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Date:26th December 2008 |
Compiled by Mr. M. Sathya Kumar |
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XBRL Around the World
XBRL is
evolving everywhere, but unevenly, driven by various stakeholders such as
governments, stock exchanges, banks and other industry sectors. While the SEC
has been finalizing its proposed rule requiring public companies and mutual
funds to file their financial reports in interactive data, this article looks
beyond U.S. shores to put the United States’
progress in a global context. XBRL, or “interactive data” as the SEC often refers to it, is an
open information format standard that enables automated, global sharing of
business information as contained in company ledgers, income statements, cash
flow, balance sheets, mutual fund risk and returns, as well as textual
information included within footnotes and other requirements of business
reporting. XBRL doesn’t change the accounting standards or methods used for
financial and business reporting, but it puts reported information into an
instantly reusable computer- readable format. Computer applications will
automatically find comprehensive, granular data the instant it is posted
online and flow it into analytical models for deep, automated analysis. XBRL
is predicted to have a profound impact on any person or organization that
creates or uses business information. Seeking proof that this evolving language for financial and
business information can deliver on its promises of superior data and vastly
improved communication, the author interviewed key stakeholders around the
world to see who the early adopters are and explore the many ways XBRL is
already in use. Who are the early
adopters of XBRL? Use these maps to explore how XBRL is already in use.
While the U.S. and Asia focus on XBRL for use in capital
markets, Europe has developed an eye-opening array of governmentwide and
cross-border applications that can share consistently structured XBRL data.
The first wave of adoption in Europe started about five years ago, with
stakeholders in the private and public sectors working together to develop
XBRL taxonomies. (Taxonomies are similar to dictionaries; they are long lists of
agreed-upon definitions for all the terms used in specific types of business
reports. Each definition has a “tag” that can be read and used by
computers.) Various groups were interested in XBRL’s early promise of efficient data gathering and automated
analysis, but for different reasons. For example, tax regulators drove
development in Ireland, municipalities in Germany, the banking sector in
Spain, the Water Board in the Netherlands, and the Companies House in
Denmark. The second wave came as XBRL International’s specification was released for commercial use in 2004. Based on
work done by the Spanish central bank, the Committee of European Bank
Supervisors started using XBRL for Basel II reporting across all 27 member
states, though usage was mandatory or optional based on local country
regulations. The third wave of XBRL development was inspired by the European
Commission. Concerned with the disparity of projects, taxonomies being
developed, and various standards being used by its 27 member states, the
Commission in 2004 formally urged its member states to register their
taxonomies with XBRL International (www.xbrl.org) and to work
together on a truly open standard. Just this year, XBRL Europe (www.xbrl.org/eu) was formed to
generate better consistency, knowledge sharing, and cross-border
interoperability of XBRL implementations. The new organization will present a
unified voice before the European Parliament and the European Commission as
they review XBRL projects. “The big challenge is not to
have 27 flavors of XBRL that can’t be
aggregated across a very diverse region,” says
Conor O’Kelly, who chairs XBRL Europe’s executive
committee. XBRL IN AISA In Asia, XBRL is being used by the capital markets. Stock
exchanges in China, Japan, Singapore and South Korea all mandate XBRL data.
Japan’s Financial Services Agency required all public
companies to submit financial statements in XBRL format beginning this year.
Japanese companies such as Wacoal and Fujitsu have begun to benefit from the
use of XBRL for internal applications. In 2004, China became the first
country to formally adopt XBRL reporting for its equity markets. Chinese
innovation continues to lead XBRL into new areas such as risk profiling, data
mining and communicating text information along with financial data. XBRL is “extensible,” meaning local users
can
extend XBRL taxonomies to satisfy their own needs, but can also extend
themselves into isolation. Asian XBRL taxonomy developers often express the
need for broader oversight, but unlike the EU, Asia doesn’t have a central authority that can mandate cross-border
interoperability. The role of the XBRL International consortium is to recognize
the developing XBRL taxonomies of national and regional jurisdictions, and to
encourage the creation of quality standards in taxonomy development. But XBRL
neither mandates nor enforces local XBRL taxonomies. Many Asian developers
expect the recently completed U.S. XBRL taxonomy to have a positive influence
in advancing and harmonizing taxonomy development worldwide. SPEED AND INNOVATION IN CHINA For a more complete view of current and future implementations
of XBRL in China, the author spoke with two active leaders in the XBRL China
organization. Bai Shuo is the assistant general manager and CTO of the
Shanghai Stock Exchange and a critical influence in the adoption of XBRL for
public company reporting. (Shuo’s comments represent the
viewpoint of the XBRL organization, not the Shanghai Stock Exchange.) We also
spoke with Shiping Liu, founder and CEO of Global Business Intelligence
Consulting Co., China’s leader in data warehousing and data mining
technology Both men reflected the enthusiasm that seems to infect the
entire XBRL community. “Absolutely!” says Shuo. “The whole country was very
excited by this new technology, especially people at the Chinese Securities
Regulatory Commission and the Ministry of Finance.” They began to seriously study its use in 2003. “We wanted to communicate with people from other parts,” he said. They attended international meetings and
invited experts from all over the world, including Charles Hoffman, the U.S.
