Written by Bob Schneider     Posted on January 29, 2009

The financial meltdown has had a mixed impact on the XBRL world. On the positive side, it has generated discussion on how interactive data might help clean up the current mess and prevent another. On the downside, it has siphoned off energy and interest that in less calamitous times would have been devoted to XBRL activities.

This diversion of attention was evidenced in sparse attendance for the XBRL for Investment Professionals conference held in London last September. That’s a shame, because as this report of moderator Chris Dreyer makes clear, the meeting included some outstanding presentations. Even though the conference was held four months ago, nearly all the material remains extremely relevant.

Chris’s account motivated me to listen to and view the presentations now available as a package from the CFA Institute. Unfortunately, not all of the talks have been archived; but of the five included, those of Messrs. Hillman, Byramji, and Krzus are extremely compelling, while the introductory talks of Messrs. Diermeier and Servais will be highly useful for readers relatively new to XBRL. Let me give you a small taste of what’s in the non-introductory presentations.

Compliance Week recently ran an article titled "XBRL: Who Will Use This Stuff?" Thomas Hillman of HOLT would quickly answer “We already do!” A consulting firm embedded within Credit Suisse, HOLT has about 600 fund managers and quants as clients who use its products for measuring corporate performance and valuation. Altogether, HOLT collects data on some 20,000 companies worldwide. Hillman said adoption of XBRL in China has allowed HOLT to expand its coverage of Chinese firms from 300 to more than 1,300.  

His talk includes this great chart that shows how much faster (XBRLized) results for Chinese companies are reported than those for U.S. firms.  Hillman said he was most excited about the potential for XBRL to enhance the analytics for intangibles, derivative disclosures, and deferred tax assets and liabilities. His talk also contained interesting takes on extensions, data aggregators, and XBRL’s role in the convergence in the cost of capital among nations. 

Homi Byramji of Thomson Reuters addressed the question, "Whither the data aggregators in an XBRLized world?" The Pozen Committee’s Draft Decision Memo (page 79) gave this pessimistic outlook for them: “Because aggregators will not be necessary, companies will be able to maintain control over their numbers; what they report will be what goes into the models.”  In contrast, the report on XBRL of the Bear Stearns accounting group saw a continuing role for the information intermediaries and stated that interactive data would help them reduce their cost structures.

Byramji makes what Chris Dreyer thinks (and I agree) is a persuasive case of the enduring relevancy of data aggregators. Of course, given Byramji’s job, it’s hard to see him saying otherwise. But as you listen to his talk, you get no sense he fears XBRL. Rather, it’s like listening to a wise astronomer who regards this latest celestial discovery as just one more bright object in the sky. He supports XBRL and sees its potential, but he’s also skeptical about some of the claims made for it.

Byramji notes that intermediaries like Thomson utilize all kinds of information, much of which – press releases, events, corporate actions, news – will not be tagged in XBRL. Furthermore, even in those information areas where XBRL will have an impact, he believes it will largely either help aggregators to cut costs or require value-added services that intermediaries provide  – and Byramji has several slides that argue just how much value that is. In fact, he says his biggest fear is that XBRL will not live up to expectations, and that clients will expect intermediaries to provide products and services they are unable to deliver.    

Michael Krzus, a Partner at Grant Thornton and President of the Enhanced Business Reporting Consortium (EBRC), begins his talk with a wonderful anecdote about asking former SEC Chairman Chris Cox about working on a taxonomy for nonfinancial information. Mr. Cox gives the go-ahead but warns “Just don’t bring me a convergence problem like GAAP and IFRS.”

That admonition has guided the efforts of Krzus and others in setting up the World Intellectual Capital Initiative (WICI), a global effort at improving corporate reporting information that comprises the EBRC, the EFFAS, METI of Japan, and other organizations and universities. Krzus makes the point that financial statements don’t explain everything about how investors value companies, and that there’s a crucial need to disclose KPIs, intangibles, value drivers, and intellectual assets. In October, WICI published a comprehensive information framework and XBRL taxonomy.

