How XBRL improves analysis

So far, 1,521 firms have filed XBRL-formatted financials, and this year all public companies will be required to report in XBRL. But many in the marketplace are asking: ‘Why are we going to all this trouble? How will XBRL make my corporate data better? How can investors use this kind of data?’  

This year, the SEC will complete the XBRL rollout that will make its EDGAR system a repository vastly more useful, by requiring companies’ financial statement data to be posted in XBRL. Back in the late 1980s, when EDGAR was first initiated, most people couldn’t imagine what it would mean. Today, however, could any of the investors, analysts, librarians, academics or reporters who actively use it imagine a world without EDGAR?

XBRL is a similar revolution that some find difficult to understand and value. Tagging in XBRL means building context or intelligence around a set of data and making that information computer-readable. A computer program can draw in hundreds or even thousands of company financial statements simultaneously and extract information easily, accurately and quickly. This is a significant advantage over the current process of taking a flat file of text or HTML, parsing or rekeying it and ‘interpreting’ the data before they can be used.  

Because of the SEC’s XBRL initiative, many companies’ corporate data are now computer-readable and available to everyone immediately, as soon as they’re published on EDGAR. To illustrate the possibilities, XBRL US has created a simple application that allows visitors to extract revenue and assets for all companies that are filing in XBRL. Data can be aggregated by sector and industry and the information is updated as soon as it’s available on EDGAR. Soon, XBRL US will be adding other line items like net income and cash flow from operations. Do your own real-time analysis using this application at http://data.xbrl.us.

A few interesting facts that can quickly be gleaned from the application when looking at XBRL data from Q3 2010:

• The finance, insurance and real estate industry comprises a full 65 percent of total assets but only 14 percent of revenue. Not surprising that problems in the financial sector as we saw in 2009 have significant ripple effects throughout the economy.

• Fannie Mae alone held 9.5 percent of total assets during that quarter.

• Companies in the petroleum refining industry comprise less than 1 percent of the companies that have reported to date, but their revenue in Q3 2010 was almost 10 percent of the total revenue reported.

• Average revenue per company was $1.8 bn, although some industries fared better than others: the 12 petroleum refining companies averaged $22 bn in revenue, for example, while the seven firms in retail variety store companies averaged $17 bn.  

• For full-year 2009, WalMart revenue represents 29 percent of the total retail trade reported revenue of $1.4 tn.  

Is analysis like this of interest to investors? Absolutely. With this kind of information available on a real-time basis, identifying investment opportunities and flagging problem companies can be as simple as a few keystrokes. Only with XBRL can company-reported data at a detailed level be made available for every public company within minutes of it being posted onto EDGAR.

Not only does it open up a wealth of information about your companies, but it also, in effect, levels the playing field between large and small companies since data are available immediately and for every company.  

XBRL is making your company’s corporate reports more useful, actionable and accurate in XBRL format. While all information consumers haven’t yet embraced XBRL, the move is in process – and they are beginning to learn how they can benefit from this new revolution in company reporting.

Michelle Savage is vice president of communications at XBRL US, a body supporting the adoption of XBRL in the US. Savage is a former equity analyst at Shearson Lehman Hutton and currently on the board of NIRI’s New York chapter.