CHAPTER FIVE

Opportunities to integrate and track data objects

5.1 GROWING INTEREST AMONG STAKEHOLDERS

That XBRL has made substantial inroads in the realm of finance and accounting is indisputable. Still, as will become apparent over time, the current install base will grow at a fast rate when influential entities, such as government authorities and financial institutions, set XBRL as a mandatory requirement for all data sourcing and business reporting needs. That of itself will be a certain source of impetus for the future. However, other considerations exist, such as the fact that double entry bookkeeping can track about ten objects, whereas XBRL can track a couple of thousand. Accordingly, new approaches to object tracking will be found and shall affect, very positively, future business management and related reporting.

Certainly, such fertile ground is evident to many people, and this has promoted the review of opportunities for numerous XBRL-related stakeholders, and will continue to do so. For instance, there are the initiatives of the Information Systems and Accounting Research Group (ISARG) of the University of Birmingham. The focus of ISARG is researching the communication, use and regulation of digital reporting. Specific areas of interest include the development of industry standards, control and electronic interchange of data, XBRL, the use of Internet technologies in business, ERP systems, and the role of technology in taxation.

ISARG runs an annual conference on XBRL and online reporting. The conference is designed to bring together academics and practitioners to share knowledge and to provide an opportunity for attendees to discuss issues. In 2011, ISARG hosted a conference entitled The future of XBRL in Europe: Impetus, institutions and interrelationships in conjunction with the IT Faculty of the Institute of Chartered Accountants in England and Wales (ICAEW). This took the form of a workshop run at Chartered Accountants' Hall in London–see www.dundee.ac.uk/accountancy/whatson/allnews/xbrl.htm or www.birmingham.ac.uk/schools/business/departments/Accounting-Finance/research/isarg.aspx.

The summary document related to this event provides considerable points to ponder. Specifically, it states:

The successful development and diffusion of standards for business information exchange requires a strong and complex stakeholder network pursuing a solution for a commonly perceived problem.

In the case of eXtensible Business Reporting Language (XBRL) it is widely accepted that adoption is being driven by regulatory bodies which have recognised the benefits for themselves and the potential for reductions in compliance costs they impose. So while it is possible for a technology for digital data exchange to become a de facto standard through widespread adoption, XBRL's diffusion has come about to date by regulators requiring it in a de jure fashion. The importance of regulators in the adoption of XBRL means that the XBRL consortium needs to engage with the institutions and governmental structures which provide this impetus and to understand the constraints and requirements that regulatory adoption imposes on the process of diffusion.

For network standards, achieving a critical mass of adoption is fundamental to their success in facilitating data exchange. Ultimately if this data standard is able to competently deliver what stakeholders need the mechanism by which it is diffused is not important, but to achieve significant adoption outside of the regulatory sphere the benefits must be understood by the market based on a sound business case. Only then is it likely its use will be spread through voluntary adoption. Regulator adoption may in this way provide the base set of users, expertise and supporting software to act as a springboard for voluntary adoption for other business purposes. With this perspective in mind, the workshop explored three important aspects of regulated adoption: impetus and diffusion, assurance, and management and maintenance. Finally the participants discussed the contribution of research and the potential for collaboration.

It was made clear that the purpose of the paper was not to provide a detailed report of the many different issues and views represented at the workshop, but to synthesise the key ideas, whether they were apparently points of consensus or key points of difference, that emerged from the discussion. Still, the conclusion makes interesting reading:

Tagging business data using XBRL is part of the larger movement to create a semantic web to free data for exchange and automated re-use. It has made significant progress, but faces important institutional and infrastructure challenges in becoming ubiquitous in business reporting settings in Europe. It may be that expectations for adoption rates have been based on the benefits perceived by those who have made significant commitments to developing it as a standard. A more realistic position may be to expect a ten year continuing project in Europe, with perhaps shorter time horizons for significant voluntary adoption within individual member states. This does not suggest that the XBRL community can ‘sit back' and wait for market forces to take over from regulator impetus.

