Intelligent Enterprise

A story we ran this week about XBRL managed to ignite a little controversy, even before it made our newsletter.

XBRL is an XML-based format for financial reporting that provides a computer-readable way to tag financial data points such as cost, assets, net profit and other values. For a primer on the technology, read this story from August 2005.
As Intelligence Enterprise reported more recently, many publicly traded companies have been reluctant to adopt the standard. But that wasn't the story that ticked off some Business Intelligence readers.

Robert Kugel of Ventana Research argues in a recent article, called The Danger of XBRL, that there's a chance the Securities and Exchange Commission will use XBRL as a "back door" to regulating the structure of corporate charts of accounts.

Some readers didn't like hearing that.

Colm O hAonghusa of EuroReg Consulting, in Dublin, Ireland, called the story "McCarthyism journalism." I don't know what that means, but he seems dedicated to the idea. In a point-by-point e-mail responding to Kugel, O hAonghusa said, among other things, that the Financial Accounting Standards Board and Public Company Accounting Oversight Board "don’t need XBRL as a Trojan Horse for a standardised chart of accounts. They will come in the front door if that is what they want. A standardised chart of accounts will bring more Enrons, not better accounting transparency which is what XBRL can bring."

O hAonghusa also pointed out that companies' reported financial information is already parsed and tagged by third-party intermediaries before it's sold to equity analysts. The data is made to conform to intermediaries' standards when this happens -- which in effect results in the creation of a standardized chart of accounts. XBRL, he noted, is designed to correct this problem.

Mike Willis, a partner at PricewaterhouseCoopers, seconded O hAonghusa's position. (In fact, he matched it verbatim, word-for-word in parts. This leads me to believe that either Willis is reading O hAonghusa, O hAonghusa is reading Willis, or they're both reading someone else.) At any rate, Willis added, "XBRL will likely eliminate existing third party definitions applied to company reports and [enable] companies to provide users exactly what they report in a highly reusable and explicit manner."