Written by Dr. Robert Eccles     Posted on April 10, 2007

Dr. Robert Eccles, an internationally recognized expert on corporate reporting, is a founder and managing director of The Perception Group.  He has been a professor at the Harvard Business School, where he served on the faculty for 14 years. Dr. Eccles is an advisor to the Enhanced Business Reporting Consortium.

It looks like XBRL is finally getting good traction in the United States thanks to the SEC’s interactive data initiative.  The new XBRL-US organization is working on completing a taxonomy for financial statements with a deadline in the summer of 2007.  Ultimately this taxonomy is intended to include footnotes, although I’m not sure of the timing. This will clearly be a big step forward. In addition, the Investment Company Institute recently released a taxonomy for the Risk/Return Summary of the mutual funds prospectus, and Broadridge, a spin-off of ADP, is working on developing a taxonomy for the Notice and Proxy Statement.  Certainly the capabilities of XBRL extend beyond financial data to cover virtually any type of regulatory filing, although as the data becomes more qualitative and narrative in form, the challenge becomes greater.

Another example of expanding XBRL beyond financial statements is the work being done by a nonprofit group called the Enhanced Business Reporting Consortium.  The EBRC is attempting to organize a market-based initiative involving the collaboration of companies, investors, and a wide range of intermediaries like sell-side analysts, rating agencies, and accounting firms.  The charter members of the EBRC are the American Institute of Certified Public Accountants, Grant Thornton, Microsoft, and PricewaterhouseCoopers.  On December 6, 2007, members of this group met with SEC Chairman Christopher Cox to talk about how XBRL could be extended into broader narrative reporting, such as for the MD&A and 10K, and for industry-specific key performance indicators.  These ideas were well received and the EBRC is now working on putting together a detailed action plan.  It should be emphasized that this is a market-driven initiative that has SEC support, rather than being an SEC-driven initiative.

Another important point is that the EBRC seeks to make this a global initiative.  Although the original members are all U.S.-based organizations, the EBRC is already collaborating with groups in Japan and Europe.  Why repeat the experience with accounting standards and have multiple frameworks?  After all, the type of information contained in a 10K such as that on the business environment, strategies, and risks — is relevant to companies and investors all over the world. Similarly, industry-specific key performance indicators are relevant to every company in an industry. The geographic location of its headquarters is irrelevant, particularly in a global economy where the Internet is becoming an increasingly common location where business takes place.

A very rough draft XBRL taxonomy for the Enhanced Business Reporting Framework Version 2.0 has been developed. However, this taxonomy was produced before it became clear that there is sufficient support for the EBRC to be a global initiative.  The next step is to convene representatives from Japan, Europe, and the U.S. to develop EBRC Version 3.0.  An XBRL taxonomy will be developed for this, hopefully using a collaborative taxonomy building tool.  We will keep Data Interactive readers informed of the EBRC’s progress in these areas.

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