XBRL is supposed to be a boon for investors, who from 2009 will
be able to extract financial information at the click of a button
for the largest US listed companies. But an investment analyst has
warned that investors may not have engaged with XBRL at all
Head of accounting and valuation research at JPMorgan Cazenove,
Peter Elwin, said while he can see the potential of XBRL it is not
the panacea to all financial reporting ills.
“I am probably starting from a position of scepticism in that
ultimately it is an IT information project. It is very easy to
travel rather than arrive as far as that [XBRL] exercise is
concerned,” he said.
Elwin has questions regarding the cost to corporates, how the
taxonomy has been formulated and how changes in accounting rules
will affect the taxonomy.
“I don’t think investors have engaged with XBRL at all, because
they don’t have to. It is far too esoteric for them to engage in
debates about the taxonomy,” he said. “That is the worry.
“Is what has been created ultimately a form of Esperanto which
has been designed by a few clever people but in reality may not
match the way the real world works? That would be one of the big
Elwin said investors would ideally like between three and five
years worth of financial data before they consider investing in
XBRL search engines.
“There is a tipping point. If the Securities and Exchange
Commission requires companies to submit data in XBRL that quite
quickly gets you to a stage where you have a useful data set,” he
Improving access to information
Elwin acknowledged that the electronic tagging system could help
analysts access information at a “granular enough level to make it
useful” and remove the need to laboriously extract key figures from
annual reports manually.
“I think XBRL could make [extracting information] a lot easier.
It would allow you to utilise the data that is there but is
currently unusable. It’s a bit like having oil in the ground but
the cost of extracting the oil is too high so you can’t use the
oil. If there is a cheaper way of extracting it then you can use
the oil,” he added.