Mark Hynes - thoughts on corporate disclosure

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

Thursday, May 22, 2008

XBRL mandated in the US – we finally got there

Replacing a voluntary filing programme that found relatively few participants, the Securities and Exchange Commission has proposed a rule that would require all public companies to submit reports in XBRL by 2011.

XBRL – promoted by the SEC under the name interactive data - lets standardised accounting data be tagged and retrieved more easily. They can be read by software, screened for specific data, and reorganised. In theory, buy and sell side will be able to create and update their models automatically when they've been tagged using XBRL.

And potentially XBRL could be translated into terms used by different countries' accounting systems, enabling a true like for like comparison between international companies.

Back in the 1980’s – showing my age again – I worked with others on the “Extel card”. This was a printed format that captured the (pre IFRS) financials from mainly UK and European companies. However, the data always suffered from the lack of comparability. Analysts who wanted to compare peer companies across borders had to construct their own models and restate the financials of each company to be compared.

When the Extel card became computer readable, the search was on for ways of doing this global comparison automatically. Names like Global Vantage and Worldscope reflect that era. None however worked effectively, still requiring manual intervention.

This weeks announcement, taken together with the completed IFRS and US GAAP taxonomies (dictionaries) and the growing mandatory use of XBRL in Europe – notably EXCLUDING so far the UK - moves the automated ‘global comparison’ vision a stage nearer.

The changing fortunes and business model of investment banks have led to a reduction in numbers of companies followed. At the same time, to judge by the attendance on the IR courses and seminars that I run, growing numbers of emerging markets companies seeking international capital, and hence needing analyst coverage. XBRL efficiencies should provide that coverage.

This might just be the start of a new era.


  • At 2:41 pm, Blogger CrypticLife said…

    Though I look forward to this, I don't know that we can say we "finally got there" when the rule has just been proposed. Vagaries of politics could keep it a long way off for years to come.

  • At 8:51 am, Blogger Mark Hynes said…

    Fair comment. Over enthusiasm on my part. But if adopted, I believe it could impact Fortune 500's as early as December?

  • At 5:44 pm, Blogger CrypticLife said…

    I looked at more news for this, and yes, it does seem like the schedule is aggressive enough that they really expect companies to comply. I wonder -- is it really that easy for the companies to standardize their data and reporting? A major project takes months or years of pulling resources together. Looking at the XBRL standard, though, I can see how it is desireable.

  • At 8:25 am, Blogger Mark Hynes said…

    Thanks! There are a small number - 40 ish ? - companies who have already done so. And there are a number of providers who offer to help create the initial taxonomy. lists 10 of them.
    Not sure how effective/easy to use they are. Any views out there?


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