Final Thoughts
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Financial Information supply
chain
Columbia Business School’s Center for Excellence in
Accounting and Security Analysis
S “An Evaluation of the current state and future of XBRL and interactive data for
investors and analysts” (Dec. 2012)
S Interviews and surveys with:
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preparers; regulators; analysts; investors; XBRL developers; data aggregators; XBRL filing and
consumption tool developers
S Findings:
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“In our view, XBRL has succeeded in so far as the objective of providing users with free,
interactively-available numerical data from portions of published financial statements and
footnotes, as soon as they are filed with the SEC. Most of the analysts and investors we
spoke with are interested in and tried to use the footnote data that are XBRL-tagged.”
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“We have no doubt that analysis of companies will continue to be based off increasing
amounts of data that are structured and delivered to users in an interactive format.”
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“However …”
However…
S Unless the XBRL stakeholders—including filers, regulators,
and developers—focus on the data’s reliability and on valueadded, easily integrated consumption tools, we doubt that
the XBRL-tagged data will be used by a significant number
of investors and analysts.
S Unless the FASB and SEC also ensure that the focus of the
underlying taxonomy is on simplification and enhanced
utility, improved data quality is not going to be sufficient for
users to readily access and use the data.
However…
S Unless the XBRL format becomes integrated as the “language” to
structure data in the underlying general ledger or MIS systems, we
believe that it is unlikely to become the format for most of the
firm-specific financial data that investors and analysts want to use.
S We question whether it is necessary to have the data structuring
provided by the issuer at the source of a regulatory filing versus by
a data supplier or other end user, given the current state of
technology. However, providing issuer-tagged information would
be valuable, as long as it was tagged at the disaggregated source,
rather than only at the aggregated level as reported in a periodic
regulatory presentation.
Recommendations
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The entire XBRL community must find a way to reduce significantly the error
rate and unnecessary extensions (company-specific data tags).
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Some approaches that might achieve this are:
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providing greater regulatory oversight
potentially requiring an audit of the data
or requiring filers to resolve the error and quality checks communicated to them by
XBRL US.
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Filers should spend the effort they are investing in attempting to destroy the
SEC’s XBRL regulation on improving the quality of their own data, as well as
on making their own data more useful and accessible to users.
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XBRL technology development needs to be taken over and run by
technologists, rather than accountants and regulators.
Craig M. Lewis is Director and Chief
Economist of the Division of Risk, Strategy,
and Financial Innovation (the SEC’s think tank,
also known as RiskFin or RSFI) and is on leave
as a professor of finance at Vanderbilt
University.
Q&A with an Expert: The SEC is Developing
Tools That Use XBRL Data to Discover
Accounting Anomalies and Improve
Financial Disclosures
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Risk Modeling At The SEC: The
Accounting Quality Model
S Developing cutting-edge ways to integrate data analysis into
risk monitoring.
S The mining of XBRL data is a key part of this work.
Accounting Quality Model
S Developed with the SEC
S a predictive model that attempts to identify firms which have
made unusual accounting choices relative to their peer group
S it is a fully automated system that effectively takes a firm’s
filing the day it comes in, processes it, and then keeps it in the
database so that somebody who is interested in looking at a
report on that company would be able to do so within 24 hours
of the filing being posted on EDGAR.
S XBRL is critical to the development of the tool simply because
it allows us to have complete coverage.
How will this monitoring tool parse the XBRL data to
select the companies whose financials need extra
review?
S The tool itself tries to model what is known in the financial-
accounting literature as discretionary accruals. It is a predictive
model that estimates how much of the total accruals that a
company reports are discretionary. (Total accruals are the
difference between cash flows and net income.)
S One of the exercises we need to go through is to take the
taxonomy and synthesize it in a way so that we can compress the
actual taxonomy choices that companies make and the way they
use the taxonomy into high-level financial statements.
Companies develop their own XBRL extensions. Does that
cause a problem in your system?
S One of the things we have noticed is that the longer a firm is
actually making XBRL filings, the fewer unique extensions
they tend to choose. So there is a learning curve that seems
to be going on, where filers may begin by using unique
extensions, but over time, as they become more comfortable
with using the taxonomy, the number of those unique
extensions tends to collapse.
XBRL Quality
S …Now that there is an actual liability associated with
inaccurate XBRL statements, I fully expect quality to
improve.
S My view is that the real solution to this is inline XBRL:
creating a document where the tags are embedded directly
into your filing so that you do not have to have two separate
documents. This seems to be where the industry is moving,
and I fully support that.
What about the claim that XBRL
data is not being used?
S Data hasn’t been around long enough
S Time series data is needed
S SEC is using the data
S Data quality improves as firms gain experience
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The SEC was really just allowing firms to have a window to figure
out how to tag data. Now that the window has shut, we are just
going to start to use the data. I view it as the natural outcome of
giving filers the opportunity to figure out what they are doing with
XBRL.
So….
S Stay Tuned!