Written by David vun Kannon     Posted on June 30, 2009

David vun Kannon was one of the first Co-Chairs of the XBRL Specification Working Group and has been an Editor of every version of the XBRL Specification. He is a Director with the Technology and Knowledge Management team of Deloitte & Touche LLP.

Recently Kurt Cagle wrote a post on this blog on alternative representations for XBRL. He freely admitted that his perspective was an interest in the XML language design, not based in domain expertise. In one of his follow-ups to a Comment on his post, he says:

Many of the big headache issues that have faced the XBRL.org committee could be readily solved if they simply admitted the obvious -- that XBRL IS XML, not some weird variant, and that the tools exist, are freely available, are powerful, and are preferable to the cumbersome solutions put in place to try to turn XBRL into its own meta-language.

I’m actually somewhat surprised by Kurt’s stance from the outset, namely, that significant and insightful criticism of a design can be accomplished without knowing very much about what business problem the design was trying to solve. In fact, this business problem was stated during the beginnings of XBRL to be very broad – namely, a single language for business reporting that would be applicable to every link in the information supply chain.

XBRL makes an important distinction. Business reporting data has a bimodal distribution. Some data is fact data, produced by many reporters, changing every period. Some data is metadata about the facts, changes slowly, and is primarily produced by sources other than the fact producers. Fact producers must, however, be able to produce and integrate their own metadata, and multiple metadata systems must be able to be interrelated. In a nutshell, this is the business problem that XBRL has historically aimed to solve.

Facts do carry contextual metadata, and XBRL’s design for handling this has changed over time. With the rise of dimensional XBRL, I could easily be convinced that we have not done a great job with context metadata, just OK. Contexts were designed to be shared between many facts, and dimensional XBRL instances can lead to one context per fact.

But Kurt makes this assertion:

…XBRL has the notion of a context, in which all data items from a given report each have a context attribute which points to a corresponding data structure that gives details about the context: the reporting period, reporting agency, any specifics about the preparer, and so forth. Any XML designer would likely fold up all of the key information about that context into a contained element, with an appropriate identifier, and any elements that span contexts could then reference the primary context as an IDREF.

Frankly, I don’t fully understand this. Contexts today are referenced with an IDREF attribute, so exactly what his suggestion would do better rather than different is not clear.

On the metadata side of the XBRL design, taxonomy design is based on XML Schema and XLink. I still wouldn’t trade the immediate value of schema validation for the forward looking (still, after 10 years) value that may, in the future, accrue to using the semantic technologies of RDF/OWL, etc. There are warts on both XML Schema and XLink that I would love to see fixed. On XML Namespaces, too! Fixing any of them would provide more value to XBRL users that adopting RDF/OWL.

So what does it mean to admit the obvious? Here’s what obvious:  XBRL is a database transfer format in XML syntax. Human readability is not a priority. In applications where that is recognized (such as many banking systems), XBRL has been a quiet success. Several large security regulators are hybrids of data transfer and human presentation, and XBRL has been a tough sell and slow going for these applications.

It still is not clear that the Web, defined as the experience of non-expert consumers, has -- or should -- drive design and technology choices for XBRL. This is a point I made in response to Tim Bray comparing XBRL to RSS in terms of trajectories of technology acceptance. I do not think they are comparable, certainly not just because they are both XML. XBRL both in design and concern (and adoption path) is closer to RDBMS than the Web.

This is NOT because database vendors had any large contribution to the design of XBRL. It is because of the choice of business problem to be solved. It is still true that it is more important for XBRL to displace CSV files and Excel spreadsheets as the data transfer format of choice in corporate culture than it is for XBRL to shift focus to another syntax choice.

On the subject of alternative syntaxes, it is important to make a distinction between a replacement syntax and multiple syntaxes. A replacement syntax faces a powerful hurdle of overcoming the strength of incumbency. You can’t just be as good, you have to be a lot better, to replace an incumbent. Multiple syntaxes face the issue of confusing users. A general rule of language design is to not give multiple ways to “skin the cat.”

It is a truism of XML that you’re only a style sheet away from some other format. But multiple exchange formats seriously detracts from the value of an exchange format in the first place. There is also the problem of exchanging executable code (the style sheet) as well as data.

