Fear of the Future?
Bond Buyer this week published one of two takes on the latest push for state-level XBRL in the US, arguing that while machine-readable technologies should bring more transparency to the municipal bond market, they could also cause ‘headaches’ for issuers. But are the concerns voiced legitimate, simply a fear of technology, lack of education – or even a fear of transparency?
Last week we reported on the publication of a demonstration taxonomy by XBRL US that shows how data standards could be used in portions of the Comprehensive Annual Financial Report (CAFR). Bond Buyer reports that while this would benefit investors by making it easier to pull and compare specific data from long reports, some are apprehensive of the money and resource implications of introducing XBRL at state-level.
Concerns range from the technology not being compatible with current systems, the difficulty of standardising systems across states, and the cost and resources required. However, we have seen how the costs for XBRL implementation have dropped sharply, and Florida has demonstrated the feasibility of state-level XBRL. Millions of reports are prepared worldwide with the XBRL standard and there is a large, interoperable, certified software base to offer support.
It’s true that a project of this scale will require infrastructure, however the proven benefits of the XBRL standard more than justify the investment. As well as bringing true transparency and increased accuracy to local and state-level government finances, investors and stakeholders will be able to better understand and invest in municipalities. That means it will be easier to report, easier to analyse and easier to decide where to allocate capital – a victory for all involved.
Read the full article on Bond Buyer (subscription needed).