This article aims to analyze XBRL as a solution to answer the technical and organizational requirements of the EC Interconnection Directive for business registers in Europe. It also explains why the XBRL standard better fits with the directive requirements than any other proposed solution, and how XBRL may bring further opportunities to the first interconnection steps made by the directive.

The EC Interconnection Directive

A business register is the official body in charge of collecting and publishing legal and economic data from private companies.

The European Parliament and the European Council adopted on June 13th, 2012 the Interconnection Directive (2012/17/UE) for business registers in Europe. This new text amends the former 89/666/EC, 2005/56/EC and 2009/101/EC directives. It aims to improve cross-border access to company information by requiring Member States to electronically link their business registers.

The European Commission targets to facilitate transparency and reliability of the information, as the directive requires available data on companies should be more regularly updated, especially for cross-border operations. This will help to promote confidence in the European internal market.

Furthermore, the directive introduces the use of a unique identifier for company’s branches. This may be a significant progress as today there is no standard numbering format for companies across Europe, or even in some cases across a single country.

Each Member State shall pass a national transposition of the Directive no later than July 7th 2014 for entry into force in 2017. However, the European Commission has first to define and confirm the data content, the practical organization, the system and technologies that will be used to create the Business Registers Interconnection System (BRIS), so called by the directive. This has to be defined by implementing acts, which are to be published before July 2015.

Different solutions are proposed to interconnect the business registers in Europe, but none of them has been selected yet.

The available technical solutions

Of course, XBRL is used by many business registers in Europe. So it may appear as a good starting point. However some alternative ideas have been proposed to meet the directive requirements. One can name various candidates, such as the UBL standard (Universal Business Language), the EBR infrastructure (an existing network of business registers and information providers), the RMS project (a system to exchange messages proposed by Germany) or the eCODEX project (a EU-funded project to connect national Ministry of Justice).

The Universal Business Language (UBL) is an XML-based dedicated format to exchange electronic data between companies (mainly SMEs). The format contains information that is exchanged via commercial paper forms (orders, product catalogs, delivery notification, and invoices). UBL was developed by OASIS (Organization for the Advancement of Structured Information Standard), a US consortium that drives the development and convergence of electronic standards applicable to e-business and web services. UBL was not initially designed and is therefore not immediately suitable for the exchange of legal information on the identity of the companies.  It doesn’t neither provide data model for financial items. As it is only used in English, this format does not completely meet the multilingual requirements of the Directive.

The European Business Register (EBR) organization is the result of many years of voluntary cooperation between business registers. The mission of EBR is to promote legal and practical coordination between registers including the provisions of a platform for inter-register communications. The legal entity responsible for the operation of EBR is the “European Business Register EEIG”, a European Economic Interest Grouping registered in Belgium. Even if the messages exchanged between EBR members use standardized templates, they are not as widely recognized and opened as the XBRL format is. It also seems that currently the electronic signatures, essential to ensure the legal certainty of the messages, are not in operation on the EBR system and require further developments, which implementations may be uneasy.

The e-Justice Communication via Online Data Exchange (e-CODEX) is another possible line of inquiry. It is a European-wide project for the interconnection of Ministries of Justice. The goal of e-CODEX is to improve the cross-border access of citizens and businesses to legal means in Europe as well as to improve the interoperability between legal authorities within the Union. Even if it may be a bit complex to adapt, as business registers do not exactly relate to the Ministry of Justice in many countries, e-CODEX appears as an interesting infrastructure for electronic exchanges; when XBRL should be a candidate to describe the structure of the exchanged data.

The latest initiative is RMS. It is a solution for registered messaging system development in Germany. We do not have much more information about it and that translates the fact that it is not really used by the business registers.

Part II coming soon...

While the volume of publicly available XBRL financial data has exploded with the SEC mandate, the utility of that data has lagged far behind. Most issuers today would characterize XBRL as an additional regulatory burden from which they derive no benefit. The XBRL promise of faster and more accurate data for better comparability has not been realized. The high use of custom extensions makes comparing all but the simplest financial statements very difficult. If we accept that XBRL will continue to be a reporting requirement, particularly in light of the calls for more market (and government) data transparency, then it is incumbent upon issuers to focus on the quality of their XBRL data to increase its utility. Higher quality data will increase investor usage of XBRL and will provide issuers a new avenue for shareholder engagement.

Quality data begins with XBRL tag selection and minimizing the use of custom extensions. In addition to facilitating comparability for the investor community, the use of standard tags can benefit a company through more effective competitive benchmarking. Creating business rules that are directly tied to an XBRL data set can complement best practices around enterprise risk management. As more sophisticated tools for the consumption of XBRL data become available, issuers will benefit from more insight about the specific areas of their disclosure on which investors are focusing. For an organization to focus on XBRL quality, it needs to look at the tools and teams available to help it realize the benefits of data consumption and analysis.