If XBRL was XML in the "admit the obvious" sense that I think Kurt meant, then there would be no XLink in XBRL. The XML schema would instantiate a particular containment structure that matched the containment hierarchy chosen by ... who? And that would make loading thousands of reporting companies filings into a regulatory database easier ... how?

I forgot, it’s obvious.

Written by Kurt Cagle     Posted on June 23, 2009

Kurt Cagle is the managing editor of XML Today and is a contributing editor to O’Reilly Media, DevX, and TechNewsWorld.  He is working with Diane Mueller on a general XBRL book for O’Reilly Media to be published in early 2010. Mr. Cagle runs a consulting firm, Metaphorical Web, dealing with future technology issues, XML, distributed computing, and the like. He can be reached by email.  

The Semantic Technologies 2009 Conference in San Jose ended recently, a fascinating event in what I'm coming to consider the most bleeding edge arena of development on the Web today. It was perhaps more notable this year for the surprising number of "suits" in comparison to the crowd in recent years of PhD students shepherded by their respective professors. The Semantic Web is changing, maturing, and reaching a point where development is beginning to move beyond the laboratory and toward real world solutions.
 
Semantic Web and XBRL issues have previously been ably explored on this blog by Andy Greener and Ashu Bhatnagar. I wish to build on their work by comparing semantic technologies.  

The focus of XBRL would seem to be tailor made for the Semantic Web, specifically for technologies such as RDF, RDFa, and OWL. For those of you unfamiliar with the terms, RDF is short for the Resource Description Framework, a rather glorified term that, at the most basic level, provides a way to describe both resources (anything that can be cleanly represented as a data model, such as a quarterly filing, a set of documentation, or an invoice) and the relationships (or links) between those resources. To put things into historical perspective, XLink (which linkbases are built on) was effectively abandoned by the Semantic Web community fairly early on because of the difficulties inherent in dereferencing given content, and RDF became the logical successor.

RDF syntax originally was based in XML, and there is still an XML representation. However, other notations that were less verbose and dense also emerged, including the N3 notation and Turtle notation, which is a superset of N3. XML and Turtle notations are essentially synonymous, and translators for moving between RDF/XML and RDF/Turtle are freely available. Another notation -- and one that holds considerably more potential for XBRL -- is the RDFa format being supported in the W3C by Mark Birbeck. RDFa provides the same relational structures -- such as the fact that a given text block is a date or taxable account total -- that can be encoded within normal RDF, but does so using attributes within HTML or other related XML content. This means that an XBRL "report" could be written in a normal HTML markup, but with critical properties encoded via attributes of elements to provide the detailed information for some external processor.

The OWL moniker is a little less obvious. It derives from the Web Ontology Language, the letters inverted in order to create a somewhat easier to remember acronym. OWL is a language for describing classes, class properties, and individual instances of such classes, which sounds somewhat similar to the XML Schema Definition Language (or XSD, as it's usually now) in that it can be used to describe entities. The difference is that OWL can describe a considerably broader array of relationships, and those relationships can include more sophisticated "graphs" than XML (where a graph can be seen as the foundation of a data structure) because what's being modeled is knowledge, rather than simply objects. This distinction means that it becomes possible to make inferences by following the relational assertions with the classes. OWL includes support for a query language called SPARQL (a recursive acronym meaning SPARQL Protocol and RDF Query Language), which makes it possible to explore such assertions, with the results being passed back as XML documents.

A second, perhaps more critical, distinction is that unlike XML Schema languages, RDF and OWL assumes an open assertion model. That is to say, the model can change dynamically as new conditions emerge or as alternative needs arise. This differs from an XML model where in general the various properties are arranged in a comparatively limited hierarchical structure (more flexible than a relational database model, but nowhere near as flexible as RDF/OWL). This flexibility can come at some cost, of course. RDF/OWL queries are usually slower than the equivalent XQuery or relational database query operations, but given the use cases involved, this may not in fact be that big of a limitation.

If this sounds similar to how XBRL schemas are created, that's because it is. An XBRL schema typically is a bundle of assertions, either property assertions such as the fact that a company's total asset value is a specific value or that the asset value property is associated with the context of 3Q09 earnings. Similarly, that asset's English long label can similarly be bound to the total-asset-value property. These are all triples, and the RDF/OWL ontology could very easily encompass this information and then produce the output in one of any number of formats as necessary.

