XBRL US Investor Forum Considers Ways to Mitigate the Cost of Structured Data
Regulatory authorities around the world have adopted rules requiring companies to provide financial information in an interactive, machine-readable (i.e., structured) format. One such format is eXtensible business reporting language (XBRL). The idea is that this format enables investors to capture and analyze information more effectively as well as helps companies automate their regulatory filings and business information processing, eventually reducing both preparer and investor costs.
But XBRL has not achieved its true potential for either investors or companies. We addressed the challenges faced by users in our 2016 report Data and Technology: Transforming the Financial Information Landscape. We continue to address these challenges in various forums, including by serving on the XBRL US Data Quality Committee.
But companies face impediments as well: They continue to see structured data as a compliance burden and a cost center. The CFA Institute paper “Cost of Structured Data: Myth vs. Reality” uses case studies to examine the costs that companies, large and small, bear in preparing and filing their financial information in a structured format and what can be done to mitigate those costs so that all parties — preparers, regulators, and users — can avail themselves of the benefits of structured data.
At the recent XBRL US Investor Forum 2017: Smart Data, Better Results, Mohini Singh, ACA, went through several of the case studies from across jurisdictions to demonstrate how, with proper implementation, both large and small publicly listed companies, as well as nonprofits, can benefit from structured data.
In the paper, we conclude that if companies focus on how they implement structured reporting — that is, by
- bringing it in-house instead of using outside vendors to prepare their regulatory filings,
- implementing inline XBRL (iXBRL), a form of XBRL that is both human and machine readable, and
- curtailing the use of company-specific tags, or “extensions” —
they can reduce costs, allowing both companies and users to benefit from structured reporting.
The Investor Forum focused on how analysts and investors leverage structured data to improve efficiency, reduce costs, and increase the accuracy of analysis. The Forum also provided practical information about where investors can get structured data on US and non-US companies, who is using this data today, and a step-by-step discussion on how to get started using XBRL data within your own organization.
You can watch other sessions of the Forum and hear speakers from the SEC, Morgan Stanley, Thomson Reuters, XBRL US, and more. The program was developed by XBRL US, and was held in partnership with Baruch College Zicklin School of Business, CFA Institute, and CFA Society New York.
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How, precisely, does “bringing in a process in house” or “implementing Inline XBRL” or “curtailing the use of company specific tags” reduce costs?
Both professional accountants and financial analysts are stuck in the past. The way to reduce costs is to become more productive. If processes are more efficient, costs will go down. So, how do you make processes more efficient? The answer is to better specify the software that is needed. To do that, professional accountants and financial analysts need to recognize that this is a paradigm shift.