More meaningful reporting with XBRL

Posted on January 14, 2022 by Editor

There is a feast of food for thought in a recent pair of in-depth interviews in the Winter 2021 issue of ThinkTWENTY20, on the theme of ‘How XBRL supports more meaningful corporate financial reports in regulatory filings,’ providing better insights and transparency to the marketplace.

Mike Willis, who is Associate Director in the US Securities and Exchange Commission’s (SEC) Division of Economic and Risk Analysis, heading its Office of Data Science and Innovation, and was the founding Chair of XBRL International, reflects on the benefits in dealing with millions of data points. “Using the machine-readable structured data language XBRL makes it possible to automatically process the reported disclosures for analysis in a matter of minutes.” He also considers the particular advantages of Inline XBRL, or iXBRL, in combining human- and machine-readable information. These include enhanced navigation and search, easier identification of data quality errors, and analytical capabilities such as benchmarking and risk profiling, among others. “iXBRL is a useful next step of the disclosure supply chain standardization effort. Like other supply chain standardization efforts, the process enhancements are available to all participants,” he says.

We particularly enjoyed Mike’s thoughts on the future and possible obsolescence of XBRL: “Let’s restate the question using an analogy: “What is the future of English and how are you managing the potential for technological obsolescence?” Few would ask about the technological obsolescence of the English language, yet this is a very common question for XBRL, which is often confused with a technology. XBRL is an acronym that is short hand for “Extensible Business Reporting Language,” with the operative word being at the very end – language. Just like English. And, just as the English language is expressed in a variety of methods (e.g., stone tablets, paper, electronic paper and Internet digital formats), we would likewise expect that the methods used to express XBRL will evolve over time. The future migration of how the language (e.g. XBRL or English) is expressed in file formats, such as XML, JSON, CSV and others, will enhance how the machine-readable disclosures are accessible by investors and other market users. In summary, the formats, not the language, is where technological obsolescence is addressed.” – and indeed, 2021 saw the launch of the new xBRL-CSV and xBRL-JSON formats.

“We continue to see more reporting frameworks adopt XBRL – such as the Federal Energy Regulatory Commission (FERC), Sustainable Accounting Standards Board (SASB), European Single Electronic Format (ESEF) – so its market use and thereby relevance continues to evolve.”

ThinkTWENTY20 also spoke to Kim B. Eriksen, founding partner and CEO of ParsePort, focussing on ESEF implementation in Europe. He identifies the key challenges as ‘GMT’ – graphics, mapping and timing; do read the full interview for more of his insights. He has found a positive response among companies to the benefits ESEF will bring: “There will be a central EU file repository for all ESEF files. This means that investors, analysts, governments, scientists, etc. can have a “one stop” repository, where they will be able to access all European PLCs’ annual reports. Furthermore, the ESEF taxonomy is multilingual, meaning that it will attract more investors across borders and provide the ability to analyse and benchmark companies against each other across the EU. And, finally, the longlasting effect will also be that we will see many more harmonized reports across the EU.”

Looking to the future, he concludes: “The next reporting “wave” – ESG reporting (on the environmental, social and governance) – is already on the roadmap, with the same concept and format as the ESEF. The plan is to place ESG reporting inside the same “framework” and have it implemented within a foreseeable number of years. After this, we will also see governmental reporting from member states, public institutions and other non-financial and financial reporting forms. This is only the beginning.”

Read more here.

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