CPA credited as the inventor of XBRL, and Liv Watson, another pioneer, who
was then vice president of Global Strategy at EDGAR Online Inc. Watson now
chairs XBRL International’s Development
Committee. “We saw so much devotion and
energy, and that influenced a lot of people in China,” said Shuo. EARLY MANDATES, NO–COST COMPLIANCE A year later, in 2004, China was the first capital market to
adopt XBRL. “The stock exchanges were interested in XBRL for
better regulatory reporting,” said Shuo. “But the
dramatic
change in the quality, granularity, and timeliness of the data has had the
effect of changing the Western world’s view of the
Chinese
market.” Along with public company reporting, the Shanghai and Shenzhen
stock exchanges have begun using XBRL for mutual funds’ information releases and expect to use it soon for IPOs as well. FUTURE DEVELOPMENTS: MINING DATA AND
COMMUNICATING TEXT In the near future, China XBRL expects to see extended use of
XBRL for:
Two areas of innovation for future Chinese XBRL applications
include:
HOW CHINA MOVED SO QUICKLY In part, China was able to move so quickly because companies
didn’t actually switch to XBRL reporting. They continued to fill
out the same forms they always used, while behind-the-scenes software
translated line items into XBRL data. This method of implementing XBRL allowed
China’s capital market to quickly adapt to the new
information standard—with no cost of compliance for reporting
companies. The template-based report forms require less financial detail
than, for example, the U.S. SEC’s proposed
rules. This made XBRL translation of Chinese reports relatively easy.
Chinese data, XBRL or not, is a more generic, standardized dataset. A downside of the “hidden” XBRL
data
generation is that Chinese companies are not going through the learning process
U.S. companies now face to comply with the SEC’s
expected
reporting rule. This knowledge is very important, says Shuo, in enabling or
inspiring corporate financial professionals to extend what is a superior
technology into their internal reporting processes, where they have the potential
to realize greater benefits. While China was the first to mandate XBRL for its equity
markets, the sophistication of the XBRL rules and taxonomy have been
developed in the West, particularly by the U.S., says Shuo. The common language for financial and business reporting has
already facilitated knowledge sharing and inspired change: The Chinese
taxonomy and data collection is expanding, in part, based on what China’s financial professionals are learning from the various taxonomies
and underlying accounting standards of other countries. China, in turn, is
adding to the international dialogue in other ways, such as its efforts to
incorporate key information that is not captured in U.S. GAAP or IFRS, for
example, key performance indicators and sustainability reporting. INVESTOR USE OF CHINESE DATA “XBRL will become more influential
as the
entire supply chain matures in its ability to use it,” Shuo says. Chinese investors, even institutional investors, are
not yet experienced with open financial markets and how best to use public
company information. The availability of fast, accurate XBRL data is
important, says Shuo, “But so is the understanding of
data-based analysis and software tools to support it.” XBRL
data accumulating for the Chinese market cannot be fully leveraged by the
Chinese financial markets without improved software applications for
regulators, investors, accounting agencies, statisticians, governmental
agencies and the reporting companies. Ironically, analysts outside the mainland using English-based
applications are already leveraging China’s XBRL market data. The
data is available from the Chinese stock exchange Web sites, directly from
reporting companies, or via a direct market data feed. For instance, Credit
Suisse HOLT has used XBRL to expand its coverage of the Chinese A-share
market from 300 firms, which it previously tracked manually with a lot of
cutting and pasting into spreadsheets, to well over 1,000, which it now
tracks automatically. XBRL IN THE UNITED STATES Not so, says Campbell Pryde, chief standards officer for XBRL
US, who is responsible for managing the development of U.S. taxonomies. “The U.S. is the largest, most-developed capital market in the world, and
no country has implemented XBRL to the extent that the SEC has proposed for
U.S. equity markets.” The U.S., he says, is taking a very progressive and carefully
documented approach, and if it has taken this long to “go live,” it’s because of the enormity of the task. From a capital market
perspective, the U.S. has far more technical, legal and infrastructure issues
to overcome than smaller countries:
THE U.S. TAXONOMY Few outside the XBRL developer community understood the enormity
of the accomplishment when the U.S. XBRL organization last May presented the
SEC with the complete taxonomy for U.S. GAAP—a last
remaining obstacle to going live. Broken out by industry sectors, the U.S.
