Parsing the data: While Inline XBRL reporting may allow for more streamlined filing, XBRL data has already opened the door to faster and better analytics for companies and investors alike. We discussed the latest developments with five experts – as well as with a representative of the SEC.
Vintage Question > For investors, what possibilities does structured data open up? How can they analyze the data made more easily available by XBRL? Is this direct tagged comparison important?
Pranav Ghai > At its core, the idea of XBRL is that you can not only get information of one company quickly, but you can also look across groups of companies very quickly. That is one of its central missions. The other mission is that, because it’s a machine-readable format, anyone should be able to go in and get it once it is filed into EDGAR (Electronic Data Gathering, Analysis and Retrieval).
When you look at the current coverage universe of firms, once you get outside the 300 or 400 largest firms in the US, you have very little news and data coverage. What that means is that you have this broad swath of companies — 7,000 or more — that need to get their message out, either to individual investors, private equity shops or institutional investors of some kind. That message needs to go out systematically and it needs to go out quickly. XBRL was meant to serve that purpose, and to a large extent it does. The likes of Morgan Stanley, JP Morgan and Citi Group aren’t going to cover a firm with just US$100m in revenue unless it recently went public or something. But with XBRL, you can get data on these companies.
We’ve also had regulators come to us and say, “We scour financial statements and we’re looking for these kinds of metrics that are really hard to find from a data vendor. We can dig them up, but it means we’d have to look through 150 10-Ks, and it would take our people weeks, potentially months. Can you do it for us?” We do it with a mouse click.
The benefits are just tremendous when you go deep into the financial statements in ways that weren’t possible before. You can ask really esoteric questions about things that previously only a few people in the world knew about, aside from the people that worked at the company. It really opens the door to faster and better analysis in the end.
Campbell Pryde > With XBRL data, you’ve got a lot more detailed financial information than has ever been available before. Important information that is often difficult to find, such as unremitted foreign earnings, is now being sourced from XBRL financials by mainstream media because it can be extracted and analyzed faster and more easily.
We’ve also found that companies like Calcbench can import their data almost in real time. We can produce aggregate data across all the capital markets on a real-time basis, which allows you to see things like the nature of capital investment happening, or whether the common revenues of corporates are growing or shrinking, and so on. You get much better monitoring of the overall economy.
One benefit we’ve also talked about is helping fix the problem small companies have with getting their name out there, as Pranav said. Often the capital markets don’t notice them.
Hudson Hollister > I’ll give you a few examples of the benefits as we see them. If you get the Bloomberg listing for a listed company, you might have about 700 data fields. If you look at the XBRL file, you’ve got three or four thousand data fields. That is so much more information to search by — you can find all the companies with particular characteristics that Bloomberg does not have. For instance, I know that Bloomberg does not have data on which companies switched their accounting treatment of leases in a particular quarter. You can find that with the XBRL file.
And that’s because it’s not cost-effective for Bloomberg to make all those thousands of fields interactive, since they are using a manual process for each one. But if all the data fields are expressed as data fields to begin with, it is much cheaper. Bloomberg and other intermediaries can provide a richer picture of each company.
But there’s more to it than that. Once companies’ financial information is available as XBRL, you can aggregate it across industries and the whole market. For instance, tax repatriations are a big political issue, figuring out which earnings companies have sequestered abroad to avoid paying US taxes. You can get that from the financial statements, but you can’t get it for the whole economy right now, because you don’t have the filings of every public company. With the XBRL data sets, you can. One of the small startups that works with XBRL data has done just that.
Ilya Vadeiko > For use of the data by investors, it’s important for filers to have a good understanding of XBRL taxonomy. In the initial years, there were not many specialists in accounting and XBRL taxonomy who could help filers express their financials in XBRL terms properly.
Now, the situation is changing quickly and we have observed a greater level of consistency, data quality and maturity in XBRL reporting. With that, investors get information quickly and at an affordable price. In our opinion, this serves a great purpose. It democratizes access to financial information and stimulates coverage of small- to medium-cap companies by analysts and retail investors. This should bring capital to small public companies that formerly struggled to attract investors due to very limited coverage by aggregators and analysts. With that, value and growth investors can also uncover investment opportunities that were not easy to dig up before. XBRL has become something like Google Maps for small businesses in terms of publicizing their existence on the map.