Bob Schneider is a Partner in 
Wilson So is the Director of Hitachi Consulting Corporation An Interview with Gerald Trites (Part 2)
Gerald Trites is Project Director of XBRL Canada and writes the XBRL Canada Blog. He is an information systems researcher and consultant who is a Research Fellow with the Center for Information Systems Assurance at the University of Waterloo. Previously, he was a Professor at St Francis Xavier University and a partner of KPMG.
This is the second installment of a two-part interview; Part 1 contains questions 1 to 5.
(6) The Canadian Securities Administrators (CSA) launched a voluntary XBRL filing program in early 2007. What is your view on the progress of the Canadian VFP? How do you see the prospects for an XBRL mandate for financial reporting in Canada? How much does a mandate in Canada depend on what happens in the United States?
Progress with the Canadian VFP has been virtually non-existent. Companies at this time are preoccupied with the pending adoption in 2011 of IFRS, and they don’t have the time and energy to devote to XBRL, or feel they don’t. But going to the last part of this question, Canadian adoption depends heavily on what happens in the United States. The Canadian and US capital markets are highly integrated, and given our relative size, we cannot afford to be seriously out of step with the US. The new SEC rule has already had an impact and forced some adoptions in Canada, because there are roughly 300 companies that are cross-listed with US exchanges. Not all of them need to adopt under that rule right now, but there will be more next year and then the year after. I anticipate that the Canadian Securities Administrators will come out with their own version of an XBRL filing requirement in or around 2011.
(7) As you mentioned, Canada is slated to adopt IFRS by 2011. How does this relate to the implementation of XBRL in Canada?
It goes back to your previous question. There is a direct linkage established by the SEC, in that they have mandated in their new rule that the cross-listed companies who meet the size test in the rule need to file XBRL documents if they report in US GAAP or IFRS. There are some that use US GAAP and therefore need to report now. However, when IFRS comes into force in Canada in 2011, it will automatically bring them in under the rule, and require them to file XBRL documents. Also, it is likely that the CSA will bring in their own rule after IFRS is implemented. That’s my conjecture. So the implementation of IFRS is closely linked to XBRL adoption.
Unfortunately most companies don’t get it — they don’t get the fact that it would make sense for them to do both IFRS and XBRL at the same time. They think that would be unnecessarily adding together two big projects and complicating their lives. But in fact doing them together will lead them to do a better job on both, because many of the analyses required to adopt IFRS and XBRL are the same analyses, but taken from a different perspective, so one can benefit the other. Spending some time on the IFRS taxonomy, the IFRS Guide, and related IFRS standards should make this clear.
(8) In a March 2006 post on your XBRL Canada blog, you wrote that progress in adopting XBRL had been particularly notable in Europe. In a post in January 2008, you wrote “Mr Cox is simply trying to drag the US into the 21st century and catch up with the rest of the world.” What is your current thinking on how Europe compares with the US and the rest of the world in the pace and robustness of implementation?
XBRL implementation in both Europe and Asia has been ahead of North America for years. The implementation in the Netherlands is legendary. In other countries, XBRL is widely used in financial industries, stock exchanges, tax authorities, and various other areas. In Canada, take-up has been very slow. In the US, the FDIC has made good use of XBRL for bank reporting, but other than that, the driver has been the SEC, and particularly Mr Cox. Without that influence, the US would be similar in take-up to Canada, and way behind Europe and, for that matter, Asia.
(9) Are you surprised by the pace of adoption of XBRL in the US? Has it been faster, slower, or about what you had expected?
It’s been slower. XBRL was invented in the US and the US has long been noted for innovation. So it would have been reasonable to expect that an innovation that made such sense would have taken off much faster. However, it must be said that many of the strongest XBRL innovators have been based in the US and this continues today. The difference is that many of these innovators are working with other countries to help them with their adoptions.
(10) There’s been much discussion about how XBRL will change the nature of financial reporting by facilitating EBR, real-time delivery of KPIs, and enhanced narrative reporting. How do you see the impact of XBRL on innovative methods in financial reporting?
Major. Even without XBRL, there is a trend in financial reporting to reporting of performance measures and individual data points. With XBRL, this will become much more common, because of the ease with which data can travel along with its context. Also, electronic reporting is becoming the central mode of reporting. We have finally moved away from the paper paradigm, and reporting on websites is now the core medium. And now things like YouTube, blogs, and Twitter are becoming common. So we have a very strong move to electronic reporting, and this is what XBRL was made for. It will help to shape this new paradigm.
(11) You have long experience in accounting education, both as a professor and in your work with the Canadian Institute of Chartered Accountants. With respect to XBRL, what would be your advice to today’s generation of accounting students? What would be your advice to accounting professionals in mid-career?
XBRL represents the vehicle of the future. But it’s not the final answer. There will be other electronic tools and probably more efficient and advanced ones. Students in accounting need to learn about XBRL and what it means. They do not need to learn the technical details. That would be like leading them to learn the technical details of database engineering or ERP structure. They do need to understand the accounting and auditing issues that emanate from XBRL, both in terms of the specific issues around judgment in tagging, the relationships of taxonomies to accounting standards, the meaning of instance documents, and how they would be used. These are all accounting issues.
In addition, there are the modifications to the contemporary curricula that are certain to come out of increased use of XBRL and other electronic tools, issues like data level reporting and assurance, materiality in data level reporting, the shape of an accounting model that includes nonfinancial data, and so many others. There needs to be more research in this area as well. Unfortunately, accounting academics, particularly those writing mathematical treatises for top-tier journals, are hopelessly mired in their own bog of irrelevance, and don’t do research that is useful to the practice of accounting.