Written by Chie Mitsui Posted on November 22, 2009
Chie Mitsui is a Data Analyst at Nomura Research Institute, where she is helping design NRI’s new XBRL-enhanced services. She previously worked as system designer for information service products at Jiji Press, a Japanese financial news and data distribution company. Ms. Mitsui holds a masters in physics from the Tokyo University of Science and is pursuing her MBA.
XBRL Japan held a workshop in February on "How to Use XBRL for Analysis," which I discussed in an interview with this blog. The attendees -- analysts, data intermediaries, and representatives of securities firms -- focused on how users can analyze statements using the XBRLized earnings digests that the Tokyo Stock Exchange has been providing on the Web since last year.
Besides showing the audience on how to use XBRL for analysis, the seminar also served to extend the dialogue regarding continuous improvement of the data standard. In order to serve users better, I believe we need (a) more testing from users' perspectives, and (b) greater opportunity for them to express their views.
Toward that end, we hosted a second seminar with the same theme in September. This time we treated US and Japanese XBRL data together for comparing companies’ performance across the two jurisdictions. Enabling fast, inexpensive, and user-friendly comparisons of this kind should be one of the main objectives of XBRL.
The important lesson we learned from this exercise is that there are considerable challenges to selecting meaningful sets of elements from among XBRL data. When we asked users to choose several elements (accounts receivable, revenue, etc.) to compare the financial performance of Japanese and US companies, they found the exercise difficult and confusing.
There were two main problems:
Differences in the style of element names Elements are developed under different business cultures and accounting traditions in different countries, leading to difficulties in identifying elements that can be meaningfully compared.
Differences in the structure of taxonomy Even if the element names are different, if the structure of the taxonomy is similar, then selecting the correct element wouldn't be much of a problem. But the different approaches to naming elements, the similarities among them, and their vast number – US GAAP taxonomies have more than 15,000 elements -- created confusion for participants. In the end, the XBRL tools we employed couldn’t enable the user to select the correct set of elements and contexts.
We used computation of the receivables turnover ratio (sales/account receivable) as an example. When selecting sales from Japanese financial statements, users just choose the element “NetSales” from the “IncomeStatement” and the “Current year” period context. All Japanese companies’ taxonomies have the same name for this element, hence users can easily select it.
However, naming for US XBRL financial statements varies. Each company decides its own names for elements, presentation links, and contexts. For users unfamiliar with US company financials, such inconsistent naming causes confusion during the selection of elements for comparison. Because Japanese users are used to a consistent naming style, they have considerable difficulty in selecting elements from US taxonomies. (Japanese taxonomies also have their problems, as I described in the interview.)
At the workshop, we discussed how feedback from users opinions could successfully be channeled to taxonomy makers. In my view, XBRL Japan should lead this effort. The XBRL groups in Japan and the US, as well as the IASB and other teams around the world, should work together to formulate international standards and rules for taxonomy design.
We hope to continue the dialogue on how XBRL taxonomies should be created from the perspectives of international users. Our next seminar will focus on comparisons between IFRS and Japanese XBRL, and I look forward to discussing the results of the meeting.
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