From a software perspective, organizations should select a tool that helps streamline content creation, review and distribution of XBRL disclosure to improve efficiency, governance and the overall quality of all financial reports. Any tool must be supported by a team with XBRL expertise. If the expertise does not exist in house, then an organization must look for a partner that is willing to do as much or as little of the process as needed. The goal is to create an integrated approach to support the organization’s financial disclosure process. With a collaborative process where various members of the executive team have input – including those financial executives who will use the data for downstream analysis – additional significance is added to how the data is tagged.

When disclosure authors commit to this level of care with the data, organizations will begin using it more frequently and investors will begin to rely upon it, as my colleague Dave Frankel will discuss in our upcoming post about the future of XBRL data consumption.

 

By David Anderman, vice president, marketing and business development, RR Donnelley Financial Services Group

 

Corporate finance executives are getting more vocal over their frustration with XBRL. At a recent Financial Executives International conference, executives said they aren’t using financial data formatted in XBRL for their own data research purposes. They’re simply submitting their financial data in the XBRL format to meet a regulatory requirement.

“This isn’t something I’ve heard my analysts say is useful,” said Nick Cyprus, vice president, controller and chief accounting officer at General Motors at the FEI conference, according to CFO magazine. Finance chiefs at McCormick & Co. and at Johnson & Johnson echoed Cyprus.

Stephen Cosgrove, vice president, corporate controller and chief accounting officer at Johnson & Johnson, reportedly said his own research tools are more sophisticated and capture more than XBRL provides. “We see absolutely no use for it,” Cosgrove said. “It’s just redundant to what we already have.”

Michael Kaplan, a partner at international law firm Davis Polk, asserted that companies are having a hard time adhering to the reporting requirement, whether they perform the job entirely in house or outsource some portion of the tagging. Companies also are finding that the filings and formatting are targeted to investors needs, not internal corporate needs.

The Securities and Exchange Commission isn’t oblivious to the concerns. Paul Beswick, acting chief accountant at the SEC, reportedly said at the FEI conference that his staff has heard from many people who have shared their challenges and their concerns about whether investors are making good use of XBRL-formatted information. He said the SEC’s economic analysis group has found that data aggregators are using XBRL information and find it helpful.

Charles Hoffman, an accountant who helped develop and promote XBRL, said acceptance and utility will follow software development. “There’s no way you can bolt on or send out to a financial printer to have more work done and then have the CFO say with a straight face that there’s any value being created,” he said. The value comes, he said, in changing systems so that numbers are managed and financial statements are created in XBRL rather than converted to XBRL after the fact.

Hoffman predicts the advent of newer and better software will make XBRL more useful to companies internally. He predicts new releases will be rolling into the market in mid to late 2013.

 

Lying just under the surface in the markup language and taxonomy designed for SEC financial reporting, the extensible business reporting language (XBRL) carries a wealth of accounting information that has never been as accessible as it is today. Within seconds, you can examine the 10K or 10Q of a publically traded company and find out the definition of each line item on the financial statements and gain further insight into the information contained inside notes to the financial statements. Want to see how companies big and small are dealing with the latest accounting standards change? Look no further than XBRL. All of this and more is available now and it is free.

A little later in this article I’ll introduce you several online and smart phone tools that will help you unlock the accounting heretofore hidden in financial reporting. First, let’s take a look at where accounting was prior to XBRL, the SEC’s mandate and the ASC or Accounting Standards Codification as maintained by the Financial Accounting Standards Board (FASB).

Prior to 2004 and the start of the SEC’s Voluntary Reporting Program (Rallying Around the Final XBRL Rule and SEC Proposes Rule Mandating XBRL Financial Reporting), accountants who needed to know more about the accounting backing a company’s SEC filing, little information was publically available. When a company reported “deferred tax liability” for example, no one but the firm and their outside CPA assurance team knew for sure what they had in mind and what accounting authoritative literature was being followed. The SEC, working with the FASB and XBRL US (see http://xbrl.us/Pages/about.aspx) set the stage for higher accounting visibility in corporate business reporting by requiring most financial disclosures sent to the SEC be coded in XBRL that contain real information about the accounting behind the submissions.

Accounting Definitions and ASC
Inside XBRL each accounting concept in the US GAAP taxonomy receives two specific links to accounting. The first link is a definition that explains the accounting concept represented by the taxonomy. The second link is a reference to official US GAAP as described in the Accounting Standards Codification (ASC). Each definition and link to ASC are reviewed by FASB, the SEC and the public before they are included in the official taxonomy release.

Refinements to the definitions and links to the ASC contained in the US GAAP taxonomy are maintained by the Financial Accounting Standards Board (FASB). Updates to US GAAP as published in the ASC now include implementation guides detailing suggested accounting treatments and suggested XBRL treatments.

The XBRL Implementation Guide series is part of the continuing effort of the Financial Accounting Foundation (FAF) and the FASB to improve use of the Taxonomy (See http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1176160665046 for access to the implementation guides).

