The next step in the evolution of corporate financial data will take place in May 2007 when Canadian issuers can start filing financial statements in extensible business reporting language (XBRL) alongside their regular continuous disclosure filings. ‘They will be showing the marketplace they are willing and able to help explore technologies that have the potential to improve efficiencies in the Canadian marketplace,’ comments Cameron McInnis, manager of the corporate finance branch at the Ontario Securities Commission (OSC).
It’s also an opportunity to start learning about XBRL sooner rather than later; for smaller issuers, it’s a golden opportunity to get more exposure for their financial statements, as investors and analysts start experimenting with XBRL, too.
The Canadian Securities Administrators’ (CSA) announcement came almost two years after the SEC rolled out a similar program in the US, which now has about 40 companies participating and over 100 XBRL filings. The results of a CSA survey announced on January 17, 2007 show a low level of XBRL awareness in Canada. In fact, North America generally shows a far lower awareness level and uptake than other parts of the world. Some markets in Europe and Asia, for example, have already implemented XBRL filing programs. However, the same survey shows a whopping 83 percent of respondents in favor of the CSA introducing either a voluntary or mandatory XBRL filing program.
Analysts currently receive their information in a fixed format; to perform any type of analysis, they have to rekey the data into a spreadsheet or other program. With XBRL the data is predefined, facilitating automated analysis, so analysts using XBRL software should be able to cover more companies and perform more sophisticated analysis in less time.
The cost in both time and money will vary, depending on how extensively a company applies XBRL tags. However, off-the-shelf XBRL preparation software can cost as little as $400. The initial preparation phase takes some internal corporate time commitment but decreases as users become more used to the XBRL translation process.
Just how fast Canadian issuers will jump on board, however, depends on how effectively the benefits of XBRL are communicated in the Canadian marketplace. XBRL Canada is a not-for-profit organization whose role is to create and maintain XBRL taxonomies for Canadian accounting standards. It is also tasked with increasing awareness and adoption of XBRL in Canada, beginning with a recent conference in Ottawa: ‘Better government reporting – XBRL for the public sector’.
Some analysts seem sold on the XBRL concept already. ‘I can definitely see the benefit of being able to access financial information in real time,’ says David Wright, managing director of technology and software at BMO Capital Markets in Toronto. ‘By eliminating the clerical aspect of rekeying and cross-checking information, more time can be dedicated to actually analyzing financial data.’