Moreover, such assertion chains can produce fairly sophisticated automated analysis. For example, through sets of OWL assertions you could get a listing of companies and their earnings derived from capital  investments in the 3Q09 where the reports are for companies involved in the airline industry, that have P/E ratios exceeding 25, and that are located in the Pacific Northwest. Such a query would be hideously complex in SQL, doable but still complex for an XML database, and relatively easy within an RDF/OWL database.

What's more, an RDF triple store (which is what such an assertion database is called) can also work with information outside the scope of the XBRL in a principle called Linked Data. For instance, a second triple store might contain a list of biographies of C-level managers for Fortune 1000 companies, including previous companies that they worked for. Because such Semantic databases employ a common underlying transport language (RDF), this means that such SPARQL queries could incorporate both sets of data in order to "pivot" on a given individual in order to see his track record of earnings by company he worked for to correlate whether he's generally proved an asset or liability to the company.

The advantages inherent in an RDF representation of XBRL should make a compelling case for being able to express XBRL documents in this manner, especially if such information could be extracted from annual reports or other reporting documents via RDFa. Indeed, Diane Mueller, a member of the XBRL.org Board of Directors, and Dave Raggett, a W3C Fellow, a developer of the HTML specification, and one of the key people in the Semantic Web space, are currently working on such a proposal for XBRL.org (full disclosure: I am currently working on a book with Diane on XBRL for O'Reilly Media). Additionally, an XBRL/Semantic Activity Group has been established within the W3C in order to explore these very options, and will meet face-to-face for the first time in conjunction with the XBRL.org annual conference in Paris in July 2009.

The Semantic Web has been moving out of the research space for a few years now, to a certain extent due to a growing understanding of the concepts, maturity of the tools, and opportunities to apply them. XBRL is likely to be one of the more significant use cases for the technology as we move into the distributed cloud of data and all that this implies.

Written by Scott Gaul     Posted on June 18, 2009

Scott Gaul is the Product Development Manager for MIX, the world’s leading information provider for the microfinance industry and the developer of industry benchmarks and performance analysis of microfinance institutions. He will be making the presentation MIX: A Microfinance Use Case for XBRL at the 19th XBRL International Conference in Paris. 

Imagine this scenario: an entire sector of financial institutions lending solely to low-income individuals without requiring the conventional safeguards of collateral and proper documentation. A superheated investment climate pushes institutions to package these loans into a set of increasingly sophisticated financial instruments and sell them to investors. Many of the institutions are unregulated.

Sound like a recipe for disaster? It’s not the subprime lending market. It’s microfinance.

The parallels have not gone unnoticed. Microfinance institutions (MFIs) have made a business of working with the unbanked for decades, developing new lending and saving strategies tailored to the needs of the poor. As the sector has garnered increasing commercial interest, microfinance practitioners have been working on initiatives designed to address and prevent the types of excess seen in the subprime sector. These initiatives focus on customer protection,ethical principles for microfinance institutions, transparency on interest rates, and improved measurement of social variables.

In large part, the microfinance sector has been able to weather the current crisis. Investment has slowed in some sectors, but global catastrophe has yet to strike.

One factor that we like to think will help microfinance institutions weather this crisis is a long-term focus on transparency. When your core business has a tendency to engender surprise or confusion (“You lend only to poor people? Poor people can open savings accounts?”), transparency has its benefits. Open, voluntary exchange of information enables MFIs to win the trust of investors, regulators, researchers, and other MFIs.

XBRL can be a valuable tool for increasing the transparency of MFIs. Since 2002, the Microfinance Information Exchange (MIX) has operated as a global public platform for exchange of information on microfinance institutions and a central repository for this information. Our organization collects data from 1,400 MFIs for presentation on our website, Mixmarket.org, and incorporates the resulting information into periodic analysis and benchmarks. To better organize, collect, and present this data, over the past few years, we have looked to XBRL as a solution. While our business processes have had to evolve along with XBRL, our small size has also enabled us to adjust quickly.

We have adopted a data-driven model for data collection. Our MFI partners operate in over 100 countries under many different accounting standards and regulatory regimes. The institutions vary wildly in size, capacity, and willingness to share information. Participation is also completely free and voluntary.

