The Data Dive

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Compliance and analytics – Two sides of the same coin

Thanks to US SEC, we now have tagged financial data freely available. What are we doing with it? Imagine this – someone has acquired the data (thanks to an accounting system), someone has prepared the data (courtesy of CFOs and their teams) and someone has labeled the data (this time thanks goes to the person who did the XBRL tagging), someone made sure the labels are correct (the ever suffering auditors get the credit this time) and finally someone made sure all this was done according to some process someone has established and monitored (this time our thanks goes to the SEC EDGAR validation system).  Wow! All we now have to do is to figure out what model to use and what colors to apply in the graphs – we have analytics and visualization!

Data visualization – Pulling data from various data files from SEC filing

This all sounds too simplistic, right? That is because the picture I just painted is just that.

There are tons of issues that are hidden in this simple process. The devil is always in the details. What is the quality of this tagging? How much details are in the financial tables versus hidden in the notes Sections? How granular is this information? Is the information sufficiently functionally related so that a complete picture can be drawn? Is it possible to query the model built based on this data? Does the model give us enough data points to forecast anything reliably? How much data is really tagged? How much of this tagging is consistent across multiple quarters? How consistent are different companies in tagging the same concept with the same element? How much of the data is using extended customized tagging? All of these are valid questions and raises a lot of very legitimate issues.

But what is really the primary question we should ask? To me, that question is:

“Does this tagged data help build better analytics than what we could before there was no tagged data available?”

A company snapshot

As someone who has been working on data analytics for quite a number of years, I can safely say that the answer is an emphatic YES!  Yes, there are problems. Yes, it is not highly reliable or accurate or sometimes even usable, but it is better than what we could have done previously. We now have tools that can build quick models, connect relevant data, compare performances and even make predictions. And this trend has not been completely missed either. Leena Roselli, Senior Research Manager at  Financial Executives Research Foundation, Inc. (FERF) recently authored a report titled “Data Mining with XBRL and Other Sources” and explored some solutions that are just hitting the market including I-Metrix (RR Donnelly), Ask 9W (9W Search) and Lyticas (Apurba). While we are still pioneering in the financial analytics and visualization space using XBRL as the primary source of data, the initial solutions are quite promising.

The bottom line is that this mandate has given us a golden opportunity to move from data mandate to data consumption, from the avoidance of punishment to generating deeper Business Intelligence. Join us in that voyage!

 

Data Ocean

The other day I was watching Tron: Legacy and there was one point where our hero’s were flying over a vast ocean of data chased by the bad guys. The bad guys were trying to shoot them out of the sky or force them to drown in the deep ocean of seemingly random data before our hero’s can get to the island of insight and get the hell out of dodge.

Quite a big data problem our hero’s have. So how did they cope. Well they had an aircraft (system) with the ability to fly fast and to allow them to shoot back (efficient architecture). Now the enemy aircraft were coming at them in volume, velocity and variety.

Okay for those of you who,watched the movie I guess I am taking this metaphor way too far. But the upshot is to not drown in this sea of data one must look at ones own enterprise architectures whether it’s data, application or I.T.

Anyway more later. Gotta get on my lightcycle and get to work. Even as CTO I can still get derezzed

XBRL Supporting Monitoring and Transparency

Questions, Questions Questions!

Can XBRL support greater effectiveness in monitoring and transparency of our financial institutions and multi-nationals?

Let’s indulge in a bit of what if. If Lehman brothers published in financial statements in XBRL, could their collapse be avoided? Would scrutiny from multiple quarters made any difference?

 Could an ever increasing position in CDO (Collateralised Debt Obligations) created from sub prime mortgages been identified as a risk if RBS financial statements were in XBRL. On there own probably not, but cross referencing these figures against other data? Who knows? Prescience is for mystics. Financial professionals have analysis and statistics; the quality of both depends upon levels of transparency/availability of information.

Why do we need greater transparency?

Greater Transparency either mandatory or voluntary in order gain trust is something that we can expect from publicly listed companies.

Especially in light of recent economic conditions with financial institutions facing even greater scrutiny.

A key feature of XBRL as promoted by the IFRS, “to standardize financial reporting to promote transparency.”

The United States (SEC) have not only made it mandatory for publicly listed companies to submit financial statements in XBRL, but have made them public.

Allowing investors, researchers and analysts the opportunity to assess the performance of these companies using an IT system that can analyze the data will be creating growth in financial analysis software applications that support XBRL.

The question is how many other regulators in other countries will follow the United States SEC’s lead in light of benefits of greater transparency?

But what about companies? What is the uptake of companies releasing financial information in XBRL to the general public? Companies such as Goldman Sachs and Apple have done just that.

Once again, will the demand of greater transparency from investors drive demand?

What will be the role big data analytics play in a potential revolution?

Time will tell…

XBRL – Global Financial Village

In my last blog I actually mentioned that XBRL can be cool. I wrote that while having my Sunday morning cappuccino, brought from an absolutely charming village in Hampshire called Hartney Wintney.

Also to be truly powerful XBRL needs to have a global market. Now the next few paragraphs are going to sound a bit heavy. But we are now into some serious territory.

On this international stage, enters the regulators, who comes as an unlikely market maker…

In the United States, the Securities and Exchange Commission, has mandated that SEC listed companies must file quarterly and yearly statements in XBRL. This information is made public by the SEC for the purposes of transparency. One of the effects being that private and institutional investors may analyze the information being released.

This has caused a growth in an IT sectorx offering services to companies who need to submit accounts in XBRL.

In the United Kingdom, HMRC (Her Majesty’s Revenue & Customs) have required all UK companies to submit their Corporation Tax returns for tax year ending in April 2010 by April 2011 using iXBRL, a simplified variant of XBRL.

