XBRL Italy kicks off

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!

Interactive Small Caps

Interesting take on XBRL for small caps and microcaps on the SEC’s Government-Business
Forum on Small Business Capital Formation
being held today.

According to speakers including Malcolm C. Persen, CFO at Radyne Corporation, Chris
from Institutional Risk Analytics and Greg Adams from EDGAR Online, Interactive
Data will help new investment vehicles such as hedge funds, and the buy-side
generally, to access small and micro-cap companies as a hitherto-ignored asset
class. Fund managers are looking for a competitive edge, and the small-cap
world is believed to offer that. Investors like the Virginia Retirement System
would feel that they are better able to cover those types of stocks if a lot of
the labour-intensive work can be avoided. XBRL offers a way for them to gain a
better understanding of the business, without incurring a lot of the complexity
and expense that they encounter today.

In fact, all the points from Assoc. Prof. Deborah
, who sits on the Investment Committee of the Virginia
Retirement System, were well made. From her perspective (backed up by Chris
Whalen) the problem is not too few analysts on the sell side. The sell side is
likely to continue to focus on the big end of town. The entire investment world
will become their own analysts, and Interactive Data will make the financials
more pervasive, facilitating that analysis and investment. This is a new
business model for financial analysis. According to Prof. Hewitt, XBRL could
mark a watershed in the speed, accuracy and availability of information. That
said, investors want something new. Broader, deeper data about companies is
what investors really want to see, and XBRL provides a great way to provide it.

There are 15,000 odd companies that are outside of the Russell 3000. According
to the panel, Interactive Data will help small companies make their story
because the information will be better, more believable and more transparent.
It will help investors sift this information, which is why there is a real
advantage in being an early adopter. The first group of small companies to get
involved will be the first to be identified.

Unsurprisingly, there was a uniform call for improvements to tools that the
user community can take advantage of. We’ll see if we can do our bit 😉

Making Sun (Even More) Transparent

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!

Three Cheers! SEC puts its money where its mouth is

So, it’s official (see point 2. in the EDGAR modernization announcement). The SEC is really serious about improving investor and regulator analytic capabilities. The decision by that agency to fund the completion of the US-GAAP XBRL taxonomies to the tune of $5.5 million is a huge signal about just how committed they are. The speed with which this has been executed has been head spinning, and congratulations go to all those within the AICPA as well as the XBRL-US steering committee for responding to the SEC so quickly. Particular applause to everyone involved for ensuring with finality that the taxonomies will be royalty free and publicly available. Period.

The message to listed companies and investment funds in the US is that the last actual barrier to XBRL going mainstream is to be knocked down over the next 12 months.

Many will interpret this step as a message about XBRL filing becoming mandatory in the United States. I’ll let the SEC decide that. I think what it does do is directly and indirectly ensure that the infrastructure, know-how and education exist to allow XBRL to become ubiquitous. Ubiquitous infrastructure gets used. I guess you could ignore these developments. But it would be a “courageous” move. Chairman Cox seemed to indicate exactly that on today’s web cast.

Taxonomies, for those not yet in the know, are dictionaries of financial reporting concepts, containing links to authoritative literature as well as labels (in multiple languages). Just as important are links between concepts, which build up a network of information about a financial metric – where it’s presented, which calculated concepts it contributes to, and how it relates to similar concepts in other taxonomies. Since you can wire these dictionaries together, it’s possible, in a manner not unlike a loose leaf folder, to add in concepts that relate to your particular reporting requirements, including the manner in which you present your performance to the world. A first, and really very large, step is the construction of the base taxonomies.

We are talking here about US-GAAP but there are other very significant “base” taxonomies built up by the International Accounting Standards folk for IFRS (used by most of the world outside of the US) as well as in Japan.