The following summary of the paper provides an insight into the proceedings:

• Impetus and adoption
  • Regulator impetus – localised developments
    • Regulator adoption is proving a key diffusion catalyst
    • Balancing the scale of projects proposed is important success factor
    • Institutional and legal boundaries may be important adoption limiters
    • Matching levels of functionality and phased growth
    • Ordering of development strategy
    • Need to manage proprietary and vested interests
  • Pan European development
  • From Regulator impetus to voluntary adoption
• Audit and assurance
• Other maintenance and infrastructure issues
  • Taxonomy architecture and structure
  • Management Commentary
  • Authority, endorsement and maintenance
  • Relationship with accounting standards
• Research and collaboration
  • Research perspectives
  • Specific areas of focus for research on XBRL:
  • Some other issues discussed
• Conclusion

For more information, see

www.birmingham.ac.uk/Documents/college-social-sciences/business/accounting-finance/ThefutureofXBRLinEuropefinalsummaryforrelease.pdf.

Most definitely, the seeds of the future are planted in fertile ground found today. This brings to mind additional considerations, such as:

• Where will ERP be, say, in two years from now?
• What of hardware, and a steady stream of improved chips?
• How will cloud computing address emerging business reporting needs?
• Will more sensors be needed to track objects automatically?

Such questions are addressed in Future Tech: Where Will ERP Be in 2 Years?, being a white paper available at www.pddnet.com/white-papers. Among other things, this paper suggests that many ERP systems are deeply entrenched in organisations, and that their core technologies are mature. Yet ERP is in a state of flux. The ERP of the future promises to be simplified, more accessible and easier to use, shaped by trends that began taking hold in 2011.

Semantics

It is noteworthy that interest in this XBRL tagging has gathered considerable momentum. This inertia, of course, stems from XBRL being open-source, whereby source code of the related software is available free of charge to the community for anyone to use, copy, modify, sub-license or distribute. This is of particular importance, and of considerable benefit, to software developers, as well as accounting and business professionals, who want to create, review, audit or extract information from model-based digital business reports.

The additional impetus of the broader community of XBRL users and developers, especially recent related outcomes, also indicates that IFRS were never made for the financial services and that tracking is badly needed for the industry. Of particular concern to many in the XBRL community is the lack of adequate standardisation on the meaning of commonly used terms in business and, more importantly, in business reporting. The associated ‘business need' is summarised in the following by Object Management Group (see www.omg.org).

Financial services organizations have a language problem. Our world is driven by legal contracts about complex financial instruments and multi-faceted entity relationships – yet we have common business terms that have different meanings, common meanings that use different terms and vague definitions that don't capture critical nuances. This is out of place for an industry that operates in real time, on a global basis, performs intricate analysis across many functions, is required to report to regulators with precision and needs improved efficiency by automating business processes.

In our industry, precision of data matters. Unfortunately, the semantics (terms, business meaning, rules and context) rarely reside and travel along with the data. This results in a never ending process of mapping and way too much manual reconciliation. It makes it hard to perform analytics and feed our models with confidence. It increases the cost of integrating data and automating workflow. This lack of provenance and traceability reduces confidence in our data factors of input, leads to compliance conflicts and increases the cost of doing business. And if we add to the equation the necessity of data comparability to meet the new global regulatory objectives of transparency, systemic risk analysis and financial stability – we begin to get the true picture of the business value and role of semantics for the financial industry.

A fascinating and insightful paper on this topic is Financial Report Semantics and Dynamics Theory, which was released in early 2012 by Charles Hoffman and Raynier van Egmond and can be found at www.xbrlsite.com/2012/Library/Theory-2012-02-11.pdf. Charles Hoffman is credited with being the father of XBRL. Currently, he works as a consultant helping accounting professionals leverage XBRL for everyday tasks and software vendors build useful software. In contrast, Raynier van Egmond is an IT professional with more than 25 years of ICT development and design expertise in financial and manufacturing industries and research.

