Here’s an experience we’ve all had (many, many times): You Google something one time — and for weeks, you’re getting targeted ads and related content on every site and every social media platform you visit. This “Big Data” phenomenon may have even ruined a surprise gift or two. It’s amazing to see just how quickly — and how broadly — the data we generate spreads. And it’s sometimes eerie to see the unexpected ways it’s used — and misused.
Now, get ready to experience the same feelings in regard to your company’s financial data.
The shift to XBRL will exponentially accelerate the spread and utilization of your financial data. In fact, that’s really the whole point of XBRL: to make your financial data infinitely more accessible and usable. This is actually a very positive thing — for your company and for investors — provided you keep some important considerations in mind around ensuring the accuracy and consistency of your XBRL data.
You want your financial data to get used
As consumers, we don’t always enjoy the feeling of being “watched” by data aggregators and analysts. But when it comes to company financial data, you absolutely want that data to be seen and used. Every company is looking for analysts to follow them, analyze them, report on them and keep them in the headlines. XBRL is making it much, much easier for analysts to capture and analyze your company’s financial data. With XBRL, data capture can be nearly automatic and instantaneous, and the analysis itself is dramatically easier, faster, less costly and less burdensome.
The result is that your XBRL-tagged data will be consumed by more analysts, more frequently than ever before. And because the intake and analysis will be so much faster and easier, analysts will spend more time diving deeper into your financials and running comparisons across your peer group. In short, XBRL is going to make it a lot easier for analysts to see — and share — how your company’s performance stacks up against your peers.
Analysis that used to take weeks will be done in a day
Here’s one great example, taken from the European Banking Authority. The charts, tables and graphs below are all built on top of XBRL data. The EBA tool lets you dive into various comparisons and visualizations, from bank-to-bank comparisons, to country-to-country and exploring individual data points.
Using the same data set, the EBA created the visualizations below representing key ratios with drill downs available to mine the data as necessary. In this case, we’re looking at CET1 Ratio Transitional, comparing a bank's capital against its assets.
Now, consider that this level of analysis and comparison would have taken days of intensive work from multiple analysts. With XBRL, these kinds of insights will be publicly available within days of when financials are filed. In other words, you can expect to start seeing your company’s financial performance “story” shared almost immediately, across a much broader audience.
You get to control the story your data tells
Here’s the other great thing about XBRL: Your company (not the analyst) gets to decide which numbers get compared to which numbers. Whereas previously, an analyst might have had to determine which figure to use for revenue comparisons, now you’re in direct control. You can tag a figure to let analysts know that this is the one to use for peer-group revenue comparisons. There’s little room for third-party interpretation. With XBRL, you’re in control of the story your financial data tells.
Key Consideration #1: There’s no filter to catch tagging mistakes
While it is great to cut out the “filter” of third-party interpretation of your data, the reality is that this filter also inherently caught and corrected many of the inconsistencies in companies’ financial data. Part of the analyst’s job was to make sure they were comparing apples to apples, so in many ways, the responsibility for interpreting which figures to use for comparison fell much more on the analyst’s shoulders.
With XBRL, there is no filter — and this puts the responsibility firmly on the company’s end to ensure accurate and consistent tagging. Your financial data will be automatically aggregated and analyzed at face value. Machines won’t be able to correct for mistakes and inaccuracies, so you need to make sure you’re choosing consistent tags. This consistency is even more critical from year to year, as analyses over time tend to be more relevant and impactful than insights gleaned from a single year. If you do change a tag from year to year, you should (and likely will be required to in the future) clearly explain why — and make sure both analysts and the public understands, to mitigate the chance of misrepresentation of your data.
Key Consideration #2: With real-time analysis, there’s no time for corrections
Many analysts say that financial data has felt like it’s been stuck in a spreadsheet, and XBRL is about to accelerate that data to light-speed in terms of accessibility and use. Quite literally, the second you click “Submit” on your XBRL data, it’s going to become publicly available and begin being consumed, used and shared. With this real-time analysis, you can’t count on any second chances to correct for inaccuracies or inconsistencies. It will simply be too late — your flawed data will already be out there, being used, being shared and spreading rapidly. Once you hit “Submit,” it’s incredibly difficult to pull it back into your control.