The US-GAAP taxonomies, like most others, have, to date, been the product of volunteer effort. As the XBRL community around the world has learnt, this is an exceedingly difficult process to manage and even harder one to complete. Base taxonomies should be created by paid-for experts. Not willing but time-constrained volunteers. The current XBRL-US GAAP taxonomies are a great start and they have been put together by a number of very skillful volunteers. However, like others, we have found a huge number of missing sections, which in effect makes what should be company-specific extensions to the base taxonomy a combination of those kinds of legitimate extensions and necessary, but annoying, add ons that paper-over some of the gaps. The task is too big for a volunteer effort. So the SEC’s initiative is a fantastic step forward.

Of course it is possible to create your financial statements in XBRL today. You should. This initiative of the SEC guarantees the importance and urgency of IR departments and financial controllers coming to grips with the process. The finalization of the US-GAAP taxonomies will improve the process, speed things up and enhance comparability. Bravo Chairman Cox!

By the way – congratulations to both Microsoft and Rivet Software. Both companies have been very active in the XBRL consortium for a very long time and their efforts have paid off – they are both part of the team that won the other (larger) contract announced today for the modernization of EDGAR.


Lots of attention on this subject, including here, here and here. Not to mention here. (Great post! Yup – that’s why we’ve been working on making XBRL a reality for all these years). But please ignore those media stories that say this is an annoucement about mandating the standard. It isn’t. Just yet.

Round the XBRL world in 80 minutes

Something like 300 senior people from corporations all over America (and much further afield) attended the Business Wire XBRL webinar yesterday. Updated: A podcast of the presentations is now available. The slides are [no longer available]. We covered interactive data from all points — inside the corporation, from the investor’s standpoint, the regulator’s standpoint, the view from Wall Street (Morgan Stanley are right at the forefront of this topic) and WIFM… WhatsInItForMe, from the perspective of the corporate controller, IRO or CFO.

Mike Willis is still thinking faster than just about everyone else on the subject of business reporting. His slide on the effects of standardisation in all walks of life is really compelling. I also like the way he splits the various defining features of XBRL into "Standardisation" and "Validation". Can I steal that slide Mike? He also hinted at linking XBRL concepts to the control framework, an idea that David vun Kannon, who now works at PwC with Mike, has spoken about in the past. Potentially this is an incredibly powerful mechanism to highlight control deficiencies, and will obviously be of interest to the Audit firm’s (non-audit) clients.

Corey Booth mentioned that the SEC will make some announcements about the next stages of its Interactive Data agenda in the next couple of weeks. I’m guessing that they will announce the way that they intend to allow investors to do financial analysis of XBRL instance documents directly from the SEC site. I don’t suppose that the guys at Yahoo Finance are shaking in their shoes just yet. But it will probably come as a wake-up call. In an XBRL world you need to add real value to data, or forget about being an infomediary.

Thanks to all the speakers for agreeing to be part of it, and to Business Wire, our hosts.

Did you like the webinar? Let us know.

XBRL Webinar Today

Don’t miss today’s Business Wire XBRL webinar, sponsored by Thomson Financial. 2pm EST, with speakers Mike Willis from PricewaterhouseCoopers, Corey Booth from the SEC and Mark Schnitzer from Morgan Stanley. Oh. And yours truly.

Should be fun. We are aiming to point out why companies should get excited about the new IR capabilities that interactive data represents. By looking ahead, companies that start to incorporate XBRL into their disclosure strategy today will quickly reap the benefits. See you there. Register Here!

Great new resources for XBRL

I’ve been meaning to put some effort into introductory XBRL materials to place on this site, but we have been busy. Now it looks like Josef MacDonald’s team over at the International Accounting Standards Committee Foundation (IASCF) are producing such good quality stuff that we won’t need to. The diagram is an adaptation of a slide that Walter created years ago and that has become a bit of a staple for XBRL International talks. But this is heaps better! And the glossary is terrific. Congratulations to everyone involved.

EarningsDirect makes its debut

From today, interactive data suddenly became an important part of doing business. Today we launched EarningsDirect with Business Wire. This is a world first — an entirely new communications tool for investor relations and finance professionals. It allows companies’ all-important earnings data to be communicated to the media, market data services, analysts and investors in a format that can be instantly, accurately and unambiguously used in analysis and investment models.