On March 28, 2013 the FAF published the fifth in a series of implementation guides. J. Louis Matherne, Chief of Taxonomy Development for the FASB, commented "FASB is committed to providing guidance to the preparers of financial statements through the issuance of implementation guides. Demonstrating updates to the ASC using possible XBRL implementations will help preparers get the changes right."
A Quick Guide to Online Accounting Resources
Ok, short of carrying an SEC financial reporting professional around in your back pocket, here are a few great places to find up to date accounting information at the tip for your fingers.

• XBRL Cloud’s EDGAR Dashboard: Features a quick guide to recent SEC filings including and in-depth look at the accounting definitions and authoritative literature backing each element chosen. Use the interactive viewer to see the accounting. All company filings are visible which allows you to see how companies are mapping actual reporting to the official US GAAP taxonomy.
• WebFiling’s Taxonomy Analyzer: Type in an accounting concept and you will see all the XBRL elements associated with the concept, a view of where it appears in financial statements and a method for seeing what other elements in the taxonomy are closely related. In the comparative mode, the taxonomy analyzer allows you to view the accounting treatments of up to five companies side by side.
• XBRL.US’s taxonomy viewer was developed by CoreFilings and features a pre-load of the world’s most popular taxonomies. Curious about IFRS reporting? The Yeti tool will allow you to load the IFRS taxonomy and explore concepts. A preview of the new XBRL US GAAP taxonomy (SEC pending) is now available.
• SEC XBRL Viewer: Using United Technologies as an example, click on a financial statement and then hover over a reporting concept. What will be displayed is the definition of the accounting concept and a link to the authoritative literature that stands with the definition.
• The BRIX Project app for the IPhone. This tool can be used to do some very cool things. First, you can look up accounting concepts, and then you can ask the app to find companies that are using the concept in actual filings. Talk about having a financial reporting expert in your pocket! Want to provide accounting help in a meeting? Pull out your smart phone and dial up the accounting treatment of your choice.
• ASKaRef is an online tool for accountants to discover the link between an accounting concept and the XBRL definition and the ASC. This very easy to use tool has the US GAAP 2012 taxonomy as the base for finding the accounting linkage. The beauty of the tool is how quickly you can find the ASC that backs up the taxonomy. Straight forward accounting concept to taxonomy element to ASC. No actual financial reporting can be seen with this tool.
• FASB’s Implementation guides and reference guide: From the FASB.org website, “The objective of the U.S. GAAP Financial Reporting Taxonomy (UGT) Implementation and Reference Guides is to provide preparers with additional insight and supplemental guidance for utilizing the UGT as they create their XBRL documents.” The guide can also be used by non-taxonomy accountants to discover how to implement new ASC pronouncements.
• XBRL.US XBRL Challenge entries. For the past three years, XBRL US and sponsors have offered a challenge to the financial community to create innovative tools using XBRL. The results can be found on the link above. An example of a winning entry is the 2012 winner CalcBench, a free online benchmarking and industry analysis tool.

Each of the above applications and websites has tools that can get you a whole lot closer to the accounting that stands behind SEC reporting. As always, you should seek the help of trained professionals to find the best way to represent your company’s financial accounting. However, you now have just as much access to the most current and up to date accounting information as most accounting firms. Good luck!

The IFRS Foundation has published an exposure draft of the 2013 IFRS Taxonomy for public review and comment. The proposed Taxonomy consolidates all IFRS Taxonomy interim releases that were published in 2012, as well as concepts reflecting some industry practices based on analysis of financial statements prepared by companies in the banking, insurance, and mining and energy sectors.

The Foundation says the proposed Taxonomy is consistent with International Financial Reporting Standards, including International Accounting Standards and IFRS for Small and Medium Entities. It includes changes to IFRS that were adopted by the International Accounting Standards Board through the end of 2012.

Even with the publishing of a newly proposed Taxonomy for IFRS, the Securities and Exchange Commission is not expected to accept the Taxonomy for use by IFRS filers in the United States. The SEC has said it is not satisfied that the IFRS Taxonomy is adequate for use by IFRS filers to meet the XBRL mandate for U.S. public companies.

The SEC has expressed concerns that the IFRS Taxonomy design is different from the GAAP Taxonomy in a way that raises concerns about comparability among filers. The SEC also has expressed concern that the reduced number of tags or elements in the IFRS Taxonomy compared with the GAAP Taxonomy increases the likelihood of companies creating extensions, or custom tags, in their XBRL submissions, which is a further cause for a concern about comparability.

As such, it is not holding IFRS filers responsible for meeting the mandate to submit their financial statements in XBRL as is expected of GAAP filers. GAAP filers began submitting their financial statements under a three-year phased in approach, with the largest companies submitting in 2009. IFRS filers were originally expected to comply with the third wave of companies in 2011.

The SEC said during a November 2012 meeting with the Center for Audit Quality that it does not expect IFRS filers to have to comply with the XBRL financial statements when filing their 2012 financial statements. The SEC has not said when or how it expects to approve a taxonomy for IFRS filers.

