TORONTO – The North American community is getting its butt kicked when it comes to financial reporting, according to one industry insider.
“Everyone thinks the New York Stock Exchange is the Holy Grail,” said Mike Willis, a partner with PricewaterhouseCoopers, during an XBRL Canada seminar on Tuesday. “I don’t think so.” Willis is also the founding chairman of XBRL International, and consults with companies on their adoption of emerging technologies used in business reporting, business intelligence and decision analysis.
XBRL, which stands for eXtensible Business Reporting Language, is a language for the electronic communication of business and financial data. An international non-profit consortium made up of 250 companies, organizations and government agencies are developing the language, which is expected to change business reporting around the world. Proposed benefits include cost savings, greater efficiencies and improved accuracy to those involved in supplying or using financial data.
But why should businesses care about XBRL?
North America is being reactive and sluggish, said Willis, which could leave us at a competitive disadvantage. “The whole supply chain needs to move quickly onto the Internet,” he said.
The Netherlands, for example, is transforming the way companies report to government, removing US$500 million in compliance costs for Dutch companies.
Japan has a “voluntary” filing program in place for reporting financial information using XBRL, he said, which, in Japanese culture, actually means it’s an involuntary program. China and Korea also have “voluntary” filing programs. The U.S. has a voluntary filing program (which is actually voluntary), and only 12 American companies have complied so far.
These countries have a huge lead on us, said Willis. “If we don’t get in gear we’re going to get further behind.”
The state of adoption in Canada is still very early, said Paul Johanis, director of the Standards Division with Statistics Canada and chair of XBRL Canada.
Statistics Canada, for example, is developing single-window reporting for its financial information using XBRL. “We see a few projects like that, but it’s still early days,” he said, adding that only through collaboration and working together will Canada be able to move ahead.
“There’s lots of low-hanging fruit for organizations,” said Prof. Tony Dimnik from Queen’s University, who is an authority on strategic control systems. If you compare the costs and benefits of the solution you have in place with XBRL, in most cases XBRL turns out to be the best alternative, he said.
XBRL can be used to solve a number of common problems with today’s data. One problem is there are no common definitions, or those definitions are inconsistent across applications. Other problems include manual audit trails and poor data quality.
XBRL provides an expanded reporting model for better management, as well as more relevant data for assessment, said Willis. It can also lower preparation, access and analysis costs.
Ultimately, it allows analysts to actually analyze data, rather than simply enter data. “I don’t go in and give them fish,” he said. “I’m teaching them how to fish.”
XBRL also eliminates the “political heartache” of forcing subsidiaries onto the same technology platform, he said. But return on investment will depend upon an organization’s pain points.
“The Internet is both a source of solutions and a source of problems,” said Willis. The issues of trust and assurance are big ones, and XML Signatures are part of the solution (this specification verifies the authenticity of XML-based transactions). In France, digital signatures are already in place, he said, and we need to internationalize that idea.
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