Tuesday, May 05, 2009

XBRL - A Guide for Investors

CFA Institute has just published XBRL - A Guide for Investors. The title is pretty much self-explanatory. I'm glad to have contributed to it. Enjoy! 

Also on the XBRL channel: Yesterday, L'Agefi published an article I've written. But when you follow the link, you'll see that it is written in excellent French, which cannot be me. Thanks for the contact and the translation goes to Marc Barbezat, member of XBRL CH!


Colm O said...

The following is from the executive summary:

"Many challenges, however, impede the successful implementation of XBRL. Chief among
these challenges is the ability of the managers of filing companies to manipulate or “work
around” reporting by customizing or “extending” the core dictionary of fields (that is, the
taxonomy or classification) of the reporting format. If companies extend the defined fields
excessively, the platform will lose the vitally important benefit of comparability."

Given that the taxonomy or taxonomy extensions are derived from a combination of international/national accounting standards and local reporting requirements: the use of the words " to manipulate .. reporting..." suggests in this context that XBRL somehow facilitates the manipulation of financial reporting in a way that is not possible with non-XBRL financial reporting.

This very misguided suggestion is most regrettable.

Enron showed how 'rules based' financial reporting could be manipulated.

The 'holier than though' brigade on this side of Atlantis expressed the view that it could never happen here as the financial reporting was 'principles based'.

As our little nation teeters on the verge of bankruptcy, we now know that 'principles based' financial reporting requires the use of principles and integrity, both of which are in very short supply.

XBRL is manipulation neutral and of it self does not facilitate the manipulation of accounts.

Chris said...

Colm, thanks for your comment. Unfortunately, you read too much into a single word (manipulation). If you look at No 1 of our core principles (disclosure neutrality), then you see that we're with you - in principle.

But it practice, it is rather easy to misuse or even abuse extensions (in the technical sense) as long as they are not standardised. XBRL would indeed facilitate manipulation - simply by adding another layer of technical complexity to reporting. That is why the principles that CFA Institute has developed in this paper are so important. If everything were as clear cut as you suggest, many of the discussions that we're currently having would be superfluous.