Big data and advances in technology have been dominating the discussions of many financial executives in recent years. In fact, the 18th Annual Global CEO Survey from PricewaterhouseCoopers (PwC), published in January 2015, highlights the impact of the digital revolution on business, reporting that CEOs are concerned by the speed of technological change. But CEOs no longer question the pace of technological change, as they learn to deal with it.

The majority of CEOs believe that investments in digital technologies have created value for their business, and around 80% say that mobile technologies and data analytics are key strands of their strategy. But standard setters appear to be lagging behind the rest of the industry in terms of embracing data and technology in financial reporting. Some argue that current disclosure requirements have led to annual reports reaching epic lengths that are difficult for users to consume and lead to added complexity in financial reporting.

As CFA Institute notes in its report Financial Reporting Disclosures: Investor Perspectives on Transparency, Trust, and Volume, today’s financial reporting system is based on paper and associates higher word or page counts with increased complexity and neglects the ways that data and technology can improve the quality of information and investors’ access to it. The current system presumes that information is consumed by humans; in other words, it assumes a human consumption model, not a machine-readable format.

Although there has been much discussion about the role of technology in filing documents with regulators, the CFA Institute report looks at how technology can be harnessed to reform the financial reporting process end to end. We examined the effects of data and technology on the finance function—the capture/collection of data; their management, analysis, and use in the production and presentation of financial reports; and the audit of those reports. We also studied the use of technology in the delivery of financial data to all parties in the information supply chain and in the consumption of financial information by investors, regulators, and other users.

The current manual report assembly and review processes used by companies require both time and money, the paper continues. These processes can be enhanced through the standardization of data, formulas, and presentation of financial information across disparate data sources or software silos and through the effective implementation of disclosure management applications. When data are standardized, these applications are able to pull information from disparate data sources to write automated reports, which enables streamlining of current labor-intensive processes. Such standardization not only saves time and resources for companies but also reduces errors in data because of less manual intervention. To achieve these benefits, companies need to structure data early in the reporting process and start thinking of structured data as a form of communication, not merely as a form of delivery.

Policy Developments

• In 2016, the US SEC announced that it will allow companies to voluntarily file structured financial statement data in a format known as Inline XBRL.
• In 2015, the European Securities and Markets Authority issued a consultation paper proposing the adoption of the European Single Electronic Format.
• In May 2014, President Obama signed the Digital Accountability and Transparency Act of 2014 (DATA Act) into law. Once implemented, it will make Federal spending data more accessible, searchable, and reliable. It will not only make it easier to understand how the Federal government spends taxpayer dollars, but it will also serve as a tool for better oversight, data-centric decision making, and innovation both inside and outside of government.

XBRL

• XBRL (eXtensible Business Reporting Language) is an XML-based standard to define or tag financial and business performance data. Groups such as the International Accounting Standards Board and securities regulators such as the U.S. SEC are developing taxonomies, or a structure, for tagging data so that XBRL can be fully implemented.
• Filing companies assign each data item in their current financial statements (including note disclosures) with a defined tag. Electronic reports, containing the tagged items, are generated and made available by the regulator or the company
• Software solutions provide end users (investors and investment professionals) with direct access to data from the electronically filed report
• XBRL will improve the accessibility, accuracy, and transparency of financial reporting. It has the potential to improve the quality of our global capital markets through advances in the valuation process
• XBRL reporting programs are developing around the world and we want to ensure the users of financial statements are involved in their development 

XBRL provides a standardized, interactive, computer-based framework for financial reporting and financial statement generation. In the past decade, this reporting framework has proven to be a promising technological advance for filers, investors, and regulators. It provides key benefits in the form of increased efficiency, transparency, and comparability in the delivery of financial information to all parties in the information supply chain, regardless of their varying needs. The reporting of financial information is the lifeblood of global capital markets, and financial reports are the key communication tool between companies and investors.

So, if XBRL is implemented wisely, the mandatory adoption of it for financial reporting will be of significant benefit to all concerned. The development of this platform is in keeping with the long history of improvements to the nature and structure of financial reports. Reporting has evolved to accommodate the increasingly sophisticated demands of capital providers—from creditors’ earliest and simplest use of data and measures of solvency to the current integration of financial data into cash flow forecasting models. Often, the new technologies in and of themselves have inspired advances in decision-support techniques, and we believe that XBRL will be a force for change in this manner.