Written by Bob Schneider    Posted October 5, 2006

The technology challenges financial professionals have faced in the past several years have (mostly) come from bad stuff happening to (mostly) good people. The Y2K problem derived from early computer programs that understandably but inimically used only two digits to store years. Sarbanes-Oxley was a reaction to scandals that were large in size but few in number. The threat of terrorism developed from cultural and political problems that have little to do with deferred taxes and accounting for leases.

XBRL is happily different. It wasn’t developed in response to calamitous events, but rather to make working with financial and business data more productive and efficient. Thus the natural constituencies for XBRL adoption are not limited to the relatively small groups of financial and IT pros that have done yeoman’s work in combating problems they did not create. Rather, they include the full cast of actors on the financial stage.

With XBRL adoption, securities analysts can look forward to real-time release of financial statements that can be analyzed in spreadsheets without re-keying. Auditors can grab company data off the Internet and immediately get to work on comparing their clients’ data to their peers’. Bank officers can spend far less time checking loan applications for mathematical error and far more time on analyzing what’s happening in their clients’ businesses. And staff at regulatory agencies like the SEC will be able to focus less on reviewing the accuracy of company filings and more on what they contain.

XBRL will benefit individuals too — big time. In their current format, company financial statements at the SEC’s EDGAR website require lots of manipulation before they are ready for analysis. XBRL-enabled statements will be a boon to small investors, who will import data directly into their spreadsheets and be able to view financial ratios and operating data immediately.

Of course, most small investors purchase shares through mutual funds. Here the SEC is also moving forward, pushing ahead to make key data of mutual funds available to the public online in easy-to-grasp, one-page summaries. Financial professionals and sophisticated investors could drill these documents for more detailed fund data.

We like the idea that XBRL benefits individuals for two reasons. First, spreading financial democracy by making investment data easily obtainable and transparent is a good unto itself. Second, creating a wider class of XBRL beneficiaries builds the political momentum for wide-scale interactive data adoption.

For the financial community, often seen as party-poopers, it’s nice to be part of the in crowd.

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This entry was posted on Thursday, October 5th, 2006 at 6:00 pm and is filed under Financial Reporting, . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.