Now that ESMA requires stock exchange companies to report in iXBRL, there has been some discussion in the Netherlands regarding the filing of annual reports by large companies that are not listed.
The listed companies only have to report the consolidated figures in XBRL; all other non-numeric information can just be written in plain text. At the same time, small and medium sized companies need to file XBRL reports containing a lot of non-numeric data such as accounting principles and notes on the balance sheet. Large companies were scheduled to report in the same fashion, but now the biggest of them suddenly have to report a lot less in XBRL, making their process less complicated. There is an ongoing discussion now on what the large companies need to report: will they have to follow the big, listed companies or the smaller companies?
It can be seen as unnecessary to report text in iXBRL as detailed as small and medium sized companies in the Netherlands have to do it. In most cases only the figures will be analyzed and the text is only read by people viewing a rendered version of the XBRL file or by opening an iXBRL file in the browser.
Some bright minds however are using the textual part of an annual report to analyze the performance, culture, strengths and weaknesses of companies. Among these is Harry Oude Wolbers from M&AT. In the last decade he created a powerful analyzing tool to determine different aspects of a company, based on statements on their website or the annual report. By adding machine learning and AI, his tool, INRO, becomes more powerful every day.
Adding XBRL to INRO adds a whole new dimension to the analysis. Especially when all the different subjects are put in separate XBRL elements. The tool doesn’t only analyze the words, but can also put it into the perspective of an explicit subject. Next to that, since every company uses the same basic set of XBRL elements, it will be much easier to compare different companies in ways that aren’t possible when you only look at the numeric part of the annual report.
Right now, we first have to crawl before we can walk and that means that listed companies have to spend their time on getting up to speed with iXBRL for the consolidated figures. But it doesn’t hurt to park these thoughts about textual XBRL data into the back of your head and know about the benefits already. For the medium and large companies in the Netherlands I would say: embrace the fact that you have to create detailed XBRL files and use it to your advantage with tools like INRO.
The future of financial reporting is here, and as European listed companies have started publishing in ESEF, a question begs itself. How do you, the investor, benefit from the new European Single Electronic Format?