This is a major investment for HMRC with the expected return on investment being massive departmental savings arising from reduction in manual processing of CT returns, increased efficiency in identifying risk, improving quality of submitted turns and above all reducing the tax gap between expected and actual revenue.

So in terms of the UK how has this affected the marketplace? It is now mandatory for all UK companies to deliver their returns in iXBRL.

As a consequence vendors of accounting software now have to handle iXBRL. Accounting firms great and small have to ensure they can support iXBRL filing of Corporation Tax returns on behalf of their clients, UK companies.

So what about the rest of the world?

The IFRS has focused on a global outreach for XBRL; in fact XBRL has also been adopted by Regulatory Bodies around the world, these include:

  • European Banking Authority
  • European Insurance Authority
  • China Securities Regulatory Commission (CSRC)
  • Ministry of Corporate Affairs (MCA) – India

A vast data ocean of financial information in XBRL presents us with some incredible opportunities. This is speculation on my part, but supposing if performance of financial instruments start getting reported in XBRL as well as financial statements? Just with financial statements we have huge volumes of data accumulating. Now with other financial events being reported, our huge volume starts becoming big data.

That would represent the next big challenge (and the opportunity). How many XBRL companies are really ready to deal with financial big data?

Now trying not to sound like an annoying smarty pants, know-it-all!

Apurba Technologies Lyticas Analytics Platform (LytAP), is built upon Hadoop, the bedrock of Big Data technologies.

Because we laugh in the face of danger! Bring it on Big Data Moby Dick! Captain A-hab is awaiting. Actually no, at Apurba Technologies. We don’t go around spearing whales.

More like we are the kind of folks that would rescue them in our very own Klingon Bird of Prey and release them in San Francisco Bay.

Now I know I am sounding ridiculous. However I do believe we can’t meet new challenges with relying on the solutions of yesteryear. The global use of XBRL and the inter-connectivity of information systems means that we have to take an imaginative, off the wall approach.

Thanks again for reading my ramblings…

XBRL – An Opportunity

I kind of feel that my last blog may have given the impression that I am slightly bitter and twisted about XBRL.

That it’s a chore added to the humble accountant in order for the tax man to get more money from us hard working folks.

Well it doesn’t have to be hard…

It can actually be fun! Yes really! An opportunity!

Through the use of XBRL we can validate our financial reports more effectively than before.  Also there are plenty of commercial off the shelf (COTS) products that give a familiar user experience to the accountant or other finance professional without them even knowing what’s being generated is XBRL.

Now here comes the cool part…

Are you ready?

If we start having more and more folks submitting financial data in a common reporting standard then we have the potential of accumulating a treasure trove of historical financial data that can be analyzed in a manner never done before.

But what good will that do?

We could identify financial risk like never before, help decide which companies to invest in, which sectors are doing well and which ones aren’t. We, as a group of shareholders, can look at the companies we are investing in like never before.

But only if the XBRL standard is mandatory, ordinary folk can get at the data and we have tools that can do the job.

The U.S, Securities and Exchange Commission (SEC) have paved the way by making the filing of financial statements mandatory by SEC listed companies. They have also made them public. This means an ever increasing treasure trove of financial data, ready to be mined.

And already there are companies with the tools to leverage this data. My own company Apurba’s Lyticas Product Suite allows someone to analyze and benchmark performance of SEC listed companies.  Our software can extract Key Performance Indicators from those financial statements generated in XBRL.

We are not the only company with products and services out there that can do what I have mentioned. Thank goodness.

From a heady mix of diversity, competition and partnerships the use of XBRL can greatly benefit the global financial industry. This is just the beginning!

XBRL and my accountant

It’s the first week of January. Like many people in the United Kingdom I have my tax return to submit by the end of the month. Such an odious chore! And so I have passed this on to my accountant.

These days giving her the excel spreadsheets is only part of the story. She then has to submit the data electronically and in a particular format. That format is eXtensible Business Reporting Language (XBRL).

To her it seems like an added administrative overhead. It’s the last thing she needs when she has a lot of them to do. Why couldn’t they just stick with the old way of doing things?

Yes, it’s frustrating when dealing with such a significant change. A change that affects every business in the United Kingdom. EVERY BUSINESS! From the small to the huge.

From the Mum and Dad sandwich van to the hi-tech entrepreneur. Everybody!! The accountants and specialists are busy again.

Before I go and give my two pennies worth let me back up a little and give a quick account of what I think XBRL is. If you want accuracy go read Wiki!

XBRL is a global standard for the exchange of business information between IT systems.

The concept behind XBRL was championed by Charlie Hoffman. His concept was that business information could be processed and analyzed far more readily by a software application if it were created as tagged text. But simple text files are not enough, what was required was an international standard for this tagging. An international standard that would facilitate the exchange of financial information between financial IT systems across the globe.

This international standard became realized as XBRL, formulated by extending an existing, proven technology XML (Extensible Markup Language) used extensively in the world of Software for exchange of generic data between IT systems.

So what has that got to do with UK companies? The UK tax authority have mandated that all UK companies should use it to improve the efficiency for assessment of their accounts and to validate that they are paying the correct amount of tax.

Through XBRL crunching IT systems, the UK tax authority plan to improve the efficiency of tax collecting. These systems will help them ensure that the right amount of tax is being paid. Making it more efficient and error free process for all tax payers, reduce administrative costs and above all allow them to target those companies they feel that are not paying their fair share.

Rather ambitious!

However these improvements mean more money can be spent on schools, hospitals, roads, all that other good stuff – all through getting more tax revenue and reducing administration costs.

However that still leaves my accountant having to cope with XBRL. I wish her good luck!

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