During their meeting with the CAQ’s SEC Regulations Committee, SEC staff said they are seeing some determined efforts by IFRS filers to submit financial statements in XBRL by following the GAAP Taxonomy. The SEC staff said such an approach should be abandoned, however, because it carries a risk of providing investors with incorrect or confusing information. Instead, the SEC staff advised IFRS filers to wait for the SEC to approve an IFRS Taxonomy, whenever that may happen.

 

 

 

One of the most important aspects of the documentation is the ability to see the relationship between each data entry field on an APRA form and the XBRL concept and/or dimension that represents that field in the form's taxonomy. The documentation consists of a series of interlinked web pages that allow the user to navigate the XBRL Taxonomy information in various ways. Below is a logical representation of the PET structure followed by an explanation of each page type:

PET Home

The home page for the Plain English Taxonomy documentation. It contains links to:

• The industry index pages. There is an index page for each of APRA industry groupings:
  • Authorised Deposit-taking Institutions
  • General Insurance
  • Superannuation
  • Life Insurance and Friendly Societies
  • Non-regulated Entities
• The data elements index pages, namely:
  • XBRL Concept Index
  • XBRL Dimension Index
  • XBRL Data type index

XBRL Concept Index

This is an alphabetically sorted list of XBRL Items used in the APRA SBR Reporting Taxonomies. Each entry in the list has:

• the XBRL Item label with a link to the XBRL Concept page; and
• a list of APRA Form codes where that concept is used in the SBR XBRL Reporting Taxonomy. Each form code has a hyperlink to the SBR Form page entry.

Example XBRL Concept Index entry
Capital Expenditure Intangible Assets Amount	ARF_332_0_D, ARF_332_0_L, RRF_332_0

XBRL Dimension Index

This is an alphabetically sorted list of XBRL Dimensions used in the APRA SBR Reporting Taxonomies. Each entry in the list has:

• the XBRL Dimension label with a link to the XBRL Dimension page; and
• the description of the dimension (from the label linkbase)

Example XBRL Dimension Index entry
ABN	This is a unique public identifier issued to all entities registered in the Australian Business Register (ABR), to be used in their dealings with government. Companies registered under the Corporations Law and business entities carrying on an enterprise in Australia are entitled to an ABN.

XBRL Data type Index

This page is not currently populated.

XBRL Concept

A plain English rendering of the XBRL Item definition plus links to the usage of the item in the APRA SBR Reporting Taxonomies. The concept pages contain:

• Label. The plain English name for the XBRL item
• TREF ID. The SBR Taxonomy Reference Identifier. This is the persistent unique identifier allocated to each XBRL element within the SBR taxonomies (i.e. It is used as the id value in the XML schema element declaration)
• Data type. The XBRL data type for the XBRL item.
• Period type. The XBRL period type value for the XBRL item (either instant or duration)
• Balance type. The XBRL balance type for numeric items (either credit or debit)
• Business description and Guidance. The business description and guidance label linkbase entries for the XBRL item (in the SBR definitional taxonomy)
• Usage. A table containing a row for each APRA SBR form which uses the XBRL item. Each row contains:
  • D2A Form code with a hyperlink to the SBR form page
  • Label. The label for the XBRL item in the SBR Reporting Taxonomy (for the form code)

XBRL Dimension

A plain English rendering of the XBRL Dimension definition plus links to the usage of the item in the APRA SBR Reporting Taxonomies. The dimension pages contain:

• Name. The XBRL element name for the dimension.
• Label. The plain English name for the XBRL dimension
• TREF ID. The SBR Taxonomy Reference Identifier. This is the persistent unique identifier allocated to each XBRL element within the SBR taxonomies (i.e. It is used as the id value in the XML schema element declarations)
• Type. Either "Predefined" for explicit dimensions (the dimension has dimension members) or "Not Predefined" for typed dimensions (i.e. the dimension values are not constrained by a predefined set of enumerations)
• Description. The business description and guidance label linkbase entries for the XBRL dimension (in the SBR definitional taxonomy)
• Usage. A list of D2A form codes where this dimension is used. each form code hyperlinks to the SBR Form page.
• Dimension Members. For "Predefined" dimensions, a table containing a row for each dimension member. Each row contains:
  • Name. The XBRL element name for the dimension member.
  • Label. The label for the XBRL dimension member in the SBR Definitional Taxonomy
  • TREF ID. The SBR Taxonomy Reference Identifier. This is the persistent unique identifier allocated to each XBRL element within the SBR taxonomies (i.e. It is used as the id value in the XML schema element declarations)
  • Description. The business description and guidance label linkbase entries for the XBRL dimension member in the SBR definitional taxonomy

Industry Index

These index pages contain an entry for each of the APRA regulatory forms for that industry grouping. Each entry has:

• The form description;
• APRA form code;
• a hyperlink to the D2A form page
• a hyperlink to the D2A attribute page
• a hyperlink to the form SBR XBRL page

D2A Form

The D2A Form page is a HTML rendering of the Direct to APRA (D2A) client version of an APRA Regulatory form. The data entry cells in the form contain the D2A attribute codes which hyperlink to the relevant SBR Form Concept page. The page also contains hyperlinks to the form's D2A Attribute and SBR form pages.

