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 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.