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TechTalk Blog: WSJ CFO Blog: XBRL for Capital Markets Transparency?

By David Colgren posted 11-17-2015 12:30 PM


Great article today in the Wall Street Journal CFO Blog on the use of the open, freely available, global XBRL data standard by the US SEC for more transparent and accountability in the capital markets. XBRL protects investors and helps companies tell their story to Wall Street by making their financials available in a machine-readable format for consumption by data aggregators. The IMA is one of the founding members of the XBRL Global Consortium. 

The interview with Mike Willis, assistant direct of the SEC’s Office of Structured Disclosure and former IMA TSP Committee member and one of the early leaders of XBRL Global Consortium. Today, more than 2/3 of the world’s capital markets are using XBRL for enhanced disclosure and access to information in a machine-readable format.  

Mike speaks about seven new securities regulations that call for special coding in financial data reports sent to the US SEC for regulatory oversight. Will this usher in a new era of “citizen regulator” and support capital formation in companies not having coverage by analysts on Wall Street. In 2009, Wired Magazine wrote an article on this topic. Can it happen now as new technologies and Big Data become more mainstream?

As the mashing of various data sources in public and private domains accelerate for enhanced data analytics -- the need for structured, trusted, third-part verified tagged data from credible sources like the US SEC will become more significant.

Financial statement data from the world’s largest corporations underscores the bedrock foundation of the capital markets. Without transparency/accountability of these entities and the ability to link and sync this data and mash with other data sources for enhanced data analytics there will continue to be perceived risk in the capital markets and “lack of confidence” by mainstream investors whose capital is critical to the creation of new jobs and opportunities. XBRL can be “pushed down” into private company oversight as well to assist private companies in their efforts to attract capital such as with the new US SEC crowdfunding rule. (Can the management accountants help these smaller companies tag and provide the assurance of this financial data using XBRL?)

We saw the impact of the global economic meltdown in 2008 and the need for more enhanced systemic risk of the world’s largest entities. XBRL offers a solution to assist the US SEC with regulatory reporting transparency and hopefully this will be build-out across other regulations issued by the US SEC for enhanced disclosure.

Could XBRL be used to enhance money laundering and the tracking of terrorist funds in the US and abroad? Financial data oversight could be significantly enhanced to assist government agencies in tracking terrorist money or other criminal elements utilized in forensic investigations using XBRL and mashing other data sources. It can’t be done by hand looking at PDFs. XBRL allows financial data to be machine-readable and consequently put into search engines and analyzed more effectively using this global business reporting standard. Efforts are now underway to link XBRL with global initiatives related to the  Legal Entity Identifier (LEI).

XBRL is a solution that can be used by both the capital markets and the public sector. In April 2014, President Obama signed into law the Data Act that would use global standards like XBRL to enhance government financial transparency. According the US GAO more than $100 Billion is unaccountable on an annual basis by US Government agencies. XBRL government reporting transparency is currently being built out by Treasury and OMB and hopefully can begin to be used by government entities within the next year or so.

Stay tuned for more information on XBRL and its impact on the management accountant. 


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