For all of these reasons, we cannot easily create or enforce a one-size-fits-all form. Instead, our focus is on providing a framework in which our analysts can extract and model information relevant to the microfinance sector from MFI financial statements such as audits, ratings, and due diligence reports. We have developed a taxonomy based on IFRS combined with disclosure guidelines and expertise from the microfinance sector to capture this information. By the end of the year, we hope to have captured data from over 1,000 MFIs through this taxonomy, and early results show that we can capture a much wider range of data points using this approach.

We expect that one of the main benefits of this approach will be increased financial transparency within the MFI community. As the complexity and detail within MFI financial statements increases, we will be able to capture and share information. In the long run, we hope the taxonomy can also support local regulators and international networks seeking to use standardized reporting as a basis for decision-making. While there are certainly challenges ahead – XBRL has little name recognition or support within the microfinance sector, and we still have not mastered presenting or analyzing XBRL content in a way that would make the benefits easier to communicate – these are a more interesting set of problems now that we have a handle on the data.
 

Written by Sean Gilbert     Posted on June 11, 2009

Sean Gilbert is Technical Development Director at the Global Reporting Initiative, the Amsterdam-based provider of the world’s most widely used sustainability reporting framework. He is responsible for overseeing the process that relates to the development of the GRI Reporting Framework (Guidelines, Supplements, and Protocols) and the accompanying resource material. Sean leads the GRI project to develop an XBRL taxonomy for the disclosure of companies’ and other organizations’ sustainability performance.

Integrating Nonfinancial Data into the Decision-Making Process
It’s clear that by providing preparers and users of data with the means to integrate financial and so-called nonfinancial data  (i.e., that which discloses a company’s environmental and social performance), XBRL offers exciting possibilities. The potential for XBRL to provide the users of corporate sustainability performance data with the leverage to push and pull information that meets their requirements is certainly there. That was the thinking behind the first version of an XBRL taxonomy for GRI’s sustainability reporting guidelines, released in 2006.
 
Of course, the users of sustainability data are no longer just those on the fringes of the investment community. Environmental, social, and governance (ESG) information is increasingly sought after by investors wanting to know how well positioned a company is to meet the challenges posed by critical sustainability issues, such as climate change and energy security. Getting this information to investors in an efficient way is key to its integration into the investment analysis process. It should be a top priority for the thousands of companies globally who now spend time and effort disseminating their sustainability performance, with investors as one of the key audiences they seek to engage.

And Not Just for Investors…
But beyond this, it’s not just investors who can benefit from a taxonomy that can be manipulated to provide tailored information on a range of ESG issues. We’re all aware of the rising importance consumers around the world are placing on the provenance and impact of their products and services. Rising in line with this interest, however, is a growing skepticism about the claims companies make for “green,” “environmentally friendly,” or “ethical” products. Providing consumers with data on what, for them, are their most important ESG criteria – whether that be greenhouse gas emissions, labor policies and practices, pollution and effluents, human rights, or a host of other standards -- goes some way to counter claims that a company is merely “greenwashing” its publics.

An XBRL taxonomy manipulated by intermediaries to provide Web and other electronic- based information direct to consumers can facilitate this information flow. And providing this data to consumers in such user-friendly forms saves wading through pages of print or PDF information and thus has clear benefits for company, intermediary, and consumer.

A Fine Idea, But a Slow Start
So, how many companies are tagging their sustainability disclosures in this way?  The answer is: surprisingly few. Why is this? Perhaps companies are unaware of the ease with which it can be done. As previous contributors to this blog have noted, XBRL is not that hard an idea to get your head round, and implementing the technology involves very little in terms of investments in time or cash.

But from a slow start, interest is certainly building. GRI is now convening a group of investors and companies to identify how to further improve the taxonomy, such that it can become a routine tool to support company-investor exchange of information. And the first companies are now making their sustainability performance data accessible via XBRL.

The output of GRI’s project will be a second version of the taxonomy that can potentially reduce the time needed to respond to many of the basic information needs of investors and other key stakeholders.

I’d urge companies to get involved now and lead the pack in meeting the needs of the diverse groups of stakeholders who want access to sustainability performance of the companies they invest in, buy from, work for, and supply to. The information is required. The appetite is there. Which companies will benefit from the rewards to be gained through satisfying that appetite?

