Financial systems guru Gary Simon and I will discuss the issues and answer questions posted by attendees. A short sharp thirty minutes. Gary is always worth listening to. You can make your own minds up about yours truly!
Great presentation and demonstration from Piero Milani from Infocamere about BRITE, which is an EU funded effort to bring the Business Registrars of Europe together. The mission is to establish a framework for the interoperability between the Business Registration Authorities of Europe.
The project that Piero was talking about is a pilot that they have developed with the assistance of Adobe. Full disclosure: using CoreFiling technology to make the XBRL part happen. The problem that Piero and his colleagues have been tackling is to do with government and local authority procurement. One of the requirements in most official tenders is for tenderers to provide proof (available only from their company registrar) that they have the appropriate legal standing and, further, that they have a certain amount of revenue or assets available to them.
The problem is that there is a different company registrar in each of the 27 states (that’s countries for our North American readers) of the European Union. And something like 18 official languages. So how does a company in Sweden bid for work in Italy and not be indirectly discriminated against, because the government agency in Italy doesn’t know anything about the legal situation (or the language) in Sweden?
Their proof of concept (covering 5 countries at present) is a good example of collaboration and a great example of the type of problem that interactive data, supported by agreed and well-defined metadata can solve. And this is a very different environment to the typical XBRL examples you’ve probably heard.
A number of company registrars across Europe, including in Italy, are mandating or offering a mechanism to allow small companies to file their accounts in XBRL. Companies House in the UK have received more than 100,000 such filings in the first year of the operation of their system to accept XBRL-based e-filings.This pilot leverages the availability (or future availability) of that information.
So the BRITE pilot allows a company tendering for some work in a different part of Europe to apply to their own company registrar for a statement about their finances and legal standing. The BRITE mechanism uses an agreed vocabulary (and a single PDF document) that gets filled in by the home company registrar, for provision to the government agency that is running the procurement.
The PDF contains summary information (with labels available in the language of the procuring agency) as well as an official extract from the registrar’s system, proving the legal standing. In addition (this is the really good bit) they provide an extract from the XBRL filing that the tendering company has made and provide that in a read-only form in the PDF. So turnover, profit, assets etc are set out in the form. Click on a drop-down and you can change the language of the labels. Click a button and you can extract the data out in XBRL format.
Simple. Compelling. Solves a problem that exists today. More power to the BRITE project. Congrats!
Yesterday we released a free as in beer, no licencing restrictions copy of our fully featured XBRL taxonomy development platform. Yes folks, SpiderMonkey Personal Version is available for download now. Read the press release here.
Why would we do that? It’s user friendly. It lets users make it easy to build complete, multi-lingual taxonomies. It is full of features that make life easier, including capabilities to unify, or de-duplicate reporting concepts. It’s based an the Eclipse Rich Client Application, and our True North validation and processing engine so it’s rock solid. It’s a great way not just to learn about taxonomies and XBRL in general, but as *the* tool of choice for that task. And we are giving it away?
Well, we are genuinely committed to making sure that XBRL gets adopted right around the world, so this should help out.
We also believe that folk that need a bit of extra help will buy the Professional version from us, in order to get full support, or, for larger operations that need multi-user features and all of the comfort, reporting, audit trails and power that is offered by the Enterprise Version. So this move is not completely altruistic. But I did mention that it’s free, right?
I was on a panel session at DIRK (the German Investor Relations Society) in Frankfurt yesterday. We were talking about ways and means for German companies to attract international investors, debating a set of thoughtful, and not entirely uncontroversial theses developed by Ralf Frank, the MD at DVFA.
Stefan Jekel, from NYSE, had a great analogy. He made the point that better reporting leads to better liquidity and greater market capitalisation, and had the academic research to prove it. But you don’t actually need all the equations. Stefan points out that to see "information asymmetry" at work, just head on down to your local used car lot. The more information, and more certainty you have about a car, the more you are likely to pay. Simple, but true. Millions of people prove that on Ebay everyday. The auctions that boast context, features, history and explanations do better, for otherwise identical items, than those with the bare necessities.
A good question posed after the session: "If XBRL can help analysts build faster, better and deeper models, and regulators can use it to drive convergence projects that bring accounting rules closer together, why isn’t everyone using it already?". My answer was three-fold: Education, Education and Education. The "enlightened self-interest" required of companies and account preparers to go to the (fairly small, in real terms) effort of publishing XBRL versions of their accounts is logical, but needs people to think at least one step beyond their own outbox.
True, it’s the analysts, bankers, regulators and counter-parties that are the initial beneficiaries of XBRL formatted disclosures, but (a) preparers don’t just produce accounts for publication because the law says they have to, they also produce them in order to gain access to capital; and (b) corporates that have started to think about XBRL in terms of improving the internal reporting and consolidation process quickly understand that the same issues exist outside their own organisational walls.
An interesting day. Thanks to Susanne Minneker and DIRK for bringing the panel together.
I’ve been drafted into what looks like an interesting panel session at the 2007 Investor Relations Society annual conference in London. Come along – it sounds like fun.
I can’t help enjoying this post on Information Arbitrage… even though it dissed some of my mates. But, err, Roger? I’m not a luddite, however unless something very funky happens to the way that Atom/RSS works (and yes, Tim has chimed in with a potential solution) you really, really, really need material news to be distributed simultaneously. As in… at exactly the same time. I pointed it out a bit earlier this week, over here. That (together with identity authentication and persistence) are some of the goodies that make wire services important.
Now this is a really impressive hire. Congratulations Mark. Hard to be more public than on the SEC web site!
Jonathan Schwartz is writing about Regulation FD, which governs the release of material information by companies in the United States (and, in Europe at least, the rules are pretty similar). He points out, (with Sun General Counsel, Mike Dillon talking the same point up yesterday) that for most individuals, the internet is far more accessible than an audio-conference or press release. The problem is the notion of simultaneity.
