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IXBRL has time-saving benefits, but doesn't address larger XBRL issues

Although Inline XBRL, also called 'iXBRL,' simplifies reporting, experts still believe XBRL's full value has not yet been unlocked.

Inline XBRL, a next-generation version of XBRL also called iXBRL, takes a compliance requirement and makes it less painful -- but not more useful. At least, that's the opinion of Robert Kugel, senior vice president and research director at Ventana Research, based in San Ramon, Calif.

"People generally don't have useful access to XBRL information in a way that simplifies their consumption of the information companies are filing," Kugel said. "The SEC [U.S. Securities and Exchange Commission] was supposed to have had an analytics tool on the EDGAR site, but I guess they were busy spending their money on other things and decided not to."

In the U.S., all public companies are mandated to tag their financial statements with XBRL (Extensible Business Reporting Language) to make business information more transparent and accessible by using a uniform format. Currently, companies have to prepare reports in two separate formats for their filings with the SEC's EDGAR online filing system: HTML and XBRL.

However, many CFOs are not enamored of XBRL. They say formatting documents with XBRL tags is costly and at the end of the day, not worth the expense or the effort, in part because investors don't trust the data that's generated. And that means they're not taking advantage of the information, according to experts.

But now the SEC is touting Inline XBRL as a tool to simplify reporting requirements. IXBRL allows companies to file one document that includes both the HTML and the XBRL formats. With this method, which is currently used in the U.K., XBRL tags are embedded into the HTML report, making formatting easier. Also, the data can be viewed using an Internet browser, rather than with software.

But again, according to Kugel and other experts and users, while iXBRL might make things easier, it still doesn't make the compliance mandate useful.

XBRL's purported internal benefits questionable

According to Kugel, there isn't currently a public company leading the charge to demonstrate how organizations can use XBRL information to create standout investor websites -- using iXBRL or not.

"The notion that you would use the information you're filing to communicate your story more effectively to investors or potential investors seems to have eluded just about every corporation that is complaining about the lack of value in this compliance mandate," he said. "At some point, somebody is going to figure out that [XBRL] is worth working with, and that they can present this information in a way that is compelling and entertaining."

And although the SEC expected companies would also benefit by using XBRL tagging for their own internal documents, that doesn't seem to be the case, Kugel said. But once one corporation does, he predicted others will follow suit.

One organization that probably won't be at the forefront of that effort is McCormick & Company Inc., a spices and herbs manufacturer based in Sparks, Md.

"From a public company standpoint, XBRL is basically a reporting requirement," said Ken Kelly, McCormick's senior vice president and controller. "The thing corporations would get out of it [internally] would be the same thing that any individual shareholder would get out of it: the ability to look at other corporations across sections. So, within the corporation, it's not going to add anything because we already have systems that do those things."

XBRL isn't a system for doing financial analysis within a corporation, Kelly added. "It isn't the right tool to do that," he said. "I know a lot of people want to sell XBRL as a solution within a corporation, but I haven't found a business model for that."

Kelly said that as yet, it's not been made clear how a version of XBRL -- Inline or otherwise -- would help him manage his corporation.

"The SEC is saying it could help me internally, but I haven't seen that," Kelly said. "Someone could say Inline XBRL is going to help you in compliance in meeting XBRL reporting. But if I only have to report at a level of consolidation of the corporation, why do I want to tag everything under that, including every general ledger and every consolidation entry, if it's not going to help me in any other way?"

Is XBRL a time and money waster?

Daniel Roberts, founder and owner of London-based consultancy raas-XBRL, agreed that there are things within iXBRL that make it easier to use, but, again, not useful.

"To be blunt, CFOs are not going to believe in the value of XBRL until the SEC starts showing them how the SEC is using it for benefit and they begin to see that the information is being taken seriously and there's some sort of assurance over it," said Roberts, past chairman of the XBRL U.S. Steering Committee, and member of the XBRL International Assurance Working Group.

More on XBRL

What is XBRL tagging really good for?

Learn more about XBRL's role in the financial reporting process

Initially, the SEC claimed XBRL would benefit the investor community first, and regulators as a side benefit, he said. But the investor community has never taken it up because the information provided in XBRL has been difficult to use and there aren't a lot of people in the market with the skills to understand XBRL.

For that reason, there's a perception that this is a form of reverse socialism, in that it has privatized the pain onto the filers but without any kind socialized gain, Roberts said.

"Nobody is saying, 'We're actually getting rid of our data feeds -- our Compustat, our Bloombergs -- because we can use the XBRL [data] and it's free and good quality,'" he said. "And until somebody is able to say [that], the filers aren't going to be seeing the value. It's another cost."

As far as Roberts is concerned, XBRL is a waste of money, time and effort. In his opinion, it would have been better if the SEC had taken the data straight from the HTML and auto-tagged it with routines that were available in the market. They then could provide the data back to the filer and ask the filer to confirm its accuracy, and make it available to the world.

"Instead, the SEC probably cost American business $550 million to a billion dollars over the last three or four years in additional reporting costs, software costs [and] people time," Roberts said. "It's a massive waste of money, and all it has done is export jobs to India, where this is being done second-rate."

While McCormick's Kelly isn't against XBRL from a public policy or economics standpoint because it will to a certain degree make it easier for investors looking across corporations, his opinion is that iXBRL is a solution in search of a problem.

"Some people [might] say that Inline XBRL could streamline the process because when you get to the end, you've already got XBRL done," Kelly said. "But I come back to the question: 'Why would I want to do that?' Because that is going to be a huge level of detail that I don't want to get outside my corporation. There are certain things reported to management and certain things reported to investors, and they're not at the same level of detail.

"Inline XBRL is taking XBRL to the next level, but I'm not sure that I need that," he concluded.

About the author:
Linda Rosencrance has written about technology for more than 10 years and has been a reporter for more than 20 years. A former Computerworld reporter, she is a freelance writer in Massachusetts and also an author of several true-crime books.

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The SEC would be right to move to iXBRL, because it will simplify both reporting and consumption of XBRL data.

However, iXBRL won't provide any kind of new justification for XBRL-based filing. The justification for the XBRL mandate is that the SEC is going to find it extremely useful, once they start making use of it. And they will. The SEC is following a well-trodden path: first get the filings in XBRL, then put in place the analysis mechanisms. And then CFOs will start to take it seriously. Watch this space.