Bob Schneider is a Partner in 
Wilson So is the Director of Hitachi Consulting Corporation Powerful Trends Encourage XBRL Adoption
Written by Bob Schneider Posted October 18, 2006
The following predictions no doubt betray a flair for the obvious. But it is still a useful exercise to identify the forces that will propel XBRL forward:
SOX Will Be Mended, Not Ended No matter which political party is in power, the regulatory burden on U.S. firms continues to grow. According to a study by AMR Research, companies will spend more than $6 billion this year alone on Sarbanes-Oxley (SOX) compliance. SOX continues to receive much hostile fire; several days ago, former Fed Chairman Alan Greenspan called for most of it to be scrapped. But while the SOX burden on smaller companies may be eased and other tinkering is possible, it’s unlikely that the law will be rescinded. As firms seek out longer-term solutions that require new technology to minimize SOX costs, they will focus on XBRL and the common platform it provides for business information.
The BRICs Will Keep Flying U.S. companies face increasing competition from emerging economies, especially those of Brazil, Russia, India, and China (BRIC). Together, these countries represent some 40% of the world’s population, and they are expected to be among the world’s largest economies in the decades ahead. In most cases, BRICs have well-educated populations, substantial natural resources, and relatively low wage costs.
U.S. business leaders and policymakers are asking: What competitive advantages can the U.S. economy sustain? America ranks at or near the top in global surveys of information technology adoption, but its continued supremacy is by no means guaranteed. To remain an IT leader, the US must continue to work at adopting the most important technology innovations. These will include XBRL, particularly in its Global Ledger (GL) variety. Information drives modern economies, but data transfer both within and outside the corporation is often impeded because of different IT systems and formatting. With its ability to incorporate all types of business data — from journal entries to product descriptions to employee timesheets – and to move it easily among different entities, XBRL-GL promises to be a boon to productivity.
Financial Markets Will Become More Globalized The world’s financial systems are much more accessible to companies and individuals than they were ten years ago. Moreover, as regulatory barriers come down and communication channels speed up, financial markets are increasingly globalized. To give one example, in 2005 Americans put $8.47 billion into mutual funds dedicated to small and mid-size foreign companies, up more than 40% from record 2004 levels. These trends are likely to accelerate as countries raise corporate governance and transparency standards.
At the same time, cutbacks at the major equity research firms have reduced the number of security analysts and, in turn, the number of equities followed. As U.S. firms compete for capital and investor attention, there is an incentive to provide financial information in formats notably XBRL — that analysts will be able to dissect economically. With other nations moving toward adopting XBRL-enabled financial statements, U.S. firms will want to make their own releases of financial information similarly easy to manipulate and analyze.
The Pace of Business Will Accelerate Information that used to lie happily dormant for months or even years is now made instantly available to the whole world through the Internet. Firms and individuals have come to expect that their information needs will be immediately satisfied; the investor’s attitude toward financial reporting is the sooner, the better. In the same vein, security analysts are under increasing pressure to perform financial statement analysis faster. XBRL-enabled statements can provide real-time financial reports that are instantly available for analysis and can help companies keep up with the faster pace.