CFOs often view eXtensible Business Reporting Language (XBRL) as a bothersome step in the disclosure process that merely allows them to fulfill a regulatory requirement. But finance chiefs should want to have their tags and detailed footnotes correct, and for reasons beyond just checking the box on a regulation.
In fact, as my colleague Kristine Brand points out in “XBRL is Not Just Another Compliance Burden,” proper XBRL data formatting is essential as the Securities and Exchange Commission rolls out the Accounting Quality Model (AQM), which will ensure all data is accurate.
CFOs benefit also from correctly tagging information because the data is used by investors to gauge a company’s market value and determine if it is a smart investment. Finally, the board of directors and senior management team can and should use the data for governance, risk and compliance (GRC) measures and value-based decision-making.
To further drive enthusiasm for correct XBRL filings for reasons beyond just SEC compliance, CFOs must look at the role XBRL filings play within the business knowledge circle. This circle consists of data creation, data dissemination and data analysis.
As information is analyzed, users provide feedback about which data points are useful, which affect data creation and compilation, and so forth. CFOs and the companies they represent will benefit from understanding how each part of the circle influences every other part.
Right now, finance chiefs are fulfilling the first and second part of the circle by creating XBRL filings to meet SEC requirements and then disseminating data through the disclosure filing process. But for these data points to be useful, CFOs and their staffs must create quality footnotes and tags, and then educate constituents, inside and outside of the organization, about how this data can be properly analyzed and used.
As the internal XBRL expert, the CFO must provide clear education on the value of this business data at all levels across the organization, not just among the financial and accounting staff. XBRL filings are a rich source of data that all departments can use to make operations more efficient and to conduct competitive analysis.
For example, a CFO could quickly benchmark capital spending for peer companies in his or her industry by selecting a standard industrial classification (SIC) code, the element from the XBRL taxonomy and the time periods, and then downloading the result into an Excel spreadsheet. It is through using the data that CFOs show how accurately compiled data can be leveraged to drive further adoption internally and champion its use among investors.