In-Depth
XBRL and Enterprise Standards
How standards are driving organization value and how they benefit IT.
Most IT professionals grumble about standards. They get in the way of doing work, they constantly change, or they just add overhead to a project. Greg Carter, CTO of EDGAR Online takes exception to that characterization. In our discussion, we touch on how standards are driving organization value and how they benefit IT, with a particular emphasis on XBRL.
Enterprise Strategies: There's no question that standards make it easier to share data. What are the most valuable standards in the mainframe world?
Greg Carter: Interoperability and extensibility top my list. There is a plethora of standards out there that intersect with all types of enterprise computing platforms -- technical standards (like Open Virtualization Format for hardware virtualization) and domain standards (like HL7 in healthcare), for example. What’s missing are standards in areas such as finance, life sciences, and economics that combine information technology and human understanding.
XBRL is an example of a data and information standard that provides a technical format for the automated exchange and validation of data and allows cooperating parties to establish a shared and extensible vocabulary without changing their existing labeling (including multi-lingual labels). XBRL allows organizations to build knowledge-driven systems and much more easily provide semantic analytics using information from a wide array of sources.
How are these standards driving organizational value?
There are two key ways. First, there’s the timeliness of information. The organizational value of XBRL comes from its ability to more quickly and accurately turn data into information that can be used to make both automated and human business decisions.
Today, organizations spend a significant amount of time and money combining, transforming, and making sense of data. XBRL allows organizations to shift the focus from data manipulation and preparation to information analysis and decision-making. Applications are becoming semantically enabled using the combination of facts and metadata found in XBRL data sources and their associated taxonomies.
The second way is with a business-driven standard. Having dealt with a large number of standards over time, I have found that the majority are driven by IT and not end users. Technology evangelists have bellowed about UML for years with almost no direct impact on how people do their work, access information, and make decisions. Don’t get me wrong -- XBRL is a technical standard based on advanced XML concepts, but the direct manifestation of XBRL is better access to data and information for regular people.
You mentioned XBRL earlier. What benefits does it provide, specifically?
I’d like to mention five benefits.
1. Data quality: XBRL formulas that are integrated in XBRL taxonomies allow users to automatically check data correctness, completeness, accuracy and consistency.
2. Data interoperability: XBRL formulas allow users to validate data (alpha and numeric) across all XBRL taxonomies and all XBRL instances.
3. Data transparency: XBRL allows timely exchanges and validation of data between any producer and consumer of information in any GRC eco-system (government, institutions, and business)
4. Data meaning: XBRL provides a way to uniquely define every piece of information (data point) while offering an infinite extensibility and without losing the interoperability between all XBRL-enabled systems and applications.
5. Automated and assisted direction: XBRL formulas include explicit and detailed validation messages that are generated automatically by any XBRL processor.
Can you describe the role of XBRL in disclosure management?
XBRL provides regulatory agencies with a standards-based platform that is used to communicate not just what data and information needs to be reported, but also how it should be reported, as I mentioned in my last answer.
For example, today the EPA regulates a variety of pollutants under the Clean Air and Clean Water acts. As part of this regulation that keeps our water and air healthy, the EPA issues permits for various pollutants and classes of pollutants. Organizations report on the output of these dangerous pollutants on a regular basis. Large companies can report on some pollutants using a semi-automated data feed, but the majority of companies use electronic forms filled in by people.
The reported information is digested into a proprietary database, and the data is made available as raw text extracts for analysis and surveillance. Anyone who uses this data needs to transform it into a usable format and manually map it to a data dictionary before the data becomes information.
Using XBRL, the EPA could work with states, other countries, and industry to develop a pollutant taxonomy. This taxonomy could include what to report by industry and pollutant as well as information and rules regarding the frequency of measurement, units, and how the data should be displayed for review.
An industry group, for example, would be able to easily produce this information from disclosure tools such as EDGR Active Disclosure, which produces information using common tools such as Word and Excel and publishes a disclosure in multiple formats including XBRL.
The EPA could easily digest the XBRL and allow submitters to syntactically and semantically validate their submissions in advance. (XBRL Formulae included in XBRL taxonomies allow an automated validation by the producer of information before submission.) Once available as XBRL, the data is easily used for surveillance by the EPA in a format that fosters easy comparative analytics.
The information in XBRL also offers low-cost portability, which will allow the information to be more easily used by independent surveillance organizations and by the very industries being regulated. An oil repressor will be able to look at its emissions of sulfur dioxide, mercury, and nitrogen oxide relative to its peers. If the firm is compliant but lagging other firms, it could be an indication that other firms are reaping better returns on reprocessing efficiencies and that an investment in research and development is needed.
Standards often carry with them a negative connotation -- they're seen as more work without great benefit. What tips and tactics can you offer so that organizations can ensure software standards become the basis for value-based decision making?
With all standards, the challenge is to sift through what standards or pieces of a standard are most likely to deliver business value. For a vendor of standards-based solutions I would rather spend time with my customers, understanding their real-world business challenges instead of debating the relative merits of two approaches to dealing with a narrow edge case in XBRL.
Organizations should take the same approach. Standards need not be viewed as atomic and organizations should question how little or how much of a standard is meaningful in their specific business context.
How are the benefits driving the creation of other taxonomies and standards?
In my experience, the agreement on a taxonomy and associated standards was the biggest hurdle to XBRL. Now, with our partners worldwide, we have developed applications that allow users to automatically generate XBRL taxonomies from data models that are developed by business domain experts. Such a new process of generating taxonomies does not require XBRL expertise.
Done right, a taxonomy balances the needs and value-chains of both industry and regulators, which can be a long and challenging process. The use of a well-established set of rules and guidance like the GAAP taxonomy for SEC XBRL reporting should have been a great head start, but as we all know, it took many years to deliver the GAAP XBRL taxonomy that met the requirements of both industry and regulators.
What products or services does EDGAR Online offer related to this discussion?
EDGAR Online provides financial data, analytics, and disclosure management solutions to help corporations and institutional investors facilitate compliance and management of regulatory disclosure filings. EDGAR Online’s analytics platform, I-Metrix, gives organizations the power to monitor relative valuation of key items such as margins and rates of growth, identify risks in supply chain management, leverage library of pre-formatted reports to quickly understand opportunities and risks in their competitive landscape.