Here is a link to the D2A form page for form ARF 222.0 Exposures to Related Entities

D2A Attributes

This page contains a list of all of the attribute codes in the D2A version of an APRA Regulatory form. Each attribute code has a hyperlink to the relevant SBR Form Concept page. This page also has hyperlinks to the equivalent SBR Form and D2A Form pages.

This page also lists APRA D2A validation rules associated with the form. These rules are expressed in APRA's own rules language which can perform validations across multiple forms and multiple submission periods for the reporting entity (which is beyond the present capabilities of XBRL Formula

SBR Form

This page contains information about all of the XBRL items and their contextual constraints. This is a plain English representation of the SBR XBRL Reporting Taxonomy for the APRA form. The page contains links to the equivalent D2A Attributes and D2A Form pages.

The first table on this page contains the XBRL dimensions that apply to every XBRL item in the form. The use of these form level dimensions is to enable the XBRL data to be processed independently of the form used in the collection of the data (e.g. enabling the aggregation of data across very similar forms). Each of the entries in this table has three fields:

• Form code. The APRA D2 Form code.
• Dimension Source. The D2A form header "Reporting Consolidation" value ; and
• XBRL Dimension name and dimension member value (for the dimension source value). In a small number of cases a D2A attribute code appears instead of a dimension member value. This means that all dimension member values are valid for the dimension but that every item in an XBRL Instance of the form will have the same dimension member value (for that dimension).

The second table on this page has entries for each XBRL item with its allowable contextual constraints and links to the forms with the same constraints. The entry fields are:

• XBRL Item label with a hyperlink to the XBRL Concept page
• Variants. There will be a separate row for each distinct set of constraints (a variant). Each variant can have zero or more individual constraints of the following types:
  • Explicit Dimension constraint. A dimension name and a dimension member name (in brackets);
  • Variable Dimension constraint. A dimension name and a D2A attribute name(in brackets). The XBRL Item can occur multiple times, once for each valid value of the Dimension in the Reporting Taxonomy definition linkbase. The presence of the D2A attribute value is to document the mapping between the D2A data entry cell and the XBRL Dimensions and their members (N.B. it is possible for a single D2A data entry cell to be mapped to multiple XBRL dimensions).
  • Negate Form Dimension. One of the form dimensions doe not apply to this particular XBRL item and its constraints. This is an exceptional situation and only occurs in a small number of APRA forms.
  • Tuple membership. The XBRL Item is to appear as the child of an XBRL tuple.
  • Period. There is a period constraint for the XBRL Item that is different to the normal case for APRA forms (i.e. the reporting period for duration items and end of the reporting period for instant items). The possible values are: Start, End and Any (unconstrained).
  • Conditional. This variant only applies to reporting entities with particular organisational metadata (e.g. APRA subsector classification). This constraint is not expressed in the XBRL Reporting Taxonomy.
  • Duplicate. Technically, this is not a constraint but rather documentation that there are multiple data entry cells on a D2A Form that map to the same XBRL representation.
• Forms. A list of APRA D2A Form codes that have an XBRL item with the same distinct set of constraints.

Here are some examples of APRA forms with the various types of constraints:

• ARF_221_0_C (Form Dimensions, Explicit Dimension Constraints, Variable Dimension constraints and Conditional constraints)
• ARF_330_0_C (Period Constraints)
• ARF_396_0_1 (Tuple Constraints)

SBR Form Concept

This page maps a D2A form data entry cell to an SBR XBRL concept and dimension contexts. The page contains links to the SBR form, D2A Attributes and D2A Form pages.

The page contains:

• Attribute. The APRA D2A form attribute code.
• Concept. The SBR Definitional taxonomy label for the XBRL item mapped to the D2A attribute.
• Label. The SBR reporting taxonomy label for the XBRL item
• Concept Guidance. The reporting guidance label linkbase entry for the XBRL item (in the SBR reporting taxonomy).
• Dimensions. A table of dimension constraints associated with the mapping of the XBRL item to the D2A attribute code (N.B. Report level dimensions are not listed in this table). Each entry in the dimension table contains:
  • Dimension name
  • Dimension member name or D2A attribute value. When a D2A Attribute value appears then the XBRL Item can occur multiple times, once for each valid value of the Dimension (in the Reporting Taxonomy definition linkbase). This occurs where the D2A attribute is inside a row in a table in a D2A form (see ARF_220_2); and
  • Dimension or dimension member description (from the label linkbase)
• Validation. An APRA D2A client validation rules explicitly associated with this attribute.

For an overview of the APRA SBR implementation see: XBRL and Regulatory Reporting in Australia

The PET documentation can be viewed at: http://apra.gov.au/sbr-pet

More information about the APRA SBR XBRL 2.1 Taxonomies is available at Adopting Standard Business Reporting (SBR)

The Australian Government SBR home page is: www.sbr.gov.au

N.B. All of the hyperlinks work in the Chrome browser. Some of the hyperlinks have been known not work in other browsers

 

What do grocery store managers and financial executives have in common? Amongst other similarities, both are at the end of a long supply chain (trade products and business reporting data, respectively) and stand between that supply chain and the external consumer. How can Financial Executives in 2013 benefit from lessons learned previously by the grocery store managers? Read on!

