CIOZone.com - Professional Network for CIOs and IT Professionals

I confess I never quite understood former SEC Chairman Christopher Cox’s fascination with XBRL, extensible business reporting language that is supposed to help investors grapple with financial data, though how exactly has never been adequately explained. And according to this article, Cox’s successor doesn’t understand his fascination either.

The theory, as far as I understand it, is that if investors can slice and dice a company’s data any way they want, then it doesn’t matter how the company accounts for its results. But if so, then the real news (unless I missed it earlier) is buried at the bottom of the article, which says that a study earlier this month revealed multiple errors among 22 big companies, including 3M, Dow Chemical, Comcast and Microsoft, that began a trial run of XBRL reporting in 2005.

Maybe I’m missing something, but if data entry errors are that frequent and significant (Microsoft reported some data in millions instead of billions), then the GIGO problem, as was eminently predictable, looms large here. And that only strengthens my suspicion that Cox’s real reason for pushing XBRL was that he had to get behind something, and this was the safest choice. After all, GIGO would ultimately allow him to shift the blame elsewhere if things didn’t work out. (The problem is never the tool but how it’s used, blah, blah, blah.)

But with Wall Street knee-deep in problems, current SEC Chairman Mary Schapiro has no choice but to spend her energy on more compelling concerns. Who cares about XBRL when you’ve got to deal with the fallout over Bernie Madoff?

Comments (4)

	1. 06-23-2009 15:30
	Wait, what do you mean here?    "The theory, as far as I understand it, is that if investors can slice and dice a company’s data any way they want, then it doesn’t matter how the company accounts for its results."    How are you using the word "accounts"? Do you mean "presents"? I mean, we aren't talking about throwing accounting principles out the window for the purposes of reporting. If that's the case you might as well just put a bunch of raw data out there with tags on it and tell everyone to sort the balance sheet out for themselves instead of putting out a 10-Q.    How they account for their results is just as important as before. Basically, you're just taking the results you were reporting and tagging them. This isn't to make things easier for companies. It's for the investors.    I think the idea makes sense on the surface. I know you've gone through your fair share of 10-Qs and know no two are exactly alike in their presentation, even from the same company. It's supposed to make extracting that info easier for those who want to parse it. Of course, the tagging is left to the companies doing the reporting and each one could apply a different tag to the same thing because that's how they feel it should be tagged, just like that's how they felt it should be reported. In the end, when looking across companies, it still won't be apples to apples. And if that's the case, there really isn't much point to it. Registered

Matthew Quinn

	2. 06-23-2009 15:57
	Good point, Matt. I think I was trying, however unsuccessfully, to say pretty much the same thing, which is that the ambiguities in GAAP results, which are never going to disappear, and may in fact, increase if we ever get to principle-based rules, wouldn't much matter so long as investors could get whatever basic information they needed and could use the tagging process to help them analyze it. But that assumes that the information is accurate, which may be quite an assumption. Registered

Ronald Fink

	3. 06-23-2009 16:02
	Gotcha. And great point about a move to principles-based accounting. I really have no idea how that would play out. Principles-based accounting with rules-based tagging, anyone? Registered

Matthew Quinn

	4. 06-23-2009 16:04
	Your point about garbage in, garbage it is well-taken. But my contact with Chris Cox (brief as it was) convinced me that he truly believed that XBRL would prove to be a big help to investors.    As Mr. Quinn stated, the goal here is pretty noble. Making it easier for investors to pull in a company' financial data--and then compare that company's financials to another--is a real good idea.    To me, the big problem is that it's taken 93 zillion years to get XBRL up and running. The technology has been hyped for so long that people have just tuned out. Registered

John Goff

Only registered users can write comments.
Please login or register.