Understanding the Importance of Standard Identifiers
Thursday, March 17, 2016 at 11:01AM
Charlie in Becoming an XBRL Master Craftsman

Computers are machines.  They are tools.  Computers have the four basic strengths:

To harness the power offered by these useful machines, four major obstacles need to be overcome:

Standard taxonomies, such as the US GAAP Financial Reporting XBRL Taxonomy, help to overcome those obstacles. Computers need to be able to grab onto a piece of information and standard taxonomies provide these "identifiers" or "handles" to grab onto or "addresses" for each specific piece of information.

In this age of "digital", business professionals need to understand how to create good taxonomies that provide these important identifiers.  All too often, business professionals tend to confuse the following three distinct, different things:

The importance of quality identifies or "handles" or ways of addressing information correctly is hard to over-state.  In an article they published, Barcodes of Finance, Allan D. Grody and Peter J. Hughes, explains the importance of these sorts of identifiers.

"Unique and standard identifiers, and standard data sets accessible by computer means through a tagging convention for both is the pre-requisite for financial stability objectives of the regulators. It is also a pre-requisite for fulfilling the promise of real-time straight-through-processing, significant infrastructure cost reduction and operational risk mitigation made to the industry by regulators."

In a webinar (about an hour in length) of the same name, Barcodes of Finance, Allan goes into details related to an initiative to create a global legal entity identifier scheme.  The presentation helps you understand the importance of these identifiers and some of the work that is going on to create these identifiers for finance.

More information:

Article originally appeared on Intelligent XBRL-based structured digital financial reporting using US GAAP and IFRS (http://xbrl.squarespace.com/).
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