Almost 40 years ago, in 1974, a package of Wrigley’s Juicy Fruit chewing gum was the first product bar coded and scanned using the now omnipresent Universal Product Code (UPC), the bar code designed for retail point-of-sale. That was the spark leading to grocery store managers realizing an adage of supply chain standardization: it’s one thing to apply the bar code to the products when they show up at the store and get put on the shelf; it’s another to push standardization back – potentially, to the beginning of the supply chain.

When grocery store managers were able to push the application of the UPC back to the product’s manufacture, they realized an increased range of process benefits over the already beneficial more automated check-out and physical inventory, including: lowered costs; automated inventory management; more timely and accurate fulfillment; and consumer purchasing insights through behavioral marketing; as well as many others.

Grocery store managers initially had inventory clerks apply the bar codes while stocking the shelves. This was a simple replacement to the legacy pricing gun; instead of a fixed price, the bar code would automate the benefits moving forward and didn’t have to be changed if prices changed. But there were other benefits available, at a lower cost. Are you doing the same thing with XBRL? Are you applying XBRL after-the-fact, as a bolt-on to an existing manual report assembly and review process?  If so, you may be experiencing the same outcome that grocery store managers experienced with their initial adoption of the UPC: unnecessary costs and time, mislabeling, and poor quality processes.

When facing regulatory XBRL mandates, many financial executives have chosen to outsource the XBRL tagging and creation process, viewing it only as a compliance requirement; initially relying on third party assistance to ‘tag their reports’. This is perceived as bringing minimal disruption, but also providing minimal potential benefit to the company – and there is incremental cost, guaranteed. Others have seen a net cost reduction, as they have chosen to integrate and push the standardization earlier in their process. The costs (or savings) and benefits realized will be largely dependent upon how financial executives view XBRL mandates: either narrowly, as a simple compliance requirement, or more broadly, as a business reporting supply chain standardization opportunity to streamline a broad range of compliance processes.

Based on a recent survey by the Financial Executives Research Foundation, financial executives are now planning a migration similar to the grocers - away from the initially pervasive bolt-on (or outsourcing) approach to a more integrated in-sourcing implementation model.   While there is a range of implementation effectiveness, companies with best practice 'built-in' implementations are realizing 25%+ net cost reduction … and time enhancements as well.

Like the forty year old UPC story, the story of potential benefits for financial executives is not new. A 2009 FEI Issue Alert titled: "Year 2 of the SEC's XBRL Mandate: Caution and Opportunities on Compliance Requirements" highlighted some of the common potential process enhancements and may be useful to companies now considering in-sourcing of XBRL Compliance Requirements.  The FEI Issue Alert notes that mapping of disclosure elements to the U.S. GAAP Taxonomy within company report writers (Built-in) rather than subsequently applying XBRL to completed company reports (Bolt-on) provides opportunities for potential process enhancements. This is the purpose of Disclosure Management systems, which facilitate:

* Automation of the assembly process of the monetary debits and credits, as well as the narrative and numeric footnote and MD&A disclosures (compared with manual assembly using word processing and spreadsheets);

* Automation of analytical and validation controls (compared with manually-applied controls using word processing and spreadsheets);

* Automation of the aggregation processes for information relevant to closing, elimination, and other adjusting entries (as opposed to manual aggregation commonly executed with worksheet templates);

* Facilitating contextual review of draft report disclosures by relevant management team members (e.g. enabling simultaneous (parallel) review of disclosure content by topic rather than waiting in line for serial review);

* Enabling collaborative review of draft reports (e.g., online review rather than individual review of hard-copy documents);

* Automation of multiple, alternative, report presentation of the reported disclosures (e.g., annual report, summary report, summary tables, graphs, etc.) using standardized presentation templates enabled by XBRL (instead of hand-crafting individual report each period);

* Transparent access by company management to supporting transaction level information (as opposed to more opaque trial balance access with limited or cost-prohibitive access to more detailed information

* Automated documentation of explicit links to technical sources, accounting and reporting memos, subject matter experts, specific and relevant company policies, creating a sustainable knowledge base.

A 2012 blog posting “How to Differentiate Disclosure Management Features” may help companies differentiate individual application feature strengths and weaknesses of different Disclosure Management tools and how they relate to company specific reporting environment process, controls and diversity of reporting requirements.

The January 2013 Center for Excellence in Accounting and Security Analysis  (CEASA) white paper “An Evaluation of the Current State and Future of XBRL and Interactive Data for Investors and Analysts”, provided a number of recommendations, noting that financial executives should work on improving the quality of their own data, as well as on making their own data more useful and accessible to consumers of their information.  For many companies with manual review processes, this may be easier said than done.

