Competing posts over at the TABB Forum look at the issue of improving data disclosure in the municipal securities market. Marc Joffe is bullish on XBRL for munis, and thinks XBRL based disclosure would help create better default models. Friedrich Lindenberg is less sanguine, believing that the same positive effect could be achieved with lighter weight standards such as CSV.
None of the players here think the existing PDF based disclosure should be left as it is, everyone agrees that there is a need for improvement. But we’ve been here before. XBRL has often been asked to justify its adoption in comparison to some other standard or incumbent method of collecting data.
Dr Joffe’s principal arguments are easy to understand. XBRL is a success in financial regulation, world-wide. From zero usage before it was created, XBRL has grown to dominate the world of financial regulation in terms of market cap using the format. Essentially every large market uses it in some way or other, and in some jurisdictions the national tax agency, the central bank, the leading stock exchange, and the prudential regulator all require the use of XBRL. The advantage of XBRL is not just that it is an incumbent technology, but that it became an incumbent technology by virtue of its benefits.
XBRL makes it possible to clearly tag highly complex and multi-dimensional data, as appears in CAFR disclosures by municipalities. In the US, the clear analogy is to the SEC’s 10-K disclosure.
Mr Lindenberg’s main argument is that the choice of technology should be influenced by the users of the data, and the analytic community, journalists and private citizens have been under-represented when this choice is made. For these constituencies, XBRL is too complex, therefore something much simpler needs to be used.
Sorry, no. That is not how technology is selected for mission critical financial regulation. As wonderful as it is to be inclusive, there is a hierarchy and priority to the users of data, and in the first place are the regulators. Part of the greatness of the US capital market structure is that so much data is shared with the public after it is collected, but sharing with the public is not why it is collected.
Is XBRL too costly for municipalities to adopt? No. One of the very first XBRL projects globally was the Dutch Water Boards, reporting by very small municipal agencies in the Netherlands. Continued adoption of XBRL around the world has driven down the cost of XBRL tools and services. Nor was XBRL designed to be overly complex and require costly tools and services. I know, I designed it!
CSV can work for sharing tables of data, if you build your own validation suite. XBRL builds on the validation capabilities of XML Schema. Rebuilding all of that on top of CSV, for one application, would be very expensive.
As said earlier, XBRL works on multi-dimensional data. This not something I would like to see tried in CSV, and if you did it, most of the benefits (easy to understand by journalists…) go out the window.
The onus is on anyone who thinks financial reporting can be done in CSV to produce a working prototype. As Dr Joffe points out, this was done for CAFR reporting in XBRL in 2008.