Improved Flexibility with XBRL
How can XBRL help meet the challenge of constant change?
THE ISSUE: RELEVANT REPORTING IS TOUGH AND IT’S GETTING TOUGHER
Developing and producing accurate and
relevant business reports is crucial, but it can be a difficult,
slow, and expensive process. It’s a process under increasing
pressure in a competitive environment that demands
businesses constantly respond to economic change. A key challenge
for the reporting function is the ability to remain nimble and responsive. In the face of constant requests for new and improved information, it’s a challenge to deliver on those demands while ensuring the credibility and sustainability of that data. It’s a delicate balance.
Requests for information from management or from an external body
such as a regulator or ratings agency can set off a chain reaction:
Do we have that information? Can we get it if we don’t currently
keep track of it? Which systems are affected? Who controls the data?
How reliable will this information be? How can we improve that
reliability? How can we demonstrate that we have controls over it?
How much is it going to cost to obtain this data, set up new
processes, and implement new controls? And finally, how will the
budget stretch to deliver it?
Among the countless issues to consider:
- Data definition: What, exactly, is required?
- Data coverage: Where, exactly, does this information come from?
- Data reliability: Is this information sourced from a system, gathered by survey, or is it, in fact, “guesstimated”?
- Data flow: How does this information flow around the organization?
- Data controls: What checks and rules
govern this information?
Answering these questions sometimes takes more time and costs more than the information request is worth. Other times, the methodical implementation of a new reporting process delivers real value in terms of business insight or control.
In any event, meeting new demands in today’s complex enterprise, even given the benefit of recent improvements in data warehouse and ERP technology, is a major demand on every organization. And it’s one that is increasing.
A FUTURE PERSPECTIVE
XBRL is likely to help companies manage
change in their reporting process, not because it is a new transport
mechanism but because it’s a new and independent documentation
mechanism. Keeping track of information sources, controls, and
definitions is exceptionally difficult, and only the most
sophisticated enterprises or the simplest of companies tend to do it
well today. In between these two extremes sit the rest of us—digging
out data is difficult and slow. In the medium term, XBRL will prove
a powerful, interoperable, and platform-independent information
management tool. Organizations will be able to order and track this
crucial “information-about-information” that is often undocumented
or, perhaps worse, is scattered across numerous proprietary,
antiquated, and incompatible computer systems. Allowing users to
navigate the information sources available to them will help the
users understand the strengths and weaknesses of reporting
processes. And adding new data in an environment in which existing information can be fully leveraged is a simpler, more effective process, and one that will become a vital part of the controller’s and CFO’s domain.
TODAY
Today, regulators and government agencies
charged with collecting information from vast numbers of
organizations are using XBRL to get a better handle on the
definitions, interrelationships, and quality checks imposed on the
information they receive. Companies seeking to better organize their
information can examine the use of XBRL
in this context.
There are a number of steps in getting there, including:
- Taxonomy design decisions
- Tool selection
- Process and policy design
- Initial population of corporate taxonomies
KPMG professionals can help.
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