Dive deep into the practicalities of implementing data standards under the FDTA
Following the passage of the US’s Financial Data Transparency Act (FDTA) late last year, there has been some debate on the best way to implement the requirements of the act. XBRL US recently published a white paper offering an analysis of the existing state of data management amongst agencies affected by the FDTA and a roadmap to meet the Act’s goals.
Unlocking the potential of robust data standards is a key priority of the FDTA. Data standards offer a transformative solution, enabling economies of scale, reducing reporting costs, and ensuring high-quality, actionable data for regulators, policymakers, investors, and researchers.
The significance of data standards lies in their ability to eliminate ambiguity and enhance data reliability. By making information simpler to communicate and move, these standards streamline processes, and drive efficiencies.
Currently, FDTA agencies are challenged by diverse data collections from reporting entities using different formats such as PDF, text, HTML, custom XML, and XBRL. The lack of standardised disclosure requirements limits access to machine-readable, interoperable data, hindering effective analysis of data.
Currently, FDTA agencies manage over 400 data collections from numerous reporting entities in various formats, including PDF, text, HTML, custom XML, and XBRL. The fragmented and ambiguous disclosure requirements impede access to machine-readable, interoperable data for users.
Challenges include difficulties in locating, inventorying, and storing data, inconsistent application of entity and securities identifiers, and inadequate evaluation of business and investment risk.
The white paper’s roadmap to effective data standards involves building unambiguous taxonomies that comprehensively describe each data collection and streamlining data collections to eliminate duplication. It’s also important to educate agencies, reporting entities, and intermediaries on the importance of a robust reporting infrastructure, to ensure compliance.
Introducing XBRL-based open data standards is the best way to meet the FDTA’s goals. By implementing universal data standards, regulators will gain a comprehensive view of regulated entities, enabling them to understand both the broader landscape and the specific details.
Read more here.