XBRL Stalls – can the potential of XBRL be unlocked before it’s too late?

31st January 2013

In 2009 the SEC (Security and Exchange Commission) made it mandatory to file financial statements in XBRL format (eXtensible Business Reporting Language), whereby financial items are electronically tagged using a standardised reporting language.  It was hoped XBRL would elevate the information contained within financial statements into so called ‘intelligent data’, enabling ready comparisons and insightful analysis.  However, as Karen Brill FSN writer finds out, a recent report by the Columbia Business School suggests that stakeholders are failing to capitalise on the availability of these XBRL documents, questioning the integrity of the data and the lack of XBRL capable analytical tools.

 

 

 

The study identifies that there is a demand and a requirement for timely, structured and machine-readable financial data, a demand which can be satisfied by adopting XBRL.  However, a tiny minority, just ten percent of those surveyed currently make use of XBRL data available directly from the SEC or XBRL US.  The report attributes this primarily to two key findings. 

Firstly, users perceive the integrity of the XBRL tagged data to be unreliable, raising questions over the accuracy of the numbers themselves.  A view which is supported by a study commissioned by XBRL US in 2010 which identified 73% of XBRL filings contained data quality errors. Unnecessary use of tagging extensions adds an additional layer of complexity further hindering the comparability of the data and reducing its integrity.

Secondly the study cited a shortage in XBRL enabled analytical tools, highlighting that many users of the financial statements sought easy-to-use, low cost applications which did not require programming or query language knowledge.  Additionally many users were not willing to disrupt their workflow that they perceive would be necessary in order to incorporate XBRL data without state-of-the-art consumption and analytical tools.

The Columbia Business School suggests that these issues can be remedied, though there is no quick fix.  Firstly the entire XBRL community must find a way to significantly reduce the error rate and unnecessary extensions.  “This could be achieved by providing greater regulatory oversight, potentially requiring an audit of the data, or requiring filers to resolve the error and quality checks communicated to them by XBRL US”, says Columbia Business School.

Finally XBRL technology development needs to be taken over and run by technologists, rather than accountants and regulators.  This could entail enlisting the help of major financial information vendors, (IBM, Oracle and SAP) or possibly major data aggregators, (Bloomberg, CapitalIQ, FactSet and Thomson Reuters).  In so doing it is hoped that the integrity of the mapping could be restored and also the standard of XBRL technology elevated.

“We still have some hope that XBRL data can become useful to investors and analysts. However, we also view XBRL as at a critical stage in its development. Without a serious reconsideration of the technology, coupled with a focus on facile usability of the data, and value-add consumption tools, it will at best remain of marginal benefit to the target audience” claims the report.

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