Written by Bob Schneider Posted January 5, 2007
When I was working as an editor in Japan in the 1980s, the big buzz word was kokusaika, or internationalization. Twenty years on, globalization is the word that's all in vogue. And just as new communication technologies (like fax) facilitated internationalization in the 1980s, the innovative XBRL data standard will be key to globalization.
In the popular imagination, I don't know if internationalization and globalization are easily distinguished. But at least for people who follow these trends, there is a substantial difference:
"Internationalization refers to the increasing importance of international trade, international relations, treaties, alliances, etc. The basic unit remains the nation, even as relations among nations become increasingly necessary and important. Globalization refers to global economic integration of many formerly national economies into one global economy, mainly by free trade and free capital mobility, but also by easy or uncontrolled migration. It is the effective erasure of national boundaries for economic purposes."
Just like internationalization, which I would throw into a report when I couldn't think of anything else to say, globalization has become a buzzword bordering on clich, for economic populists and management gurus alike. The thing about clich's, though, is that they become clich's for a reason, i.e., they were repeated over and over because they are particularly descriptive and useful and, at one point, original and interesting.
Even if many of us wish the now-tired globalization would just go away, its enormous impact will continue to be felt in the decades ahead. I was reminded of this by two articles I recently read, one by Michael Mandel in Business Week and the other by Anatole Kaletsky in the Times (London).
Mandel's focus was the US; Kaletsky's was Japan. Mandel emphasized how globalization has impaired the ability of U.S. political institutions to effect economic change. Kaletsky emphasized how globalization has upended traditional macroeconomic assumptions about the economic competitiveness of strong manufacturing nations like Japan.
But both pieces reinforced the point that globalization is having a profound impact on nations, companies, and individuals. As these various entities compete in a globalized economy, what strategies can they adopt to be winners in the new environment?
Although it may be mere happenstance, perhaps it isn't surprising that in 2004 China -- the nation we associate most with globalization -- became the first country to mandate that all of its listed companies file its financial reports in XBRL. Other countries that depend importantly on overseas markets, such as Spain and the Netherlands, have also been leaders in XBRL adoption for financial statements.
But as readers of this blog are well aware, the potential of XBRL extends far beyond financial reporting. As Gianluca Garbellotto wrote in his recent post on this blog:
"Data archival, data integration, consolidation, auditing and compliance, generation of various internal and external final reports from the same underlying transactions, and automation of the related reconciliations are only some of the processes that XBRL can help make more efficient."
Many of these processes will be important for the success of the global company. But it is improved data integration that I think will be particularly crucial. Even Chinese companies are now moving production facilities offshore, as they seek the optimum set of conditions for costs and logistics. Combining information from external and internal sources -- in various jurisdictions and across functional lines -- is a task at for which XBRL-GL is peculiarly suited. As XBRL moves beyond its traditional boundaries of financial reporting to business reporting for the entire organization, companies will realize the return on their XBRL investment, thereby inspiring a virtuous cycle of increased outlays and greater diffusion.
None of this is to discount the substantial roadblocks along the way in XBRL becoming the global business reporting standard. But it's essential that this larger vision of interactive data be kept in mind as efforts to adopt XBRL for financial reporting continue. Just as internationalization has given sway to globalization, the current emphasis on XBRL for global financial reporting should eventually yield the spotlight to its general use for a broad spectrum of information needs for the global company.
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