Mark Hynes - thoughts on corporate disclosure

Opinions on changing rules, changing best practices, and their effect on investor relations officers.

Thursday, January 10, 2008

2008 – the year of interactive data?

No don’t switch off; I know dear old XBRL has been threatening to make it for so long, but I finally believe its year has come.

We have a world that is submerged in data. XBRL helps move us to a world where useful data - such as the financial results of a company - are more understandable and easier to process by software because it is "described" by agreed metadata.

The push to make this XBRL thing happen is in overdrive. With SEC Chairman Cox nearing the end of his term, and having pinned his colours firmly to the mast of XBRL/interactive data, it seems to me to be now or never. And there’s too much credibility on this line for ‘never’.

Recent moves:

The SEC has launched the Executive Compensation Reader - the first-ever online tool that enables investors to easily and instantly compare what 500 of the largest American companies are paying their top executives.

Nine software companies now have products that enable public companies to make quarterly and annual financial reports available in interactive data form instead of text form.

And its not just in the US; in India the new CFDS (Corporate Filing and Dissemination System) put in place jointly by the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), now offers an XBRL enabled common platform for listed companies to file. This will be mandatory for new listings.

Countries as far apart as Japan, Australia and the Netherlands have taken positive steps to adopt XBRL in national standards for enhanced financial reporting.

But what will this mean for IRO’s? Re-skilling?

In the brave new world envisaged by its proponents, XBRL will allow the markets automatically to analyse a company’s financials, and derive their conclusions/ update their models much faster than previously. Done correctly, it should remove simple Excel keying and circular argument errors.

Financial analysis therefore becomes a given, with more time for analysts to build in what if scenarios.

Which therefore will allow more time for IRO’s to focus investors’ attention on the company’s equity story, delivering against the corporate strategy, and communicating information not available in the balance sheet (such as the 40-50% of the valuation represented by intangibles).

Of course we have heard this before, but time for the chief regulator of the world’s largest equity market is running out. 2008 is therefore a clutch year, and if (actually, make that when) more markets begin mandating use of XBRL, IRO’s will enjoy focussing on the real essence if IR.


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