While the common errors outlined by US Securities and Exchange Commission (SEC) Staff are basic accounting / reporting issues; many financial executives limit their review to comparing the rendered view of their XBRL report with their traditional report as their primary assessment method.  This approach, which ignores mappings and other vital messages about their information, makes it  difficult to effectively identify common errors within their XBRL reports; it is like trying to validate formulas in an Excel file by reviewing a fax transmittal of the worksheet.  Undoubtedly, this rendering review results in a very frustrating process for both financial executives and the potential users of the XBRL reports.

The common errors are largely found in subjective and or judgmental areas including: backward amounts (e.g. debits reflected as credits and vice-versa); inappropriate company specific extensions; disclosures not tagged; totals that don’t add up; missing or incorrect contextual data (e.g., “I am six gallons tall”); and other subjective or judgmental items. These subjective errors cannot be automatically detected – they require someone with business savvy to catch them - and thereby are commonly found in company reports.  Using appropriate analytical tools that enable more effective identification of these types of subjective error types is a great step towards more efficiently identifying errors and resolving them. Tools that can help financial executives effectively identify judgmental errors range from open source products (free) to $2,500 and include applications like: Arelle; Corefiling Magify, Fujitsu XWand, XBRLCloud and XBRL US Consistency Suite, to name a few.

At the end of the day, grocery store managers’ reliance on the accurate and cost-effective application of supply chain standardization at the beginning of the supply chain (rather than at the end) enabled a broad range of economic benefits.  The costs and benefits realized by financial executives will be largely dependent upon how the XBRL mandates are viewed; narrowly, as a compliance requirement, or more broadly as a business reporting supply chain standardization opportunity to streamline a broad range of external and internal compliance processes and controls.

 

 

XBRL US reported recently that it has 37 entries so far and more expected for its 2nd Annual “XBRL Challenge” software development contest. Entries have arrived from not only U.S. developers, but from Asia and Europe as well. Most entrants are entrepreneurs, individuals and even a few academics, XBRL US said.

The contest is meant to flesh out the top open-source analytical tools that can mine XBRL-formatted corporate financial statement data. The winner of the $20,000 grand prize will be an individual or team that submits the most useful, user-friendly application that will enable investors and other users of financial statements to conduct innovative analysis of public companies.

The Securities and Exchange Commission has heard the groaning from public companies that they are investing the time and money necessary to produce the XBRL-formatted data as required, but make little use of the data internally and see little investor use as well. Many XBRL experts are hopeful that will change as companies continue to populate the EDGAR system with historical, comparative, detail-tagged data across all companies, and as software developers produce more user-friendly tools to make the data more useful.

The winner of the inaugural XBRL Challenge contest, Calcbench, has made its open-source tool freely available on its website. Co-founders Alex Rapp and Pranav Ghai continue to refine the tool to process and store all XBRL filings in their structured, cloud-based data universe. They spend a great deal of time, they have said, scrubbing data to identify and correct errors and increase comparability across companies. They say they have identified and fixed nearly half a million errors so far.

XBRL US has said they are looking for innovative tools that provide highly functional, strong analytics, such as multi-company year-to-year comparisons, ratio analyses, or other functions that help investors make critical decisions. The second annual contest opened in July and is accepting submissions through Feb. 28, with final judging and prizes awarded in late March 2013.

Judges for the contest include Alfred Berkeley, vice chairman of Gentag, Inc.; Eric Gillespie, founder and CEO of Poplicus; Kaitlin Lee, senior developer at Sunlight Foundation; Philip Moyer, managing director in the technology group at Safeguard Scientifics; and Paul Ratnaraj, director of advanced initiatives at Wharton Research Data Services.

Training and education about XBRL continues to be in demand and 2013 will be no exception.  XBRL US, the nonprofit consortium for XBRL reporting, continues to offer programs geared to multiple audiences at different stages in the learning process.  The SEC rollout of XBRL for corporate reporting is at the phase where filers need more in-depth, intensive training to make sure they get their XBRL filing right. In addition, data consumers and developers are now looking for more awareness-building and instructional programs to help them understand how to work with the vast amount of data now available.  Development work and pilot programs in corporate actions mean a growing number of stakeholders are eager to learn more.  Even government officials are starting to awaken to the benefits of greater consistency, comparability, timeliness and accuracy that XBRL can offer.

In 2013, we will provide more support for the filing community with monthly webinars covering core filing concepts, best practices and case studies delivered by XBRL experts.  In late September, the 5^th Annual XBRL US National Conference in Las Vegas will focus on hands-on, collaborative, software-agnostic training and best practices.  This event is the largest gathering of XBRL vendors and public company filers in the United States, featuring more hands-on practical sessions on detailed footnotes and best practice issues critical to preparers.  Regulators (SEC and FASB) will give progress updates, cover new and revised accounting standards and address how to implement them in XBRL.