Key Consideration #3: Your data will live on (and be used) in perpetuity
We’re now firmly in the cloud era, where data storage and computing power is almost literally limitless. That means that as soon as you hit “Submit,” not only will your data be immediately public — it will be part of the public domain forever. Since data is now the most valuable commodity in our world, data aggregators will continue to pull your data into more (and more unexpected) places. Moreover, the accessibility and capabilities of today’s cloud-driven analytics engines mean that your data is going to be used by more organizations, and in ways you would never have imagined — much in the way that we’re continually surprised by the creative and bizarre ways that our personal data is used by marketers and advertisers. And the further removed your financial data is from your organization, the easier it is for it to end up out of context. That lack of context, combined with machine-readable XBRL without a human “filter,” means that errors and inaccuracies could become big problems and liabilities for your company in ways you won’t be able to predict.
There are tools that can help you get XBRL right — right from the start
The good news is that you’re not on your own when it comes to getting XBRL right. There are tools and expert partners that can help you get it right, right from Year 1. We’ve talked about this in previous blogs, but you should also keep in mind that you don’t have to change that much in Year 1 — and you definitely don’t have to implement a whole new piece of software. You can keep doing exactly what you’re doing in building your financials, and then simply hand off a PDF to an expert partner who can handle the XBRL tagging. It’s also important to mention (again) that you really can’t trust AI and automated software to do all the tagging. There’s some art to the science of tagging — that’s what we mean when we talk about having the ability to control the story your financial data tells. And for all the reasons we listed above, you’re going to want to make sure there’s a human expert looking at your XBRL to make sure you’re getting it right and telling the right story.
Why XBRL tagging might be a good idea — even if the ESEF requirement gets delayed
One last note: In light of the ongoing impacts of the pandemic, you’ve likely heard buzz about regulators considering a potential delay in the implementation date for the ESEF requirements. While there remains a chance that some EU nations may choose to delay implementation for another year, several countries (and almost 2,000 issuers) are pressing forward with implementing XBRL tagging in 2021.
Regardless if your company is required to begin XBRL tagging in 2021, it is still a smart decision to go ahead with XBRL tagging this year. In fact, a delay in the requirement might make 2021 the best time to begin XBRL tagging — without the pressure, time-crunch and added scrutiny of hard regulatory requirements. Companies may choose to use a one-year delay as a “test run” with XBRL, getting ahead on the learning curve, so that when the requirement does begin, they’re experienced and ready.
Moreover, many companies are choosing to begin XBRL tagging in 2021 in order to leverage the powerful advantages we’ve already covered — namely, making their data more accessible and consumable, while taking greater control over the story their data tells in these analyses. As Wes Bricker of PricewaterhouseCoopers pointed out in a recent article: “As digitization of data, and use of XBRL by regulatory bodies continues to grow, companies that have implemented strong quality review processes and controls, as well as governance and outside assurance, will be better positioned to reap its benefits and have comfort that the reports being filed in response to regulatory reporting mandates are high quality.”
The bottom line: If you DO file XBRL, you need to get it right
Whether you’re filing because you’re required to, or because you’d like to get a head start, the critical thing to understand is that once you hit “Submit,” that data is going to fly further and faster than you ever imagined. You need to do everything you can to make sure you’re getting your XBRL data right from the start — tagging accurately and consistently. Because once your data is out there, there’s no pulling it back.
Bartek Czajka, Director of XBRL Consulting Services at Toppan Merrill, is one of the foremost experts on XBRL, having created the majority of updates and additions to the IFRS Taxonomy between the years of 2010-2017 during his tenure as Senior Technical Manager at the IASB, the organisation that issues the IFRS Standards. When ESMA was tasked with developing the European Single Electronic Format (ESEF), Bartek directly helped ESMA define the shape and form of the XBRL taxonomy to be used. He also participated in the field test organised by ESMA with 25 European issuers to assess the cost and benefit of using XBRL for ESEF. We can think of no one more qualified to help our clients understand, successfully implement, produce and confidently move forward with XBRL.
Reach out to jump start a partnership that will bring speed, security, accuracy and efficiency to all of your complex content and communication requirements.