Analysis of corporate information, particularly from a market’s forward-facing perspective, has always been a time-consuming business. This is due partly to the effort involved in obtaining accurate raw data, and partly to the fact that primary statements have focused on and continue to contain historic information. Predicting future performance requires extrapolation and, inevitably, a wider and deeper understanding of the business drivers, many of which are apparent only from non-financial data.
Today professional analysts spend considerable time gathering information and re-keying it into proprietary models.
When financial statements and related business performance information is available in XBRL, analysts will be able to rapidly pull together an understanding of the financial and non-financial business drivers. They will get information faster so they can spend more time on analysis and less on data management. In the near future we can expect a wide range of enhanced analytic tools and techniques that will take advantage of the extensibility of XBRL. This means that analysts should be able to pick up the differentiators (good and bad) faster and more accurately. Markets are likely to expect information delivered in XBRL.
It seems likely that the pressures for improved transparency in accounting and disclosure will be heightened by the use of XBRL.
A recent academic study by the University of Washington gives some notion of the different perspective achieved when data is obtained automatically without inherent bias in presentation or detail.
The Washington University study compared the analysis produced by people provided with hard copy versions of financial statements with XBRL versions of the same thing. Using an experimental approach, the academics documented the difference in investors’ judgments and decisions made where financial information was recognized in the body of face financial statements, versus disclosure of financial information in the (often voluminous) notes to the accounts. They then examined the different decisions that investors made given XBRL powered tools that allow information of this sort to be examined without regard to where the information appears, versus decisions made where investors had traditional paper and PDF based formats, where the difference is inherently apparent. They conclude that XBRL based search facilitation helps investors make appropriate decisions.