Trapped in an Analysis Paralysis?
Imagine you are an investor wanting to run a competitive analysis of the top five mining companies in South Africa, and that each company has its own unique way of presenting its data in PDF files. You would spend a day’s compiling the information across these five banks.
iXBRL helps companies retain the original human-readable flow and formatting of a PDF annual report while enabling machines to read the XBRL tags embedded in the document. Since machines can read the underlying data in the document, and since all data mapped to the XBRL standard taxonomy becomes comparable, it becomes very easy to run quick and accurate comparisons, benchmark companies in the same industries, or even across industries in no time. Some of the benefits iXBRL bring to investors are detailed below*:
Before XBRL, investors had to either manually collect data from company annual reports or purchase data from third-party data aggregators (who had collected the data from company annual reports and also aggregated the data the way they felt best). With the data available in iXBRL format, investors have access to all the essential information in a machine-readable format that can be easily and quickly downloaded into their financial models when needed. Data is also available in a granular format, and investors/analysts can update their financial models quickly, easily, and with as much granularity as they want. The use of XBRL data helps investors improve their analysis and research as the focus shifts from collecting data to analyzing it.
Better data quality
For analysts who manually extracted data from company annual reports, often re-keying the data, there was a potential for human error. For analysts who purchased data from a data aggregator, there was also a potential for error in the transcription of data into their products. With iXBRL, data is available for download directly from the filer, with no transcription or re-keying needed.
XBRL has been adopted as a de facto financial reporting standard by over 60 countries around the world. From being a standard that only assists regulators in their job of regulatory oversight, the wider use of the data by industry has made it easier for corporates to get investor interest, to get access to funding, and more.
An example from Europe
In 2015, Dutch banking giant, ING, announced that it would offer discounts on loan and credit applications for its Small and Medium-sized Enterprise customers in the Netherlands if they provided XBRL versions of their financial statements through the Dutch SBR platform.
The reason? Data accessed by ING analysts in XBRL format made it much easier for them to analyze the credit risk of these companies, and arrive at a conclusion quickly on a lending decision.
Of course, this announcement by ING came some years after XBRL was adopted in the Netherlands as a standard for statutory reporting. However, what is clear is that after the first wave of benefitting the regulators who enforce an XBRL mandate, the benefits also start to open up to various stakeholders in the business ecosystem.
South Africa’s iXBRL journey: led by the CIPC
In an article on the digitization of financial reporting, Adv. Rory Voller, the Commissioner at CIPC, and the driving force behind the iXBRL mandate in South Africa wrote about the motive behind South Africa’s move to iXBRL. According to him, the decision was taken to promote transparency and boost investors’ confidence in the country. Citing the example of the sound legal and regulatory framework of Mauritius and how it enjoys the top spot in the World Bank’s Ease of Doing Business Report, Adv. Rory Voller stressed upon using iXBRL in South Africa to boost investor engagement.
“If South Africa is to play catch up to its counterparts on the continent, it will have to ratchet up the information available to potential investors and bring its reporting framework to the digital age,” he wrote.
CIPC’s iXBRL mandate provides the foundation for a new digital information-led financial ecosystem to grow in South Africa. Investors, lenders, and indeed, an entire range of business stakeholders can derive much benefit from using the iXBRL data for smarter, quicker, and more effective decision making.
How can IRIS help?
IRIS has a suite of solutions around XBRL and iXBRL reporting. Our ‘Data Consumption Platform’ solution primarily focuses on smart data analytics using XBRL/iXBRL which makes analysis, comparisons, and peer bench-marking easy for both investors and users of data. To access our solution/service for iXBRL creation, or to learn more about how to leverage iXBRL data for smarter investor engagement and better decision making, contact us at firstname.lastname@example.org
IRIS has also successfully helped thousands of clients in South Africa such as Nedbank, Bidvest, Allan Gray, Growthpoint Properties, Redefine Properties, and several other large, medium, and small-sized entities to comply with the iXBRL mandate using IRIS CARBON®, our compliance reporting platform for entities. With rich experience working in the U.S., UK, Ireland, Italy, and Indian markets, we are very proud to be part of South Africa’s journey in transitioning from non-standardized financial reporting to standardized reporting. As South Africa prepares for the second phase of the mandate, IRIS will continue to extend its support and expertise to help entities, investors, and regulators in better governance.