It's absolutely true that if I, as an individual, am considering investing in Sun or any other company, subscribing to company blogs would be a great way to understand the business. As long as I know which of the 4000 or so blogs at Sun I should concentrate on (and I realise that Eve and her fellow identity experts can ensure that I know with complete certainty which they are), presumably it would be a great way for me to notice material statements.
With Atom or RSS, I'd be pretty sure of getting that information within a minute… or at least minutes of the announcement. Depending on latency.
Within a minute? Pretty sure? Depending on latency? Hang on!
That might be fine for individual investors. But what about professional investors? If a professional investor in a mutual fund, a hedge fund or proprietary trader on Wall Street or in the City was faced with the mere possibility that they will probably get the information at probably the same time as their competitors…
Well. Ummm. There might be a few problems with that.
The thing about the "anachronistic press release" is that it can get information to thousands of media outlets, professional investment houses and investment infomediaries absolutely simultaneously. And I mean simultaneous… which is to say, within a tick or so of an atomic clock.
So, if a trader (or her algorithm) is sitting next to a terminal watching material news flash by, she can be totally confident that the only difference between her and her competitor is the time it takes to act on the news. All market participants get the news at exactly the same time.
In the interests of full disclosure, I should mention that we are part owned by Business Wire, who run the proprietary NX network that drives nearly half the press releases that contain material news in the United States and a big chunk of the rest around the world. They are great people, who take their role in the information supply chain very seriously, and run a bunch of smart technology that ensures that simultaneous disclosures really work.
I believe that in a world that is increasingly transmitting material information in computer readable form, especially XBRL, the need for true simultaneity is only increasing. So I, for one, just don't see how the rules can change to allow what Jonathan is asking. Not that it isn't an admirable goal. Just that the internet can't deliver on it just yet. Thoughts? john DOT turner AT corefiling DOT com
[Updated] Tim Bray weighs in.
Did it seem like all the XBRL news last week was coming out of Washington? As usual, there were developments everywhere else. They were meeting in Rome last week to kick off the official Italian jurisdiction, with Infocamera, the companies registrar, set to co-ordinate the development of taxonomies for collecting financial information from companies all over the country. According to this communique, the work will be completed by March next year. XBRL in Italy has been slow to incubate, but I’d say they have their timing just about right!
Jonathan Schwartz’s post about the problems with transparency was interesting. There is a simple answer of course – stop innovating and then performance reporting can stay absolutely static 😉
Specifically though, Sun’s admirable drive for transparency could be pushed along with some hard numbers, internet style. The SEC’s voluntary filing program for XBRL (which got a huge push earlier this week) is the perfect opportunity to experiment. You don’t have to publish your interactive data at the same time as your earnings release, or your 10Q/10K. You can start and stop when you like. You do need to make sure you publish valid information, but that’s not so hard. You can even make it accessible (needs Acrobat 7.0 or better) to the masses.
It seems to me that blogs like Jonathan’s go down incredibly well with customers, prospects and partners. And probably makes competitors green with envy.
But will they make an impact with Wall Street analysts? Certainly. For the tech-savvy ones. To get the rest it is important to connect the strategy (that Jonathan is articulating in a very clear manner) with performance metrics. Obviously, not all of those metrics are in the financial statement — they are more the preserve of the MD&A. And, as Jonathan points out, the market shifts and the technology changes, which means that KPIs that were relevant yesterday are far less so today.
One approach, which seems like a step forward, is EBR. An initiative of the AICPA, the Enhanced Business Reporting Consortium seeks to provide a market, rather than regulatory, framework for the agreement and publication of standards for performance reporting. The EBR goals seem commendable:
- Give the capital markets relevant information
- Eliminate stale and redundant disclosures
- Make information easier to use
- Collaborate with users and suppliers of capital; and
- Enhance the integrity of the capital markets.
And are fully in line with the common sense of one of our main ultimate shareholders:
"At Berkshire, full reporting means giving you the information that we wish you to give us if our positions were reversed. What Charlie and I would want under that circumstance would be all the important facts about current operations as well as the CEO’s frank view of long-term economic characteristics of the business. We would expect both a lot of financial details and a discussion of any significant data we would need to interpret what was presented." Warren Buffett, Chairman, Berkshire-Hathaway, Inc. 2000 Annual Report
Overall, one of the main ideas of EBR is that industries should come together to agree clear, comparable definitions of industry-wide metrics, and individual companies should define more specific value drivers and describe how they can be measured. Then publish those results, in timeframes that make sense, using XBRL. The market gets clear, unambiguous messages about what management is driving towards over the long term and sees how it is measuring itself.
The EBR consortium hasn’t really taken off at this stage. The accounting industry has been a bit preoccupied with the present, rather than defining the future, and in any event, the leadership should probably really come from Corporates rather than their advisers and auditors. But it’s a worthwhile goal. The process of getting a taxonomy together for these types of disclosures is something that individual companies, or entire communities, can collaborate on, whether or not they wrap it up in consortium tape.
The specific problem of a new product not fitting into a well-defined existing segment is something that XBRL handles really well by the way (it reflects accounting 😉 ) — you can disclose metrics split out across multiple segment hierarchies. So disclose information using the "old" splits, and, if it helps improve the way that performance is described, also disclose using a new set of breakdowns that better reflect the way the market is changing. If you want you can even use the new dimensions capabilities of XBRL to neatly constrain these splits.
By the way – Tim Bray gave a great talk about standards adoption (and, yes, provided another hint to us to keep things simple) at a conference run by XBRL-US in January.
Sun participating in the VFP is a natural next step.
With disclosures in 11 languages, if you like!