taxonomies currently include more than 12,400 XBRL tags and definitions for
the standard accounting terms used in U.S. GAAP. This is nearly double the
size of any other national taxonomy. Even for those not involved in creating XBRL data, or who do not
yet use XBRL-enabled financial software, it is worth taking a look at the
U.S. XBRL taxonomy, Viewers can quickly see how XBRL data is structured and
extended. Each data point can be searched and used in automated analysis.
Additionally, the US GAAP Taxonomies reference many of the related FASB
standards and SEC Regulation SX sections, which not only enhance the transparency
of reported information, but also transform how professionals use these
resources relevant to company disclosures. THE UNLIMITED FUTURE IN THE WORLD OF
INTERACTIVE DATA What happens as the world’s financial supply chain begins
to share a single language for interactive financial and business
information? Investors will be able to find numbers they can understand on
hundreds of companies around the world. They will be able to find comparable
data automatically, at low or no cost, on a variety of Web sites. Conor O’Kelly, who is also vice chairman
of XBRL
International, expects the next global wave of XBRL development to be in
standard business reporting projects, looking at how government agencies can
unify and simplify data collection. The Netherlands is leading this wave,
with Australia and New Zealand close behind. There’s no technical reason there should not be one central repository for
all government data collection and dissemination to the public. The SEC has created an Interactive Disclosure office, which is
expected to look beyond quarterly and annual reporting, to study the general
issue of data collection and the creation of central repositories. Large data
repositories could be used for all types of information collected from the
marketplace, such as a central repository for mutual funds, which are now
reported separately. XBRL is simply structured data. Such a language does not have to
be confined to IFRS or U.S. GAAP, or to any national language, as nicely
demonstrated by the Israeli “Manga” system that lets users simply toggle to see information in English.
Today, XBRL taxonomies accommodate more than 30 regional languages. As SEC
Chairman Christopher Cox remarked, “This is so
obviously what computers were made for, it’s hard to
believe investors
could never do this before.” There are huge opportunities for gathering statistical data, or
information in the health industry or for environmental pollution control
compliance, resource management, oil and gas reserves, and more. Already, the
Global Reporting Initiative ,a group committed to sustainability, has
developed an XBRL taxonomy for the many indicators itemized in its
sustainability framework, to automate and support more sustainability
reporting. “It’s going to be interesting to
see how
XBRL in the United States seeps down from regulatory filings and works its
way into the general market,” says Liv Watson. “XBRL
will gain its foothold in regulatory filings, but as the market finds its comfort
zone, it will quickly see XBRL’s potential for broader financial
reporting, internal reporting, scorecarding and general knowledge management.” XBRL is even being used in the poorest emerging countries. The
Microfinance Information Exchange Inc. (MIX), which acts as a clearinghouse,
tracks the performance of nearly 1,000 microfinance institutions and has
adopted XBRL as the core technology. The goal of improved information
exchange and reporting is to encourage investment and success for
microfinance projects worldwide. “We are creating market enablement— we are creating a standard that will allow the market to exchange
information more efficiently, with greater transparency and interoperability,
with more efficient flow of capital,” says XBRL
Europe’s O’Kelly. “But we can’t predict what the market will do with these
capabilities. It’s like creating the MP3
format: the developers knew it worked to play music files, but they couldn’t have envisioned Napster or iTunes. The role of international
developers is just to make sure there is a robust, scalable, interoperable
open standard for the market to use in whatever ways it will find.” |
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