Financial data first gets disseminated as an earnings release, in text format. This generally occurs two or three weeks before regulatory filings, like 10Q statements, are lodged with the regulators. A very few key numbers get punched into financial news stories and active investor models within a matter of 10 – 20 minutes of the earnings release being made available. And any number of market data services either key the information in at off-shore facilities in India or Eastern Europe or parse the information out of the text and into databases using fairly sophisticated software over the next hours and days. Naturally, and much to the horror of a lot of the accountants and controllers who sweat over the production of financial statements, in the process of all this manual wrangling, the data gets drastically summarised. Inevitably, mistakes creep in.

EarningsDirect changes all that. Selected information within the earnings release are disseminated simultaneously in XBRL format, which means that the information can be used without rekeying, re-parsing or manual manipulation of any sort. News stories can gulp down EBITDA, changes in revenue, earnings growth, SG&A improvements or the effect of a merger, instantly. Analysts’ models can absorb the base data that they need to calculate hundreds of ratios instantly. The really great thing about this new way of communicating, is that we can’t begin to work out all the ways that the market will use all this instant, accurate data!

Ok, great — how does it get turned into this magic format? It’s a pretty simple process. Business Wire clients download a Microsoft Excel template, fill it in and upload it to our software running on the Business Wire servers.

Clients get back a special Intelligent Financial Statement™, or IFS. An IFS is a special PDF file containing a range of CoreFiling proprietary technologies. It looks like a set of financials – tables setting out familiar information like a balance sheet, income statement and cash flow. But if you hover your mouse over a number in the document, TagTips™ tell you how the information has been marked up, or tagged, in XBRL. The data document itself is embedded right inside the PDF, accessible at a click of a button from within Adobe Acrobat Reader. As a result, the controller or CFO can gain complete confidence about the manner in which the information is being communicated to the market.

Once approved, this document – the Intelligent Financial Statement™, as well as the XBRL in its raw form, is disseminated, with the earnings release, simultaneously, to global capital markets by the Business Wire NX system, ready to be used.

It’s like corn on the cob. It’s better to eat it fresh, within seconds of it being picked, than the kind that’s washed in chemicals, cut down to a uniform size to fit into uniform packaging and then refrigerated or frozen and shipped over a period of days or weeks from somewhere you have trouble finding on the map. Both are recognizably corn. But the mass produced kind is missing quite a bit of its goodness and never tastes quite the same.

Won’t this just be a sub-set of the information in the earnings release, I hear you ask? It depends. There are three levels to the EarningsDirect service. Level 1 is a simple template, containing around 90 concepts, critical to almost every company. It’s free for the next two quarters of earnings. Business Wire client? Talk to your AE about EarningsDirect Level 1. Level 2 involves more detailed data, specific to certain sectors, ensuring comparability and accuracy for larger, as well as more specialized businesses. But Level 3 is a completely customised template. CoreFiling specialists create it to meet the communications objectives of each company. Clients can use the same template each quarter. Again, all the client needs to do is fill in the spreadsheet. So EarningsDirect is easy to use. Easy to understand. And makes sure that financial performance messages get across accurately, unambiguously and (did we mention?) instantly!

Lastly, some people will be wondering how analysts and media organisations can consume this data. Hint – some of them already can. For the others, it’s a simple exercise that provide a rich new seam of crucial investment information. Don’t know how? Talk to us, or (if you must) the other XBRL vendors. We can all help.

EarningsDirect. It’s powerful reporting made simple by CoreFiling. And Business Wire!

How XBRL differs from other XML standards

Developers familiar with XML standards often look at XBRL and ask the same questions:

  • XBRL looks different: how does it differ?
  • Why does XBRL differ?

In this article, Steve Baker, Director of Product Development, explains how and why XBRL differs from most other XML standards.

Check back for later articles on how XBRL works and how to work with it.

XBRL is a framework, not an implementation

Most XML standards provide a schema that defines fairly tightly what structures and datatypes are allowed. If a standard is extensible, it is only in defined places and often in only narrow ways.

