In our last article, we introduced to you the XBRL open-source data standard, and validations inbuilt into the standard that can highlight inconsistencies in your financial report. In this article, we turn our attention to some more benefits of this very powerful standard.
XBRL makes your published financial reports easier to access
There is a reason why XBRL has become the de-facto standard for business and financial reporting the world over. Regulators embrace the standard because they benefit from automated validations, standardization of data, and easy comparability. As a company, you can lay your hands on the same benefits.
Many companies – especially mid and small-cap firms – have a problem attracting investor attention. By converting financial reports into a machine-readable standard such as XBRL, these companies can gain greater visibility – because XBRL enhances the readability of their reports, making it easier for investors to engage with them.
The best example we can recall of stakeholders showing their preference for standardized data is in the Netherlands, where a consortium of three major commercial banks – ABN AMRO, ING, and Rabobank – have eased the loan approval process, and are also providing loans at a lower interest rate, to local companies that file their loan application data in XBRL.
While that’s about lenders, even equity analysts are in a better position to track company reports when XBRL is used. They can auto-populate and auto-update their financial models at the click of a button each time new reports are published in XBRL.
The multiple language advantage
The ESEF mandate brings to the fore the language attribute of XBRL. Take the ESMA taxonomy for example. Every machine-readable tag in the taxonomy has 23 labels – all the European languages and English. This allows anyone reading your XBRL financial report to view the tagged data in a language of their choice – a powerful way to engage with a global audience easily.
And we mustn’t forget – a good way to easily find disclosures in an XBRL document is to run a search for their corresponding tags. Imagine searching for one disclosure out of a 100-page document. All you need to do is use an XBRL viewer to see the document and run a search for the disclosure based on its tag.
You see, it’s a no-brainer that making your report easier to consume means you increase the probability of more people consuming your data.
So, here’s the deal. If you need to comply with the ESEF mandate, use the opportunity to push ahead and convert your entire report to iXBRL. That’s more than what the mandate requires for now, but the benefit you reap will be huge – your report will immediately become more readable and discoverable across a much wider audience.
And the bonus is, that you are already one step ahead of Phase 2.
As XBRL evolves, more benefits keep emerging – but what is already available in this standard is enough to help you significantly with your quality journey. In fact, XBRL can be leveraged not just in your final annual report, but can also be integrated deeper into your organization’s financial process to help you achieve the quality goals you seek.
With this, we have introduced you to two powerful artifacts – embracing software and leveraging the power of XBRL – which you could use to up your quality.