Last week I gave a talk at the 16th International XBRL Conference here in Vancouver. XBRL is an XML-based system for packing up companies’ financial information, and I think it’s real important. But its take-off has been kind of protracted and arduous. I was there as an Ambassador From the Web. Here’s a quick XBRL news overview.
Why XBRL? · Right now a huge number of people in the finance business get PDFs of company reports of various kinds and spend substantial error-prone time copying numbers into spreadsheets, so they can think about them properly.
If you package up the numbers in a machine-readable form, everyone can skip that step, which is A Good Thing.
But the big story is the never-ending war between accountants and investors. In any given industry sector, 50% of the companies are performing below average. Historically, they have been systematically dishonest about reporting this; “creative accounting” includes a huge variety of practices for putting reporting lipstick on various parts of financial pigs. Investors, on the other hand, want the truth.
If you have a strict and fairly formal machine-readable wrapper for your financials, that gives investors another club to beat accountants with, which is A Good Thing.
XBRL News · The good news is that the development of all the bits of XBRL you need to do comprehensive US financial reporting is about done, as of last week.
The bad news is that less than 100 big public companies (not including Sun, sigh) are currently reporting in XBRL, and that there isn’t much in the way of tools to, you know, actually do anything with the data. Even view it.
Now, XBRL is complicated, and that’s at least partly because public-company accounting is complicated. It also relies heavily on Linkbases, a piece of XLink technology (disclosure: with some of my fingerprints on it) that hasn’t had much adoption, so there’s not much software out there to do things with it.
I’m actually not too worried. Near as I can tell, the SEC, under the leadership of Chris Cox, is hell-bent on squeezing XBRL out of public companies whether they like it or not; and once that information resource is available, tool-builders will arise to do something with it. The Americans are well along but lots of other governments are taking this bit between their teeth. So, given the existence of the chicken, there will be possibly-golden eggs. Stay tuned.