I finished listening to these presentations in a mood of excitement and anticipation. One senses being at the cusp of a revolution in business reporting, underpinned by ever-faster information delivery; the emergence of XML languages, most notably XBRL but other varieties like RIXML too; the convergence of national accounting standards; globalization of capital procurement; and innovation in nonfinancial reporting through KPIs and narratives that cover the gamut of company data, from employee turnover to carbon emissions.

That the Chinese word for crisis comprises not only the character for danger but one of opportunity is in fact a misconception. Nonetheless, it’s a useful fiction for viewing our current muddle as actually a solid launch point for a much better world of business reporting these presentations all predict.

Written by Daniel Díaz     Posted on January 16, 2009 

Daniel Díaz is a contracted regional coordinator for XBRL International (XII) for South America.  He is Professor of Information Technology at the National University of Rosario (Argentina) and was a prize winner of the XBRL Global Academic Competition sponsored by Bryant University.

The economic crisis in Argentina that began in 1999 -- culminating in a default on its international obligations in 2002 -- had a dramatic, negative impact on most countries of the region. Since then, however, South American nations have begun to restructure their economies, as high commodity helped stabilize business conditions. At the same time, the region’s stock markets, regulatory agencies, and financial regimes have pursued better control and predictive systems that reflect the models and advances seen all over the world, and they have adopted more efficient tools to succeed in these goals.

Against this backdrop of improved economies and enhanced control, South America's countries have been moving ahead in the XBRL field. Brazil, Argentina, and Chile – the  region’s three leading economies which together represent some 75% of its GDP – are involved in projects for adopting XBRL. The convergence toward IFRS is playing an important role in spurring these efforts, and the support offered by the IASB and IAS is notable in this area. The mandate by the U.S. SEC that all listed companies file financial statements using interactive data will also help foster adoption in South America, because it will require about 100 leading companies of the region to begin reporting in XBRL.

Brazil, Argentina, and Chile will likely begin the process of developing their own XBRL jurisdictions this year. This will be a great step forward in increasing an active presence and diffusion of XBRL in the region. The balance of this post provides a brief description of the main projects and initiatives going on in the region, with the ultimate aim of implementing the XBRL standard throughout South America.

Argentina

On October 1, 2008,  the Central Bank of Argentina  (BCRA) decided to begin the process of establishing an XBRL Argentina Provisional Jurisdiction. The BCRA will be facilitator of the Provisional Jurisdiction; the co-founders and participant members will be FACPCE, Argentina’s professional accounting association; AFIP, the country’s tax office; and CNV, her stock exchange commission. In the meantime, BCRA  will apply  to be a Direct Participant of XII. 

Under the so-called Balance Sheet Registry Project, XBRL would be introduced for financial reporting in stages, according to the company’s size, market prominence, etc.. When the entire system is in place, XBRLized financial information will be received for about one million Argentine companies. The BCRA – again with the active participation of the FACPE, AFIP, and CNV – is leading the Project. Its main goal through this initiative is to obtain clear credit rankings for different clusters of companies in Argentina's economy.

The FACPCE will help in obtaining legal approval of the system. It will collaborate with BCRA in the development of the financial data sets necessary to develop credit ranking models. The AFIP will provide the electronic infrastructure and digital signatures required for implementation. The CNV will take care of the regulatory issues for the listed companies that will join the system in its first stage.

The FACPCE and CNV are leading the convergence initiative between Argentina GAAP and IFRS for 2010.

Brazil

Members of an initiative to establish an XBRL jurisdiction in Brazil have been in contact with the Jurisdiction Development Committee of XBRL International. In addition, the University of Sao Paulo has presented an XBRL taxonomy to the Taxonomy Recognition Task Force of XII.

Still in its initial stage, the implementation of XBRL is being studied as part of the Balance Sheet Registry Project  for Brazil, an effort being led by the Tax Office of Brazil (Receita Federal) and the Central Bank of Brazil (BACEN).

Over the past few years, BACEN and the Stock Exchange Commission of Brazil (CVM) have both decided to move to IFRS. In 2006, BACEN issued a resolution that would mandate IFRS for the banking sector in Brazil from December 31, 2010. On July 13, 2007, CVM published instructions that would mandate IFRS for all of Brazil’s listed companies for periods ending in 2010.

