SEC-Mandated XBRL Data at Risk of Being Irrelevant to Investors and Analysts

 SEC-Mandated XBRL Data at Risk of Being Irrelevant to Investors and Analysts

PR Newswire

NEW YORK, Jan. 22, 2013

NEW YORK, Jan. 22, 2013 /PRNewswire/ --In 2009, the Securities and Exchange
Commission mandated that public companies submit portions of annual (10-K) and
quarterly (10-Q) reports—in a digitized format known as eXtensible Business
Reporting Language (XBRL). The goal of this type of data was to provide more
relevant, timely, and reliable "interactive" data to investors and analysts.
The XBRL-formatted data is meant to allow users to manipulate and organize the
financial information according to their own purposes faster, cheaper, and
more easily than current alternatives.

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But how useful and usable is the new data to analysts and investors? The
authors, early proponents of interactive data, from Columbia Business School's
Center for Excellence in Accounting and Security Analysis (CEASA) recently
completed a review of the state of XBRL, with a focus on its usefulness and
usability for security analysis. The study questions the reliability of the
data, the simplicity and stability of the underlying taxonomy and
architecture, as well as the lack of user tools that add value and are easily
integrated into an investor's or analyst's existing work flow and tools. As a
result, the researchers conclude that XBRL has promised more than it has
delivered to date and is at risk of becoming obsolete for use by analysts and
investors.

However, the authors recommend specific changes that could make the formatted
data more useful to investors and analysts. First, the entire XBRL stakeholder
community must reduce significantly the error rate and limit unnecessary
"extensions" (company-specific data identifiers or "tags"). Steps that might
achieve this include: greater regulatory oversight and enforcement, mandatory
audits of the data and tags, or requirements around meeting the XBRL US
organization's error and quality checks. Second, the entities that file the
XBRL-formatted financial reports should focus their energy on improving the
quality of their data, rather than on trying to destroy the SEC's XBRL
regulation. Third, the ongoing development of XBRL technology should be taken
over and run by technologists, rather than accountants and regulators. An
interesting approach for this might include partnering with major business
information system vendors (like IBM, Oracle, and SAP), the key web-based
financial information suppliers (like Google and Yahoo), and possibly even the
major data aggregators (Bloomberg, CapitalIQ, Factset, and Thomson Reuters)
not only to ensure that the SEC's regulatory data can be used effectively by
investors and analysts, but, more importantly, to help improve the XBRL
technology and usability overall.

"The potential for interactive data to democratize financial information and
transform transparency remains stronger than ever, and many investors and
analysts wish that the data were more useful today," the researchers wrote in
the study. "But unless stakeholders focus on improving the data's reliability
and on creating value-added, easily integrated tools, XBRL-tagged data is
unlikely to be used by a significant number of investors or analysts."

About The Center for Excellence in Accounting and Security Analysis (CEASA)

The Center for Excellence in Accounting and Security Analysis (CEASA) at
Columbia Business School provides an independent, objective voice for
practical solutions in financial reporting and analysis.

Drawing on the wisdom of leading experts in academia, industry, and
government, the center produces sound research and identifies best practices
on relevant issues. CEASA's guiding criteria are to serve the public interest
by supporting the integrity of financial reporting and the efficiency of
capital markets. For more information, visit www.gsb.columbia.edu/ceasa.

About Columbia Business School

Led by Dean Glenn Hubbard, the Russell L. Carson Professor of Finance and
Economics, Columbia Business School is at the forefront of management
education for a rapidly changing world. The school's cutting-edge curriculum
bridges academic theory and practice, equipping students with an
entrepreneurial mindset to recognize and capture opportunity in a competitive
business environment. Beyond academic rigor and teaching excellence, the
school offers programs that are designed to give students practical experience
making decisions in real-world environments. The school offers MBA and
Executive MBA (EMBA) degrees, as well as non-degree Executive Education
programs. For more information, visit www.gsb.columbia.edu.



SOURCE Columbia Business School

Website: http://www.gsb.columbia.edu
Contact: Evan Nowell, egn2109@columbia.edu, +1-212-851-9147
 
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