If you believe in the need for getting this information across, then learning how to use the technology now, while it’s still formative, can only be to your advantage.

Written by Thomas Verdin     Posted on June 4, 2009

Thomas Verdin is Chair of the XBRL Europe Business Registers Working Group and CEO at THEIA Partners. He can be reached by email.

Business registrars in Europe have published millions of XBRL files and the number continues to grow. This trend started with companies’ annual accounts and is now spreading to companies’ various legal filings, affording new opportunities to increase transparency, share information among national registers, and facilitate benchmark analysis by end users.

The first XBRL projects in Europe were related mainly to the banking sector, initiated by the Committee of European Banking Supervisors (CEBS) using the Common Solvency Ratio Reporting framework (COREP) and the Consolidated Financial Reporting framework (FINREP) regulatory templates and taxonomies.

Now, however, another use of financial information’s universal language has appeared in Europe, concerning business registers. As business registers operate independently in each country, the push to embrace XBRL has been less coordinated. In fact, at the 2007 XBRL International Conference in Eindhoven and in the months following the conference, it came as something of a surprise to each national business registrar to learn that their neighbor countries also had started XBRL filing. The movement has quickly taken form, however: registers of major countries deal with more than one million national accounts each year, so projects focused on companies’ annual accounts quickly generated hundreds of thousands, then millions, of XBRL files.

On this front, the National Bank of Belgium’s Central Balance Sheet Office is considered among the pioneers. In April 2007 the NBB introduced free online software for drawing up annual accounts in the form of an XBRL file. The NBB now collects more than 92% of Belgian annual accounts in the XBRL format. A recent study estimates the net savings in 2008 of the introduction of online filing of annual accounts in the form of an XBRL file to be  €17.3 million (23% of all filing charges) for Belgian enterprises and €0.5 million (45% of all filing charges) for nonprofit organizations.

Other European business registrars providing XBRL services include the following:

• In the Netherlands, the Kamer van Koophandel has adapted its system to accept XBRL filings for financial statements from the year 2005 and further. Accounting software editors have been associated so that it is possible to send instances directly from their tools.
• The German BunderAnzeiger offers choice among different filing formats including XBRL with the local GAAP taxonomy.
• Infogreffe now publishes the XBRL financial statements of French companies.
• In Italy, it is mandatory to deposit an XBRL instance as a signed annex to the annual account folder for companies closing their fiscal year after February 16, 2009.
• Swedish, Danish, Serbian, and British registrars, among many others, have displayed a strong interest in the XBRL language or already benefit from its advantages.

As it is adopted by an increasing number of business registrars and annual accounts publishers across Europe, XBRL appears as their common language. This represents the first time that the same standard is used by so many registers, and opens opportunities for more efficiency and transparency. Even if local GAAPs remain local, and local regulations differ, it now becomes possible to produce consolidated data of cross-border companies, define transnational sector analysis, and offer new benchmarking capabilities by sharing the same technology.

With these opportunities in mind, some registrars are starting to exchange XBRL information with their neighbors, sharing annual accounts figures but also other economic or legal information like companies’ name and address updates. Making these first cross-border contacts develops new synergies, which may yet lead to defining widespread taxonomies and joining forces on IFRS consolidated accounts, whose quantity is reduced at each national level and therefore are worth a collaborative treatment.

To encourage such interactions, a Working Group has been created within the XBRL Europe association. XBRL Europe connects European jurisdictions and continent-wide organizations like the European Federation of Financial Analysts Societies (EFFAS) and the Global Trust Center (GTC). Its XEU Business Registers Working Group, created in late 2008, offers a place for business registrars and company information publishers to combine efforts and share ideas about XBRL projects and taxonomies.

During its first meetings, the Group prepared an overview of existing initiatives, based on an initial survey with answers from nine project leaders and completed with data from various studies undertaken by the Group’s members. For the next XBRL International Conference in Paris, the EU BR WG wants to transform this overview into a concrete “mapping diagram” showing the similarities and differences that exist across Europe for annual accounts filing with XBRL. This diagram should help identify and establish common and best practices, and consequently increase interoperability.

XBRL affords financial registrars common language and an opportunity for collaboration. Now we must seize the opportunity to speak this language, so that XBRL’s advantages widely enjoyed at national levels become a working reality at the level of all of Europe.