ThinkTWENTY20

Dr. Seuss’s last book, on life’s journey and challenges, inspires the headline of this blog entry. As I last wrote on looking back on the twenty years since the FASB and IASC efforts to document the current state of Internet-based reporting and perhaps guess where the Internet might take corporate reporting, I also had time to think back on twenty years of XBRL.

Twenty years ago, a small group came together in the Minneapolis/St. Paul area to discuss forming the XFRML group (now known as XBRL). Then in October of that year, the effort began at the offices of the AICPA in New York. 

So I likewise had to ask myself where are we in the spectrum of those original goals of XBRL. Which aspects are evolutionary and which were and will be/might be revolutionary?

The US Securities and Exchange Commission (SEC) has begun the newest phase of its XBRL Financial Reporting mandate (Rule 33-9002, Rule 33-10514) with the change in the mandatory submission format from XBRL instance documents (and related files) to Inline XBRL (HTML with XBRL artefacts embedded within to enable the automated extraction of the XBRL instance document from the visually-focused HTML) and related files.

Early stated goals were benefits to all participants in the business reporting supply chain (the “win-win-win” to all participants”), the ability to “see any report from any organization for any period of time in any language at any time”. It was not just about a better report, but to revolutionize audit processes. As noted in the minutes of the first steering committee meeting (October 14, 1999):

• [XFRML] should have its roots in the "Audit Supply Chain."  XFRML as technical standard for seamless process of exchange across all audit processes. 

• Our opportunity is to address things internationally at the level below the financial reporting level since there is more commonality at that level.

It was with those goals that I have been here for more than twenty years supporting the first steps of a more readily consumable and comparable financial statement paralleling the existing, unchanged paper-paradigm financial report with XBRL, but I had these and other more specific goals in mind, largely inspired by my collaboration with my long-time co-conspirator at my former employer, Mike Willis, and largely related to those audit processes, associated with the reports and the underlying data. I am pleased to say that my musings (and work with XML security standardization) to that end were used to inspired some of the current (non-US) reporting assurance regimes.

Some of those musings did pertain to improving the current reporting model, give or take. Some were about setting data free from the current reporting model, but still with some manner of “sticky” assurance, a “gossamer thread”, if you will, always binding information set free back to source materials of record “as a whole” or at least the necessary contextual bundle of information. And some of my ideas (in my fulfilling my function as the “XBRL GL guy”) were aimed at changing the processes of deriving the reports from the detailed underlying data and associating underlying evidence with reporting facts.

I wanted to inventory some of the ideas I have put forth and written or spoken on, particularly topics that are yet to mature, and the find the right forums to find those with a interest is moving forward the topics we jointly agree whose time has come. The topics may be mapped into different categories:

• Reporting vs assurance processes vs consumption

• Evolutionary (less change management required) vs revolutionary

• Remediation (solving a known problem or risk) or prospective (primarily about adding new functionality and capabilities)

Here are ten areas I would like to resurrect, not necessarily in order of importance or urgency, but just in the order they come back to memory:

• Data level assurance, including linkages of individual facts to contextually necessary accompanying information and to the population as a whole.

• Explicitly identifying what information in a financial statement is assured, to what extent, and what is not with useful UIs.

• Enabling a way to anonymously note reliance on management’s or auditor’s association with information because of the imperfections of “presumption” (where the courts assume an investor has relied on an auditor’s opinion when things went wrong rather than requiring the investor to prove reliance). 

• Enabling stochastic assurance with varying materiality, permissible risk and other attributes.

• Digital signature trails for accountability

• Separating management’s responsibility from the auditor’s responsibility (from third party overlay, such as an analyst) clearly and through abstraction rather than physical binding

• Security methods, including selective encryption, for selective unfolding of single documents to different stakeholders – one version of the truth

• Abstracting and standardizing roll up and drill down logic; standardizing crosswalks from detail to summarized, aggregated reports or summaries

• Standardizing automated and manual linkages to source documents, data and facts (disc)

• Setting data free; creating that “gossamer thread” so reported and assured facts can be traced from later republication to some original source, including audit documentation

Over upcoming weeks and months, I hope to unfold some of these and others on these pages and in related forums.

Fifteen years ago, as the US SEC began its voluntary XBRL filing program, one of their representatives spoke at an XBRL conference and said (paraphrased), “The true value of XBRL will be when the financial statements are merely a happy by-product of an internal environment made more effective and efficient with XBRL.”