Global

XBRL and investors 

How will XBRL impact corporate interactions with investors?

The issue: Data access

Traditionally, the gulf between major investing institutions and the individual investor has been wide in terms of the quality and range of analytical tools, information sources, and speed of communication. The Internet has begun to address this gap by making corporate financial information widely and cheaply available, but it can only deal with information in the format and quality publicly available. Aggregation and comparison of individual companies currently requires both data and sufficient knowledge to understand and interpret the genuine differentiators as well as distinguish them from issues of alternative presentation. In reality, many of the reports and accounts presented on the Web are simply replicas of the hard copy versions.

 

Other 'investor portals' rely on simplified reporting templates manually populated by data consolidators, who often force round pegs into square holes. This means that the information the individual investor receives is a summarized data set with the messaging and unique disclosures painstakingly developed by companies stripped out. Institutional investors tend to rely on unique models developed by manually re-keying complete financial statements. The time involved in this exercise is one of the factors that limit the analysts’ coverage of smaller companies.

 

The ability of the corporation to target its investor relations message is substantially improved with XBRL through both the widespread availability of financial information and the faster, deeper analysis the professional analyst can apply to reported financial statements.

 

A future perspective

Once XBRL is fully adopted and underlying data is available in tagged format, investors should be able to access, combine, extrapolate, and sensitize reports to make more informed decisions about a company. Base data will contain its own identifiers, enabling shareholders with the relevant analytical tools to get right to the heart of a company’s business model, its prospects for future growth, its unique drivers, and its competitive advantages. Companies publishing information in XBRL format will have the advantage of delivering their messaging directly to potential investors.