Developing and producing accurate and relevant business reports is crucial, but it can be a difficult, slow and expensive process. It’s a process under increasing pressure in a competitive environment that demands businesses constantly respond to economic change. A key challenge for the reporting function is the ability to remain nimble and responsive. In the face of constant requests for new and improved information, it’s a challenge to deliver on those demands while ensuring the credibility and sustainability of that data. It’s a delicate balance.
Requests for information from management or from an external body such as a regulator or ratings agency can set off a chain reaction: Do we have that information? Can we get it if we don’t currently keep track of it? Which systems are affected? Who controls the data? How reliable will this information be? How can we improve that reliability? How can we demonstrate that we have controls over it? How much is it going to cost to obtain this data, set up new processes, and implement new controls? And finally, how will the budget stretch to deliver it?
Among the countless issues to consider:
- Data definition: What, exactly, is required?
- Data coverage: Where, exactly, does this information come from?
- Data reliability: Is this information sourced from a system, gathered by survey, or is it, in fact, 'guesstimated'?
- Data flow: How does this information flow around the organization?
- Data controls: What checks and rules govern this information?
Answering these questions sometimes takes more time and costs more than the information request is worth. Other times, the methodical implementation of a new reporting process delivers real value in terms of business insight or control.
In any event, meeting new demands in today’s complex enterprise, even given the benefit of recent improvements in data warehouse and ERP technology, is a major demand on every organization. And it’s one that is increasing.
XBRL is likely to help companies manage change in their reporting process, not because it is a new transport mechanism but because it’s a new and independent documentation mechanism. Keeping track of information sources, controls, and definitions is exceptionally difficult, and only the most sophisticated enterprises or the simplest of companies tend to do it well today. In between these two extremes sit the rest of us—digging out data is difficult and slow. In the medium term, XBRL will prove a powerful, interoperable, and platform-independent information management tool. Organizations will be able to order and track this crucial 'information-about-information' that is often undocumented or, perhaps worse, is scattered across numerous proprietary, antiquated, and incompatible computer systems. Allowing users to navigate the information sources available to them will help the users understand the strengths and weaknesses of reporting processes. And adding new data in an environment in which existing information can be fully leveraged is a simpler, more effective process, and one that will become a vital part of the controller’s and CFO’s domain.
Today, regulators and government agencies charged with collecting information from vast numbers of organizations are using XBRL to get a better handle on the definitions, interrelationships, and quality checks imposed on the information they receive. Companies seeking to better organize their information can examine the use of XBRL in this context.
There are a number of steps in getting there, including:
- Taxonomy design decisions
- Tool selection
- Process and policy design
- Initial population of corporate taxonomies
KPMG professionals can help.