Written by Bob Schneider Posted March 17, 2007
Some question whether the federal form of the US government, designed for a nation built on 13 colonies, has continued relevance in a country unified by the interstate and McDonalds. Other argue that state governments continue to play a useful role, since they can serve as laboratories for ideas and programs that, if successful, can be introduced in other states as well at the federal level.
As an international organization and data standard, XBRL enjoys similar advantages for innovation. The many nations that are adopting XBRL each serve as potential testing grounds for projects that other countries, as well as supranational entities like the EU, can adopt to their own needs. The trailblazers enjoy (if I can use that term) the challenge of being pioneers and the prestige that comes with success; they also suffer the mistakes and mishaps of first movers.
The Dutch Taxonomy Project, a joint venture of the Netherlands's Ministries of Finance and Justice, represents one such program in the XBRL arena. (In Holland, the Justice Department is responsible for the legislation on the filing of company records.) Abbreviated from the Dutch as NTP, the Project intends to reduce the administrative burden of the nation's businesses by 25%.
At the Third Annual XBRL Canada Conference held last month in Ottawa, Harm Jan van Burg, a senior policymaker in the Netherlands Ministry of Finance, gave a fascinating talk on the NTP's progress. (The presentation is available online; it's listed under the February 14 Special Interest Sessions, 13:40-14:20.) The speech runs about an hour, but it seemed much shorter (I'm serious). Unfortunately, there are no accompanying slides (perhaps a more adroit user can locate them); however, I don't think they're crucial to the presentation.
Mr. van Burg has many important insights. He does not shy away from criticism, including self-criticism. Among his salient points:
1. The average company in the Netherlands has about 30 to 40 parties, both public and private, who all demand information in their own unique forms and reports. These include law enforcement and tax authorities; insurance companies and banks; and suppliers and customers. These reporting requirements put an enormous burden on firms, and much of the paperwork gets outsourced.
The NTP's aim was to slash the administrative burden for companies in the public sector, which was accomplished through developing an XBRL taxonomy and adopting XBRL reporting for three areas: taxation, annual accounts (ie, financial statements), and economic statistics. Using XBRL, the NTP was able to consolidate filing requirements and reduce the number of required elements from 200,000 (from all forms) to 8,000 without losing any data.
2. The NTP stemmed specifically from a promise made by politicians to Dutch voters to cut government red tape. Mr. van Burg didn't say so directly, but I believe his implication was that the political imperative helped give the project momentum.
3. The NTP did not originate nor was it designed as an XBRL project per se. Rather, XBRL was adopted because it was deemed effective in accomplishing the Project's objectives.
4. The NTP is founded on cooperation between the public and private sectors. Mr. van Burg stressed one reason why that's important: When you start a new project of this magnitude, certain parties are going to be very slow movers. If you wait for them, you'll never get anything done. You need to encourage the fastest movers to get things moving.
(A covenant has been adopted that formalizes this collaboration. Signed by some 80 parties, it states "The reduction of administrative burdens for companies can only be accomplished if private and public sector cooperate, if they use the same data and process standards and if they respect their separate interests." The signers included four Cabinet ministers, governmental bodies, accounting firms, major software vendors, employers' organizations, and others.)
5. Mr. van Burg said that, while there are many XBRL taxonomies, the NTP taxonomy is one of only two taxonomies he knew of that is "recognized" (the other is the FDIC's). According to Mr. van Burg, "recognized" means that the entity (in this case, the Dutch government) takes responsibility for the taxonomy and any mistakes in it, and that reporting parties (ie, businesses) know that the taxonomy is acceptable for their filings. Mr. van Burg stated his preference for recognized taxonomies over taxonomies created by volunteers.
6. Mr. van Burg said that those seeking to emulate the NTP should not underestimate the resistance to change. The accounting community, for example, has protested its complexity. On the other hand, he noted there was little opposition to a mandate for electronic filings.
This brief overview really doesn't do justice to the NTP or Mr. van Burg; if you have the time, I encourage you to listen to his entire speech. The insights of Mr. van Burg and the lessons from the NTP implementation will undoubtedly prove valuable to policymakers and government executives as they seek to adopt similar XBRL projects in their own countries.