XBRL is different: an XBRL report is defined to contain contexts, units and concepts but the XBRL standard does not provide any concrete concepts one can use. Instead, XBRL is defined in terms of the two types of concept: items and tuples. Concrete items and tuples are provided by XBRL taxonomies.

By leaving items and tuples to be defined by domain experts in taxonomies, XBRL provides a great way to model typical business reports in a uniform way, while allowing preparers to report whatever they need to.

XBRL models tables of data

A typical business report will have a column of labels on the left, indented to indicate structure. A table is formed by providing the data for those headings for each of several periods in time: the rows are the facts, the columns are the different periods or instants. The units of the report are given, as is the name of the business entity to which the facts refer. Additionally, footnotes are added, and certain facts typically sum to subtotals.

Sketch these features in a spreadsheet and hand them to a dozen XML gurus and you will get at least a dozen different designs. And remember we didn’t tell the gurus what we would actually be reporting!

XBRL’s big win is that it takes these typical features and gives us one design so we can move forward.

XBRL reports are defined in several parts

Where a schema is usually sufficient, XBRL requires a definition in several parts:

  • The general structure of an XBRL report is defined by the schema for XBRL.
  • The concepts which may be used in a report – the items and tuples – and any datatypes are defined in a taxonomy schema.
  • Relationships between concepts and about concepts are stored in taxonomy linkbases for flexibility:
    • The label linkbase gives various human-readable labels for concepts, often in several languages.
    • The reference linkbase points to authoritative documentation for concepts.
    • Hints about how to present concepts in relation to one another – those indents in the business report – are provided by the presentation linkbase.
    • Statements about how concepts should sum to other concepts are provided by the calculation linkbase.
    • Miscellaneous – and infrequently used! – relationships are given in the definition linkbase.

The way these components of the definition are brought together varies, but typically a report points to a taxonomy schema and the taxonomy schema points to all the other components. Taxonomies often point to other taxonomies.

XBRL uses some uncommon XML technologies and techniques

In addition to the now run-of-the-mill XML technologies like namespaces and XML Schema, XBRL has some uncommon features.

Nothing could work without substitution groups. The schema for XBRL reports says, “you can put items here” but it makes items abstract: you can never use an item directly. Taxonomies declare concrete items that can be substituted wherever XBRL allows an XBRL item. Don’t worry: we’ll be coming back to this in a later article!

A quite arcane part of the landscape of XML standards is XLink. XLink allows the definition of arbitrary networks, or graphs, of relationships between things of any type. XBRL takes XLink and applies it to good effect: all the linkbases use XLink to relate concepts to one another and to other information.

IDs and IDREFs have always been available in XML, but in XBRL they are indispensible. Taxonomy schemas give every concept an ID to which links can refer out of the linkbases. Footnotes use IDs on reported facts with IDREFs to add that extra information to the report.

XBRL is typically quite flat

No doubt you are used to seeing deeply-nested elements in XML documents: tags within tags within tags. In XBRL, reports are usually quite flat. Most of the structure is in the linkbases.

XBRL is not completely flat. Contexts use structure to lay out entity, period, segment and scenario information and units are structured. Tuples can contain other concepts – that is, items or tuples – so they can reintroduce as much structure as is necessary.

But why?!

It’s all about extensibility:

  • Allowing multiple accounting standards within the same framework.
  • Allowing extensions to accounting standards by adding new concepts with new labels and references while changing relationships.
  • Removing concepts from presentation views.
  • Removing concepts from calculations.
  • Permitting labels for concepts in new languages.
  • Inserting new concepts into a report, changing the existing presentation and calculation relationships.

As you can imagine, flexibility and extensibility are available in XBRL to a degree unseen in most standards. Thankfully, all this change happens within the same defined framework, so tools and applications can still get on with the processing.

Further reading

Check back for further articles as we explain how XBRL works in detail. You can also see our paper XML Flattened.

