Monday, December 04, 2017

Corporate Actions should be reported in XBRL

 It’s time to report Corporate Actions in a standardized electronic format such as XBRL

Corporate actions includes events like dividends, stock splits, mergers, rights, options etc. Such actions are announced by companies through news releases, prospectuses, regulatory filings and more frequently lately, social media, particularly Twitter.

They are extremely time sensitive, because all investors must have access to the information at the same time. Even seemingly innocuous differences can lead to significant unfair trading advantages. Also, the traditional means of communication means that the information must be copied from one document to another, which increase the likelihood of errors being made.

The DTCC, SWIFT and XBRL US released a business case several years ago for the use of XBRL in such filings. This could reduce the timing issue significantly as well as the risk of error.

Since then an international Working Group of XBRL International has been working on this at the international level.

There has been some interest in Canada in this approach and XBRL Canada has been pursuing it. For more information see and .

Tuesday, November 28, 2017

How to Implement Open Data in the Canadian Government

By Gerald Trites, FCA, FCPA

We live in a world of data driven decisions. Governments, companies, investors and everyday citizens are striving to find ways to make use of the data they have, and find the data they need. The Open Government initiative of the Government of Canada is an important part of these efforts. Availability of quality, easily usable data is crucial.

As the preamble to the Canadian Open Government website states, “Governments around the world are taking advantage of digital technologies to advance transparency and make information more readily available to the public.” This is true, as evidenced by activities in the UK, US, EU and others.

Now, the government is in the process of developing a fourth plan for Open Government, which includes open data. Consultations are going on throughout the winter of 2017/18. This is an opportunity for Canadians to get involved in an important initiative.

Several basic objectives underpin the initiative:

-       “Canadians can easily access government data and information in open, standardized formats.”[1]
-       “Open by default is about providing easy and consistent access to government data and information in open, standardized, digital formats.”
-       “understanding how well the Government is doing as a whole, or in key areas of interest, is challenging because data is presented across multiple reports and information sources.”

The sources of information include Statistics Canada, other Government departments such as Finance, various business registries and companies themselves.

With regard to Statistics Canada, the commitments include: “Statistics Canada will increase access to high-quality statistical information in open formats, including releasing all 2016 Census data a full 10 months sooner than the 2011 Census. Steps will also be taken to ensure the data are well understood by Canadians.” The words “in open formats” are important.

Also, important is this additional stated objective: “Provide access to high-quality, open statistical data and information from Statistics Canada, free of charge, in machine-readable formats.” Again, the words “in machine-readable formats” is noteworthy. 

With regard to Finance, the plan states “Starting with Budget 2017, make all data from Budget charts and tables available in near real time to facilitate analysis by citizens and Parliamentarians.” Provision of data in near real time that is useful for analysis is a challenge, especially considering the data comes from diverse technological sources. Therefore the data format chosen needs to be platform independent.

There are business registries at all levels of government. Another commitment stated in the website is “The Government of Canada will provide searchable information on Canadian businesses that is held in business registries at the federal, provincial, and territorial level.”

It is worth noting that the largest registry in the UK, where some 3.5 million companies file their information, has been requiring inline XBRL since 2010.  The EU is bringing in sweeping requirements for 2020.

Inline XBRL is an international standard for presenting data that meets all the requirements for presentation of government data from Statistics Canada, Finance and other departments. It is now required by the Securities and Exchange Commission for larger companies so all the large companies in Canada will be required to file in XBRL on December 15, 2017. There are other forms of structured standardized data, but only XBRL has met the test of time for financial data and has achieved such a high level of acceptance around the world.

The government has said that they will “Develop a proof of concept and prototype of a digital solution for reducing burden in the areas of corporate search, registration, and reporting for Canadian businesses that is expandable to all registries across Canada in order to drive consistency in corporate data provided to the public by both federal and provincial governments.” XBRL is there for the taking. And its standardized, machine readable and platform independent. Seems like a clear case.

