Posts Tagged "ifrs"
New IPHIX Corporate Blog
With the release of the new IPHIX website we are also starting a corporate blog. I will keep writing on the GLG Repository and my posts will show up in the IPHIX blog as well, or at least the XBRL related ones. In addition, the IPHIX blog will from time to time have posts from guest bloggers – and by the way, if you are interested in posting something you can contact us.
If you are a reader of the GLG Repository for professional reasons you may want to subscribe to the IPHIX blog instead. The current skin of the GLG Repository may have already suggested that the tone of the blog will slightly change, to become a little more personal. At least this is one of my New Year resolutions, we’ll see if time allows.
So I hope to see you there… and here, if you care to stick around.
Good XBRL Things Are Coming
When the Convergence Assistant experiment started back in 2007 it was an exciting time. It was conceived as an awareness tool to help Canadian businesses understand the implications of the transition from the local GAAP to IFRS. It soon became one of the first publicly available applications that leverages the power of XBRL Global Ledger as the “great reconciler”, allowing a business to map its own chart of accounts to the GIFI, a standard chart of accounts used in Canada, and leverage pre-defined mappings (expressed as XBRL GL instances) between the GIFI itself and both the Canadian GAAP Taxonomy and the IFRS Taxonomy to generate the two sets of XBRL instance documents, and automatically reconcile them.
The experiment was successful, and since then I have been thinking that it could, and should, be applied on a broader scale – to any standard chart of accounts, and to any taxonomy. The enabler for this ambitious project is the availability of a broader set of those pre-defined mappings mentioned above, a sort of global knowledge base including sets of standard accounts and their mappings to multiple XBRL taxonomies – enter WikiAccounts.
And now it is becoming a reality, with various groups already working at the creation of those pre-defined mappings and beta-testing the IT infrastructure that will make it happen.
Good things are indeed coming for that part of the global community that truly believes that open standards can make a difference not only in e-filing, but also in day-to-day internal business processes, where any improvement leads to very significant cost savings and greater efficiencies. It takes some vision, like in the case of the Professors and students of the Franklin P. Perdue School of Business that I have the privilege to work with – check on Page 3 of the March 2011 issue of the Perdue News. Or like the CPA that decided that his clients, mainly small businesses, would benefit if he started using the IFRS for SMEs Taxonomy to prepare their financial statements even before they knew what it is, and thought that a good way to start was to leverage the standard chart of accounts approach, create the mappings and contribute them to WikiAccounts.
If you want to get involved too, the time is coming. Select and visionary beta-testing projects on the footprints of the ones described above will be warmly accepted and supported to the best of my possibilities. Or, wait just a bit longer – maybe around May, when the XBRL winds will blow on Brussels - and you will be able to join the WikiAccounts community after its official launch.
Good XBRL things are coming, and I can’t wait.
XBRL Global Filing Manual
The Interoperable Taxonomy Architecture project, a joint initiative between the US Securities and Exchange Commission (SEC), the Japan Financial Supervision Agency (FSA) and the International Financial Reporting Standards (IFRS) Foundation XBRL team, recently published the Global Filing Manual (GFM), a set of best practice rules for the preparation, validation and filing of XBRL documents. More information can be found here, and the actual manual is here.
This document is a very useful resource made available by a globally significant project, and it contains information that anybody working with or interested in XBRL and its implementation will greatly benefit from.
From my perspective, I was happy to read in it a very clear statement about the scope of the Manual (page 4):
“The rules in this document have been created for financial reporting; some of the rules may be inappropriate or inapplicable for other types of business reporting.”
I have always been very vocal in stating that financial reporting is only a part of business reporting, and that XBRL is about the latter – as the words behind the acronym spell out - and not (only) about the former. The statement quoted above is very clear in pointing out that best practices or rules that are suitable for the use of XBRL to represent financial statements are not necessarily applicable for other kinds of XBRL reporting. In my professional activity I frequently (and painfully) deal with the damages caused by applying the “financial reporting” mindset and best practices to initiatives that are broader in scope and different in nature – the Standard Business Reporting (SBR) environment is a typical example of XBRL taxonomies where filing financial statements is only a portion of the business requirements, but there are many others. Architectural principles that are best practice for financial reporting taxonomies are simply not appropriate for other types of business reporting, for example tax or payroll information, and in general form-based information, due to the nature of the data being represented and to different underlying requirements . Seeing this concept so clearly expressed in the GFM really made my day.
