Faster, more accurate, and standardized information – XBRL promises to transform the way companies keep their stakeholders up to date. Still, it is no substitute for intimate company knowledge.
XBRL (eXtensible Business Reporting Language) is a standardized format for sharing financial information. Similar to how the USB plug has made it easier to connect computers to peripherals, XBRL aims at making financial figures easier to access and manipulate. For the end user, this brings a lot of benefits:
- Figures can be imported directly into the user’s preferred investment software
- Figures can be easily converted to different formats, making it simpler to compare figures across formats, accounting standards and other obstacles
- Figures will be more accurate, as the human error caused by manually typing figures across formats is minimized
In short, XBRL makes it easier for investors to play around with your figures. This again should mean a greater reliance on timely, accurate data. This implies two opportunities for IR:
- An increased need for timely, accurate and extensive financials. As users come to rely more on financial figures in XBRL format, expect even mom-and-pop investors to grow increasingly sophisticated. They’ll expect you to provide them with data both early and often.
- An increased need to highlight important metrics. As automated models become more common, it becomes even more important for IR to help investors understand the value of the company by pointing out figures that are important for making an investment decision about your company. For example, your annual report can make investors aware of KPIs that are particularly relevant to your company’s success.
The modern IR professional needs to work with XBRL. Ignoring it will move investors toward companies that do fulfill their need. Even more importantly, there is no substitute for intimate knowledge of the importance of certain figures and the qualitative aspects of your company. The winners will be companies that are good at conveying both.
