Digital Financial Reporting

Harvard Business School held a workshop, A Workshop on Integrated Reporting: Frameworks and Action Plan.  As part of that workshop an eBook, The Landscape of Integrated Reporting, Reflections and Next Steps, was made available.

The executive summary of the workshop provides the following conference overview:

Business has lost society’s trust and must act to restore it. One way to do so is through ideas and processes that demonstrate that business cares about more than just profit. Integrated reporting is a way to show society that business cares, is holding itself accountable, and is measuring itself on matters that society cares about.

While perhaps a bit ahead of the curve, the timing is right to be holding this conversation and the topic is of great importance. Harvard Business School is committed to this subject, which is reflected in HBS’s own reporting efforts and by supporting this workshop.

The book is a collection of papers submitted to the conference and provides a summary of the current thinking on integrated reporting. The book is packed with information, about 334.

One of the interesting things in the ebook is this graphic (from page 324) which provides an example road map to the future. The graphic shows an evolution of the framework. The reason the graphic is interesting to me as it explains the process we are going through with SEC XBRL filings.

I like the way it shows an evolution from nothing, to a simple framework, to a structured framework, to a more rigorous framework, and then throwing in assurance.

In my view, that is similar to what is going on with SEC XBRL filings right now.  We went from no XBRL filings, to a simple US GAAP taxonomy and a simple filing framework and XBRL instances.  We learned from that. I think we are still in that simple framework level currently.

Over the coming years we will evolve to a more structured and rigorous US GAAP Taxonomy and SEC XBRL filings. A lot has been learned in the past couple of years; this will contribute to a more structured an rigorous, and therefore more useful, set of SEC XBRL filings.

This is a great Gartner research report: The 21st Century Disclosure Initiative will Reprioritize Your Business Intelligence and Performance Management Strategies. The punch line is:

Publicly traded companies should use these regulatory reforms to gain a competitive advantage, rather than treat them as a cost of doing business.

The research report discusses how the "last mile of finance" will change, the benefits of the change, and approaches to implementing these changes within your organization.

In my view these changes will not be limited to public companies. Private companies reporting to their financial institutions in support of commercial loans is the obvious next step.

Further, the report points out the benefits structured data provides internal information systems.

Many people make the mistake of asking, "What it costs to add XBRL to a business report." The equation has two parts: cost and benefit.  Another logical question one might ask is, "What is the cost of not having XBRL tagged business information." As more and more information becomes available in an XBRL format, comparing the true costs and benefits will become easier.

As these net benefits are seen, more and more organizations will realize that the "outsource" and "bolt-on" options are less favorable than an embedded or integrated approach to implementing XBRL.  Perhaps not for everyone, but for many.