Initial test of TRAX – Collaboration for XBRL

Recently we signed an MOU with XBRL-US, providing a new collaborative taxonomy tool called TRAX to help business experts review the work of taxonomy developers. The tool has now been launched and is ‘on trial’ through to the end of the year. Other parts of this site give you plenty of information on the tool. What follows is part justification, part theory: to put it into context.

Some of the most powerful new technologies today are loosely termed “social tools”. They provide a mechanism for collaboration. Our hope is that by bringing on-line collaboration into the middle of the process of creating XBRL taxonomies, project teams will build an increasingly familiar process.

It should become more than a process. It should be a ceremony – a set of steps that everyone involved in the exercise understands and expects everyone else to follow. Ceremony is a term that I’ve borrowed from the security folk, who are now using it to describe what is required to grant an electronic identity to someone. A good term, with wider application. What does it mean in the context of XBRL taxonomy development?

Not long after we started CoreFiling, we began to discuss taxonomies and, specifically, taxonomy review. The parable goes something like this:

The acolytes spend many days and long nights labouring over the construction of a set of definitions, that, once mangled with tools, scripts, or notepad, becomes a taxonomy. And they consider it good, if in need of some fresh eyes. Thus, each time that a taxonomy gets created a great hue and cry goes out. “Please review this!” beg the acolytes. Generally, although not always, their beseechings fall on a silent multitude of accountants, accounting standards setters, analysts and preparers. And then there is gnashing of teeth and tearing at hair amongst the acolytes. “We have built it. And yet they haven’t come,” they call out. And then (finally) there is some review by some people and the acolytes try to tell each other that it will be enough. But often it isn’t.

It seems to me that to create a standard, (and a taxonomy is a very specific kind of standard) you need subject matter experts to reach agreement about what the standard should say. Just as importantly, you need an authority that will publish it and maintain it. For the moment, let’s assume that authorities are easier to come by than subject matter experts. A topic for a later note, no doubt.

So, why is it difficult to get business experts to look at XBRL taxonomies to see if they will meet their needs? Well, there have been a bunch of reasons, including the rather obvious fact that until recently, quite a lot thought it would be a waste of time, as they didn’t want to create reports using XBRL. The tide in that area is changing quite quickly, so now there are very good reasons for business experts to review them. However, I think there are a couple of other important reasons they might continue to hold out, if it were not for TRAX (and no doubt its successors): Accessibility and Trust.

Subject matter experts tend to be much in demand, so, among other things, it’s necessary to ensure that they don’t have to waste time understanding something they don’t need to. Something like XBRL. Equally, subject matter experts are very unlikely to be able to spend very much time together, so it would make sense if they could collaborate over the internet. Combined – the need for the materials to be available in a form that is easily understood, and the need for the materials to be available at all hours of the day or night, anywhere on the internet, captures what I mean by “accessibility”.

Finally, subject matter experts need to trust that, if they are going to put effort into reviewing something, their comments will be used and not ignored. Transparency in the comment process is really important to their commitment. Nothing seems to put people off faster than not seeing how their contributions have made a difference. That’s trust.

So, TRAX, which came about following some discussions internally, and then with our good friends at both WebOrganics and the one and only Galexy, is the result. It’s kind of nice that this collaborative tool was built collaboratively! We hope that TRAX will make the process more accessible, since we can skin it to make even XBRL seem reasonably straightforward, and since it is a creature of the web, merely subject to continuity of power at a very big, very red building in the London Docklands, it should be nearly ubiquitously available. And we hope that trust will be pretty straightforward, as you can always see “My Issues” and how they have been dealt with by other commentators as well as the project moderators. Creating a whole new set of incentives.

So while the system gets put through its paces (and there are a number of new features that will get added during the course of the trial, and no doubt a number of bugs stamped out as well), we’ll be most interested to see if it helps make it easier for subject matter experts to give a little of themselves. And perhaps a new type of ceremony will start to get created.

If you would like to contribute to the review of the XBRL-US Broker-Dealer taxonomies, please contact Brad Homer (bhomer) at (at) the AICPA (aicpa dot com). If you have your own taxonomy project and would like to experiment with TRAX, please drop me (john turner at corefiling dot com) a line.