Then, I went on reading:
“In this document, ‘financial reporting’ encompasses authoritative financial reporting standards and generally accepted accounting principles/practices (or GAAP), regulatory reports whose subject matter is primarily financial position and performance and related explanatory disclosures, and data sets used in the collection of financial statistics; it excludes transaction‐ or journal‐level reporting, primarily narrative reports (for example, internal controls assessments) and non‐financial quantitative reports (for example, air pollution measurements).”
These words rang a bell, and then I remembered why. The very same words were used in the Abstract of the Financial Reporting Taxonomies Architecture (FRTA) 1.0 document released in April 2005 by XBRL International Inc. FRTA, even if obsolete – it was released before the XBRL Dimensions 1.0 Specification, and many of FRTA’s provisions are not suitable for dimensional taxonomies – is still considered by many the ultimate source of best practices for XBRL taxonomies architectures… and in spite of that statement in its Abstract, this tends to happen no matter if the taxonomy is about financial statements or not.
With this I do not mean that those statements in the FRTA and GFM are insufficient or inappropriate. Quite the opposite, they clearly state a basic principle that many seem to ignore or forget. The problem obviously lies in the way in which best practices are applied, even by XBRL “experts”, without enough insight on what those best practices are about in the first place. If you only have a hammer…
Having a clear understanding of the differences between financial statements – usually a flat list of reporting concepts with little or no hierarchy – and other types of business reporting is key to make the right choices in terms of taxonomy architecture principles. Being aware that comparability across different instances, a clear requirement for published financial statements, is not a requirement at all in other contexts, and that the architectural choices necessary to meet that requirement come at a price that you may not want to pay if you can avoid it, is also key. These are only the most evident examples, there are many more, and more subtle ones.
It is not a matter of right or wrong – it is a matter of understanding the actual requirements and making choices that are consistent with them.
AICPA White Paper: Impact of the Transition to IFRS on IT Systems – XBRL Can Help
The white paper “Financial Systems Considerations in IFRS Conversion Projects” recently published by AICPA is available here. it includes considerations on:
- Background of IFRS and Information Technology (IT) impact when converting to IFRS
- Key differences between IFRS and US GAAP and the impact to financial/business reporting
- Implementation considerations
- Learning from the European experience
- A use case: IFRS transition in Canada
The white paper also discusses the benefits of a standards based approach to IFRS transition and what XBRL has to offer in this respect – which is a lot, considering the availability of authoritative and royalty free XBRL taxonomies that support both IFRS and US GAAP – and other local GAAP . Plus, of course, XBRL Global Ledger as the standardized “glue” that enables the automated reconciliation between different views of the same underlying data.
Enjoy!
Hope To See You In Paris
If you are in Paris – or around there – during the week of June 22, and since you are reading this blog, chances are that you are already aware of the 19th XBRL International Conference. What you may not be aware of are the excellent opportunities for training that the Conference offers in such topics as taxonomy design, conversion of financial reports to XBRL and how to leverage XBRL internally for the benefit of your company with an XBRL Global Ledger (XBRL GL) introductory and intermediate courses.
I will be teaching the XBRL GL courses together with Eric E. Cohen, the inventor of XBRL GL. If you want to find out how to make XBRL work for you rather than it being just an additional compliance cost, and how to achieve the same benefits and significant cost reductions that drive the adoption of XBRL by governments and regulators around the world for your own company, you should take advantage of this opportunity. You will leave with practical, actionable knowledge on how to make XBRL work for you and how to achieve significant process enhancements and cost reductions in key internal reporting, auditing and data integration processes.
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