This is the last part of a four-part interview. The first part offers basic information on XBRL CH; the second discusses the unique Swiss environment for XBRL adoption; and the third deals with questions on Swiss vs. European regulatory frameworks, as well as non-FR XBRL applications. In this final segment, Chris reflects on more general issues of XBRL adoption.
9. In an interview with this blog two years ago, in response to a “Why aren’t more analysts using XBRL data” question, you said:
It’s a classic chicken-and-egg problem: analysts are not aware of XBRL, therefore they do not ask for it. They will not pay much attention to it as long as there is no clear perspective about an impending, large-scale availability of XBRL formatted information. ….It’s all or nothing, really. That’s why scope and momentum behind the movement to XBRL are critical.
Two years on, with the SEC’s XBRL mandate proceeding (although by no means fully implemented), do you continue to hold the view that analysts will use XBRL data once large-scale implementation is realized?
Absolutely, although I would not want to hold my breath until it happens. I am still waiting to see some cloud-based applications similar to that hedge fund using Twitter to gauge the market sentiment in stocks. The complexities of the accounting semantics should become manageable by using appropriate tools. It will take leaders to pioneer the use, probably first in the specialist segment. But once the first successful models are in place, you’ll have to beat the herd of imitators away with a stick. It has always been like that.
10. The fallout from the financial crisis continues on a massive scale, as evidenced by the sovereign debt crisis in Europe and the housing troubles of the US. What role, if any, do you see for XBRL in ameliorating these problems?
I continue to hold the view that XBRL is not much more than an efficient information vector. Transparency requirements will have to be enacted by standard-setters as far removed from political meddling as possible, and with as clear and non-conflicting a mandate as possible. Secondly, XBRL should be fully integrated into the standard-setting process, so that everybody involved in the process is aware of the new possibilities offered by the medium, as I tried to imagine in this recent Accounting Science Fiction post.
11. Views of XBRL tend to fall into “half full/half empty” categories. The optimists witness XBRL becoming the global standard for FR in the key reporting regimes of the US, Europe, and East Asia. The pessimists see XBRL adoption as being driven entirely by government fiat, lacking any significant private-sector demand or applications.
How do you assess the environment for XBRL today, and what do you predict for its future?
I’m not sure the optimist / pessimist setup is useful in any way. It is a fact that XBRL is becoming the global standard for this type of information flows. And I happen to hold the view that in the wake of the crisis, the distinction between government and the private sector has become largely academic in practice, at least for the finance industry. This is not to say that I condone of it, but it is unfortunately a fact as well.
The environment for XBRL continues to be favourable as it caters to an evolving transparency megatrend, also represented by Wikileaks for instance. Privacy is attributable to individuals, but not to organisations because of their immanent agency issues.
That said, we need to pay attention to the practical implementation of transparency through XBRL. It is all too easy to destroy its usability and usefulness by means of bad architecture and/or bad reporting standards – we are not going to solve any problems just by throwing our preferred four letters at it. XBRL requires diligent use.
And then, there is another issue that I am a bit nervous about: it’s the business model of XBRL, the organization. Everybody agrees that it is not sustainable in its current incarnation, but I have yet to see a valid proposal that is. But I have no doubts that this problem will be solved, even though a solution may be beyond the reach of current organizational politics.
So, applying Paul Saffo’s forecasting toolbox of Constants, Cycles and Novelties to XBRL, I’d say that its future is brighter than today’s post-mandate gloom might lead us to expect. It is clearly in line with an important social and technological trend, but its perception is momentarily cycling down. Where the next surprise might come from is anybody’s guess, but I’m having trouble imagining one that is unfavourable to XBRL.
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