We’ll also expand our one-day Springtime Detailed Tagging Workshop in 2013, with both east and west coast sessions for filers.  These interactive workshops take place before the end of the limited liability provision for every public company filer.  The emphasis will be on making sure you “get it right” with tips, best practices and validation to ensure filers can create the best possible XBRL data.

In addition, we’ll roll out the XBRL US GAAP Certificate Program – an online training program created with the AICPA, providing detailed instruction on creating high quality XBRL financial statements.  That program is slated to launch in late spring with over 30 hours of Web-based, CPE content.

We’re also expanding events for software developers and data consumers, e.g., investors, analysts.  On March 27, we will hold our XBRL and Financial Analysis Conference jointly with the NY Society of Securities Analysts (NYSSA). In late September the XBRL Data Forum will target developers and IT professionals at buy- and sell-side firms to educate on building XBRL databases and working with XBRL data.  Later in the year, we will hold more programs targeting the corporate actions stakeholder, to continue moving that important initiative forward.

We look forward to bringing together XBRL experts to help educate and inform XBRL creators, processors and consumers in the expanding XBRL market.

 

Attend almost any CPE conference and one will walk away with the perception that XBRL is an unnecessary evil. In fact, you will hear executives describe it as useless and even agents from the SEC, who don’t work in the Office of Interactive Data (OID), won’t be able to provide a good response as to the benefits of XBRL.

However, XBRL has come a long way since last year when it was described as painful. Invariably, changes and new ideas moving from being described as “painful” to “useless,” is very promising and represents progress.

In the next year, this perception of negligible use of XBRL data beyond the regulatory community will continue to change. By April 2013 nearly every public company reporting in the United States will have provided detailed XBRL financial reports for at least one year. Filers’ and regulators’ focus will change from ensuring everything is tagged to focusing on quality. In fact, the SEC has been commenting even more about the quality of XBRL filings and that will only continue to increase. The FASB regularly analyzes how the taxonomy is used and works with filers and service providers in improving the quality of the taxonomy and advising on how specific elements should be used. XBRL experts have learned a great deal over the last few years and are turning this into better taxonomies, software and processes, and suites of automated tests. Once we reach a critical mass of quality production of XBRL-formatted data and business user-friendly software that provides transparency of data, the perception of XBRL will change from “useless” to being an inseparable part of the reporting process.

Progress in 2012

This year brought significant efficiencies in the XBRL reporting process. While there are some service offerings and tools that continue to struggle with efficiencies and user experience, the majority of filers have had a significantly easier time with XBRL. This is due to experience, building time for XBRL in the close process, leveraging of existing tagged data, and software improvements. Some current software even makes aspects of XBRL document creation nearly as easy as authoring the visual document itself.

XBRL in 2013 and Beyond

2013 will be a big year for registrants and investors. The emergence of better consumption tools will provide flexible ways for viewing XBRL documents, but more importantly will also provide visibility into the underlying meaning of the data. In fact, the loudest requests for transparency and comparability come from registrants themselves. Filers want to know how they and how their reports compare with their peers; if they are using similar tags for similar meaning and how their respective extension elements align. New tools are going to readily provide useful answers to these important questions in this next year as the wide availability of both preparation and consumption software that makes creating and viewing structured data easy will continue to grow and improve.

Another improvement that will facilitate greater investor use is the continued improvement of the US GAAP Taxonomy. The XBRL developer community has learned a great deal as a result of dealing with what is considered by some the hardest financial reporting use case. Regulators, standards bodies and filers are all collaborating and succeeding in improving the quality of the US GAAP Taxonomy. In addition, there is work among industry peers to standardize their extensions and element selections rather than each having unique incomparable elements.

Moving forward, more consistent and leveraged use of taxonomy templates—focused on meaning rather than visual presentation of data—will serve to further improve the quality of information for analysis and consequently bring value to investors. Transition to structured digital financial reporting will help resolve another difficulty; that there are too many ways of representing the same concepts, and sometimes no apparent way of representing the obvious. The ultimate step that software and hence the conversation about XBRL will take, is to be focused on consistent models that express information, rather than simply expressing data.

On other fronts, XBRL is going beyond the SEC mandate for public filers and is percolating into other reporting domains. There are groups currently involved in developing XBRL taxonomies for the not-for-profit community as well as for state and local governmental reporting. The Global Reporting Initiative (GRI) Taxonomy brings comparability to Corporate Social Responsibility (CSR) efforts. The U.S. "DATA act" legislation continues to propagate structured digital data because of its clear benefits for reporting and transparency. We are now even seeing the use of XBRL for some internal corporate reporting.

In Conclusion

In the beginning of the Internet, most experts believed that it would only be used by those in academia. For those of us who searched the Internet in the early days, found it to be a novel idea but one that was painful to use and thus useless. We are still in the very early stages of XBRL but the ubiquity of XBRL structured financial data will eventually be met.

Attend any CPE conference in the future and XBRL will be the norm. As we progress throughout the next few years, tagging quality will improve, user experience will develop, and smart data will be inseparable from reporting. Get ahead of the XBRL curve as it will help separate data from information.