Chile

In October 2008, the president of Accountant College of Chile (CONTACH) offered that institution as the facilitator for the development of the XBRL Chile Jurisdiction. CONTACH’s Board of Directors includes representation of each state of Chile. This month the Board will likely ratify the President’s decision and begin the process of developing the XBRL Jurisdiction.

The Stock Exchange Commission of Chile (SVS) has developed electronic reporting with XBRL for listed companies of Chile. Companies will begin to report for periods ending June 2009. For this project the SVS developed an XBRL taxonomy based on IFRS version 2006.  While CONTACH will be organizing the Chile jurisdiction, the SVS has decided to apply to be a Direct Participant in XII.

Over the past three years, CONTACH has been working to converge to IFRS. This project has been funded by Inter-American Developing Bank (IADB).  Beginning this year, Chilean companies will have to report in IFRS.

Uruguay

Uruguay’s National Internal Audit Office (AIN) and the Central Bank of Uruguay (BCU) have been leading projects -- funded by the World Bank -- to improve  transparency in local financial markets. One goal of the project, which began in 2007, is the modernization of the country’s Balance Sheet Registry system, which is still based on paper submissions of company financial statements.  The AIN has decided to implement XBRL for electronic reporting this year.

The AIN will probably apply for direct membership in XII to support recognition of the taxonomies used and to enjoy the benefits of being part of the XBRL international community.

As member of the transparency project, the BCU is interested in modernizing the reporting system of commercial and industrial companies and the banking sector as well. In view of this objective, it is analyzing and studying the benefits of implementing XBRL. If the BCU this year decides to implement XBRL, it will apply for direct membership of XII.
 

Written by Matt Kelly     Posted on January 8, 2009
 
Matt Kelly is editor-in-chief of Compliance Week, a magazine and online newsletter on corporate governance, risk, and compliance. Prior to his role at Compliance Week, Kelly was a reporter and contributor on corporate compliance and technology issues for magazines such as Time, Boston Business Journal, eWeek, and numerous other publications.

Well, after three years of hype and months of irritated anticipation, the XBRL community finally has what it wanted:  an order from the U.S. Securities and Exchange Commission that mandates use of XBRL technology in financial statements.

Somehow, though, I suspect the revolution will be neither tagged nor televised.

I applaud the SEC for adopting an idea that’s noble in theory. When I first started paying heed to XBRL in 2005, I dismissed it as a highfalutin IT dream with little real consequence to investors. Three years later, I stood corrected; once XBRL reader software was produced, I could see that it had some mighty attractive features and capability — but it still seemed to have little consequence to investors.

I tend to divide the investor community into two camps: the individuals who shout about stocks on eTrade and track their portfolios on Quicken software, and the professionals who do all manner of secretive analysis before making block purchases. And in three years of reporting about XBRL, I’ve heard nobody in either camp demand that companies start publishing financial data in XBRL. At best they’re enamored of the idea once I explain how XBRL works, but that’s where it begins and ends.

On the corporate side, executives’ attitudes have shifted in the last 12 months from a cynical skepticism to something like a benign curiosity. Now that companies have had several months to study the SEC’s mandate, few say they can’t achieve compliance; they just don’t feel much urgency to do, beyond the SEC telling them to comply. All those sessions at XBRL International conferences touting the wonders of interactive data for internal reporting and operations? Not on anyone’s radar screens, especially in these cost-conscious times. The SEC has mandated XBRL filings, so companies will prepare their reports, stick some XBRL instance documents at the end of their filings, and be done with it.

None of this is to say I expect XBRL to die on the vine. On the contrary, I believe XBRL is a technology with amazing potential. I believe the SEC mandate — phasing in XBRL over three years, with the largest 500 public companies going first — is a prudent approach, and one that large U.S. companies will certainly be able to handle by 2010.

But we’d all do well to remember 1993, when the techno-geeks in Corporate America started chirping that we all needed to create these newfangled things called “websites.” It took 10 years for companies to digest the full potential of websites and stamp them onto the corporate DNA from Day 1. (Lots of companies still haven’t managed that, come to think of it.) We should expect a similar adoption curve here: impressive in the end, but long and slow in the start.