOR EXAMPLE: Deloitte created this great video on how XBRL can be used for sustainability reporting for superior data analytics to get information out to the marketplace to help make better decisions This concept of using XBRL in the video can be applied to other non-financial reporting disclosures.  

HOW HAVING AN EMPOWERED INVESTOR/ CITIZEN REGULATORS USING STRUCTURED DATA / XBRL RESULTS IN A BETTER CAPITAL MARKETS/ SOCIETY

Wired Magazine several years wrote an excellent article about this transformation as well called: "Road Map for Financial Recovery: Radical Transparency Now!" and the development of the "Citizen Regulator" and how with new technologies both the INVESTOR and the PUBLIC can use machine-readable data to make better decisions.  -- the capital markets or government itself.

STRUCTURED DATA (XBRL) is a key ingredient needed for BIG DATA ANALYTICS. Just like MPEG4 changed the world of audio and visual media consumption -- XBRL is doing the same for financial and non-financial reporting.  

BLOCKCHAIN, DISTRIBUTED LEDGERS AND SMART CONTRACTS

Now comes Blockchain. Blockchain is just one vehicle that can utilize XBRL via distributed ledgers and smart contracts. Distributed Ledgers and Smart Contracts will contain data -- XBRL will allow this data to structured and extracted out of Blockchain for instant data analytics. Blockchain will need to move beyond PDF 

Management accountants can play a major role in helping companies prepare for this revolution that is currently transforming both business and government reporting. 

Its all about connecting the dots -- moving beyond financial data to include non financial data -- creating new reporting frameworks for this non financial data and using XBRL to tag both financial and non-financial data to create "integrated reporting" to tell a more complete story about a company or government entity to both the investor and the public by creating better transparency and accountability. Our society required better data to make better decisions and management accountants are a key steward in making this happen.
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