At Intrinio, we leverage a data standard called XBRL in our underlying technology.
XBRL, or eXtensible Business Reporting Language, is an XML standard for tagging business and financial reports to increase the transparency and accessibility of business information by using a uniform format.
XBRL, combined with the Intrinio standardization technology, enables us to rapidly and accurately source, standardize, normalize, and distribute financial data directly from regulatory bodies like the SEC and the FDIC. This means we are delivering it to you (developers, investors, students) faster, more affordably, and with higher quality.
As members of XBRL US, we are working to advocate for the adoption of XBRL around the world. This technology has incredible potential, and we believe strongly in its ability to fully digitize financial information. Standard business reporting has efficiency effects across governments, businesses, and end users like you. The absence of XBRL adoption has equally powerful consequences.
What does a world without XBRL look like?
1. Time Delays
When regulatory filings are not filed in XBRL, the process for distributing the data results in serious time delays. Once the data becomes publicly available (like 10K and 10Q data filed with the SEC) it takes days, at times, to manually source all of the data. It has to be entered into a database so that it can be distributed to consumers easily on platforms that are useful to them, like Microsoft Excel.
These delays are not just annoying. They impact the timeliness of investment decisions, and they represent a system that is incredibly outdated and inefficient.
Companies like Intrinio are leveraging their technologies to systematically source and standardize data sets that are filed in XBRL. This solves part of the timeliness issue, but there are still hundreds of data sources and international filings that have yet to adopt XBRL.
2. Duplicate Reporting
Without a unified reporting taxonomy that is mandated, companies end up filing the same information across multiple agencies. Organization like the IRS, SEC, FDIC, FDA, etc. all demand different reporting standards.
To illustrate how inefficient this is, let's use JPM as an example. A publicly traded holding company like JPMorgan Chase & Co. is required to file with the SEC, but its wholly owned subsidiary JP Morgan Chase Bank NA (which is FDIC insured) must report with both the FDIC and the Federal Reserve. There are also reporting requirements for the IRS, etc.
If XBRL were mandated across these regulatory reporting bodies for all enterprises in the US, the reporting bodies would have instant and digital access to regulatory information. Imagine if tax returns of both private and public companies were submitted in XBRL (like they are in Singapore). All of our government systems would know exactly where to look for reliable information without duplication and inefficiencies.
3. Poor Data Quality
Currently, regulatory bodies have duplicate standards for the methods companies use to report financial information. For example:
- Crowdfunding companies report "Total Assets Most Recent Fiscal Year End" on SEC Form C
- Public Companies report "Total Assets" on SEC Forms 10-K and 10-Q
- Investment Companies report XML-based "Assets" on SEC Form N-PORT
All of these companies are attempting to report the same thing (assets), but the standards for reporting "Assets" are defined differently across regulatory bodies. This makes the quality of financial information for governments, businesses and consumers incredibly low, and in cases make some of the data useless.
Even with the adoption of XBRL, there are data quality issues (see extension issues). The good news is that Intrinio is doing a pretty darn good job of correcting those.
4. Manual Data Review
As mentioned above, without XBRL the digestion of financial information is a nightmare. It involves hundreds of hours of manual labor and data entry. Sometimes the data is manually entered into a database, a spreadsheet or a report. If there is no digital language to enable easy download and processing, the information must be manually entered straight from the regulatory filings.
Clearly this leads to issues of timeliness, but it is also a shameful display of inefficiency. These inefficiencies could easily be solved with more widespread adoption of the XBRL reporting standard.
XBRL US recently released the infographic below. It outlines why XBRL is so important and why we must work towards wider adoption: