XBRL is in danger of becoming obsolete before it is even fully established, according to research out of Columbia University. The report finds that consumers of financial statement data who are meant to benefit from XBRL are not adopting it as expected.
Despite the time and money spent developing XBRL as the interactive financial reporting method of the future, analysts and investors are rejecting it because it is riddled with errors and doesn't easily tie into their existing data collection and analysis systems, the study concludes. “We have no doubt that analysis of companies will continue to be based off increasing amounts of data that are structured and delivered to users in an interactive format,” write co-authors Trevor Harris and Suzanne Morsfield of Columbia's Center for Excellence in Accounting and Security Analysis. “However, we have numerous reservations about whether XBRL will succeed as that format.”
The study is based on the views of a wide variety of XBRL players, including regulators, preparers, filing service providers, technologists, analysts and investors. Harris and Morsfield say analysts and investors generally like the idea of XBRL, but find the data unreliable and inaccurate. They also say there is a dearth of value-added, easy-to-integrate consumption tools, making it difficult to make use of the data.
The Securities and Exchange Commission has issued guidance and called on companies to correct routine but persistent errors in their XBRL submissions. The SEC also has called on companies to more carefully select tags from the thousands in the GAAP Taxonomy rather than rushing to create custom extensions, which reduce comparability among companies. The largest companies have been filing in XBRL since the SEC first required it in 2009 while smaller companies were given until 2011 to complete their first XBRL submissions. The limited liability that the SEC established for their first two years of filing in XBRL has expired for the earliest adopters and the second wave of companies that began filing in XBRL in 2010.
Still, errors are a significant barrier to more widespread use of XBRL, the Columbia study concludes. “Stakeholders have got to find a way to reduce the data errors and the unnecessary tags,” says Morsfield. The SEC in particular has good cause for concern, she says. “You risk running out of interest from the very users that they hope are using this.”
The study makes some recommendations to steer XBRL in a new direction -- more regulatory oversight, a required audit of the data, or requiring filers to resolve errors that are communicated to them by the XBRL US consortium. Harris and Morsfield put a great deal of onus on corporations to correct their data. “Filers should spend the effort they are investing in attempting to destroy the SEC's XBRL regulation on improving the quality of their own data as well as on making their own data more useful and accessible to users,” they write in their conclusions.
Harris and Morsfield also suggest XBRL technology development should be driven by technologists rather than accountants or regulators. They suggest more partnering with leading information systems vendors, financial information suppliers, and data aggregators to get their help in improving XBRL technology overall.