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Technology: Compliance and XBRL
Five years ago the fallout from financial catastrophes like Enron and WorldCom drove the Sarbanes-Oxley into being. A year ago now the pendulum was beginning to ease and advocates for relaxing compliance regulations seemed to be getting greater recognition. But the events of the last six months have pretty much closed any opportunity for easing compliance requirements: the housing crisis, the credit crisis, the Madoff incident, India’s Satyam scandal, …
With a new administration of Democrats moving into Washington in the coming weeks, the agenda in Washington is sure to bring up the review of Sarbanes-Oxley and other existing compliance regulations, and then to inevitably introduce new legislation to try to create more fiscal accounting transparency and oversight.
Entrepreneur Mark Cuban suggests the government push more towards greeater use of the financial reporting specification XBRL. XBRL is a set of special XML tags that are designed to represent detailed financial data, and because each piece of data is tagged, searchability of XBRL data is a snap. The SEC already requires $5 billion+ market-cap companies to report their financials in this format and the remaining public companies will need to report data in this format by 2010. XBRL will make it much easier to analyze, compare and research company financials.
Cuban recommends that the requirement of XBRL reporting be extended to all mutual funds, hedge funds, EFTs, brokers, dealers, market makers, banks, and loan companies. With XBRL, the monitoring and auditing of these institutions would be made much more efficient. Beyond the requirement of changing the format for how data is reported, additional regulations may not really be needed. There’s enough laws on the books already, it’s just that up until now, trying to uncover problems has proved to be too time-consuming without a way to quickly size up the data.
XBRL might be all we need. And from an ECM data management perspective, it’s satisfying to think that using the right data format can solve a lot of the world’s problem…