Their work is an expository paper that explains the semantics and dynamics of a financial report. As such it is a useful resource for software vendors, accountants, internal auditors, external auditors, regulators, financial analysts and other business professionals working with semantic, structured, model-based digital financial reports that leverage the XBRL medium. The related table of contents of the draft, which makes attention-grabbing reading on its own, appears below:

• Introduction
  • Metaphors, Models, and Theories
  • Not a theory of financial reporting
  • Financial reporting conceptual framework
• Axioms (self-evident principles)
  • Financial reports communicate facts
  • Facts reported in a financial report have characteristics
  • Financial reports have components
  • Facts reported within financial reports are organized into components
  • Financial report facts and components can be organized leveraging the financial reporting conceptual framework
    • Financial report elements
    • Financial statement components
  • Industries and reporting entities with certain activities have different reporting practices and therefore use the financial reporting conceptual framework differently
  • Common characteristics of financial facts exist
  • Financial facts may have parenthetical explanations
  • Characteristics of a financial fact may be related
    • Partial set
    • Complete flat set
    • Complete hierarchical set
    • Complete complex set
  • Financial facts may be related
    • Financial facts can relate to one another numerically
    • Financial facts can have a non-numerical relation to another fact
    • Financial facts may not relate to any other financial fact
  • Financial facts have fidelity
  • Financial reports have integrity
  • Financial report components may have core facts and relations common to all reporting entities
  • Financial reports have a flow
  • Differing sets of detailed facts for a higher-level fact does not change the definition of the higher level fact
  • Financial reports may have supporting schedules
  • Reporting entities which created financial reports can be categorized into industries/activities
  • Financial analysts use certain common key financial ratios when analyzing financial report information
• Theorems (deductions from axioms)
  • Facts of a financial report should be uniquely identifiable
  • Components of a financial report should be uniquely identifiable
  • Different sets of detailed facts does not change the definition of higher level fact in general
  • Components and facts of a financial report are comparable to the extent that the components and facts are identifiable and common
• Ethics (worldview)
  • Financial reports have traits which impact their quality
  • Financial reports are used individually, compared across periods, and compared across reporting entities
  • Disclosures are reported, notes is a presentation related notion which refers to organization of disclosures
  • Reporting entity segment definitions are inconsistent in financial reporting literature
  • Financial reports may be expressed using different medium
  • Financial reports may contain non-financial information, sustainability information, or other information
  • Categorization of disclosures can be helpful
  • Facts reported within a component may be illogical without the existence of other facts
• Financial Report Semantics and Dynamics Theory
  • Financial report semantics
  • Financial report dynamics
  • Financial report component example
    • SEC HTML filing
    • SEC Interactive Data Viewer
    • XBRL Viewer (Firefox add on)
    • XBRL Viewer (XBRL Cloud)
    • I-Metrix (Edgar Online)
    • Magnify (CoreFiling)
    • CalcBench
• Proof (partial proof)
  • Balance sheet reports assets
  • Balance sheet reports equity
  • Cash flow statement reports net cash flow
• Conclusion

Another interesting publication is XBRL as a Semantics over XML that Makes Relaxed Data Analysis, available at www.imes.boj.or.jp/iso/papers/11_4.pdf. This was produced by Fujitsu in 2010 and ends with the following quote:

A UML profile for XBRL GL has the potential to make it simpler to integrate heterogeneous enterprise resource planning (ERP) systems, as XBRL GL has been designed to help the data coming from the different systems to ‘look the same'. It also will help UML vendors deploy models that will extend the functional reach of their products from software development into data integration, thereby addressing a much larger market than presently exists. The formality of UML will also help with standardization and simplification projects. Where proprietary integration between ERP systems must be completely rewired when one of the systems is changed, a standards-based investment using XBRL GL as a centralized data hub format means any new system just need to be mapped to the standard, resulting in greater return on the investment and providing greater agility.

The quote is attributed to www.omg.org/cgi-bin/doc?finance/2008-12-2. Interestingly, OMG's mission is to develop, through worldwide membership, enterprise integration standards that provide real-world value. OMG is also dedicated to bringing together end users, government agencies, universities and research institutions in communities of practice to share experiences in transitioning to new management and technology approaches such as cloud computing.

Fundamentally, the future is certain to differ in many ways from what is evident presently. As an indication, a simple Internet search parameter, say, of XBRL will raise numerous hits that reflect the considerable, and escalating, interest of corporations, financial service providers, software vendors, research institutes and others. All of that interest, which grows by the day, will increase the reach of XBRL, as well as provide better business reporting in the longer term.