[1] All quotes in this article are from the Third Biennial Plan to the Open Government Partnership

Friday, November 24, 2017

The People Side of Digital Transformation

Perhaps it's because digital transformation has become so ubiquitous or because the change is happening so fast that we are downplaying the people side of the change. Too often, digital transformation is being viewed as a technological issue, while the people aspects of it are much more important.

The effects of technological change on people is not a new issue. Businesses have been adopting new digital technologies since the creation of computers in the 1940s. With the advent of micro-computers, the pace of change grew rapidly. More recently, with the growth of mobile technologies the change took on a breakneck pace. Now, with the development of new Artificial Intelligence and advanced data analytical applications, digital transformation is poised to reach for new previously unattainable heights.

What this means is that the need for traditional jobs will continue to drop and for new skills to rise with increased vigour.

The human impact of this change is well documented and has given rise to a considerable backlash among the populace most affected - those who have lost their jobs, can't find new work and have effectively dropped out of the workforce. This has fed the rise of political populism, growing gaps between the rich and the poor, and a growing questioning of the viability of capitalism.

History tells us that, left unaddressed, the rapidity of change will lead to political unrest, and perhaps civil war. The exponential growth in digital transformation will accelerate these trends. The change can happen quickly and with unexpected force.

The responsibility for dealing with the people effects of digital transformation change rests with government, in terms of broad policy, but mostly with individual companies in terms of the immediate people effects.

Again, this is not a new issue. Implementation of technology has always had this effect. The rash of enterprise systems implementation in the eighties and nineties pointed clearly to the need for companies to carefully deal with the consequent changes in business processes, which means job losses, retraining and restructuring.

It's not good enough for companies to cheerfully go ahead and implement massive job cuts and sit back and watch the earnings per share rise. They need to implement serious programs to help those directly affected. Programs on a much higher scale than we have previously seen. Programs to salvage jobs where possible, programs that involve a commitment that people with their jobs being phased out will be helped with retraining and placement programs. A commitment to defined and effective outcomes is critical.

Such change requires a major change in attitude. Profits are important, but not as important as looking after the people who are hurt in the process. In the long run, a singular focus on profits will inevitably lead to serious economic and political unrest, which, incidentally, can be devastating for profits.

Wednesday, October 18, 2017

Data Standards are Needed

There's an old saying that figures don't lie, but liars figure. Whether one agrees specifically with this saying, the fact is it draws out an important issue about numbers. They can bury many subjective elements under the appearance of objectivity. It's an old problem with statistics too. The same statistics can be used, for example, for different purposes in the political arena. An unemployment rate of 8% can be considered bad from the view point of the number of people out of a job, but good if it was 10% for all of the preceding year. Context is everything.

Cathy O'Neil made a similar point in her book "Weapons of Math Destruction". She pointed out that not only is data subject to mis-representation of the facts, but the algorithms used to analyze them can similarly embody biases in point of view that the analyst may not even be aware of. There are lots of biases available in our world.

She goes on to say that we should address this issue with development of proper standards in presenting data and the related algorithms. This may need to be approached on an industry basis. We have long had standards in presenting traditional financial information (such as balance sheets and income statements) but not so much when we talk about financial information presented in non-traditional format. That's why we need something like eXtensible Business Reporting Language.

This issue with data standards must be addressed when we talk about using data, perhaps particularly big data, for decision-making purposes. The use of data without standards can be very misleading.

Tuesday, September 05, 2017

How Companies use Social Media for Corporate Reporting

The use of websites for corporate business and financial reporting by large public companies is well established. What is less established but a significant part of such reporting is the use of social media.

A recent (but still unfinished) study of 100 public companies shows some interesting facts about the use of social media. For example, it shows that most of them reference some social media from the Investor Relations section of their site. They have links, for example, to Facebook, Twitter and others. These references act as a clue that the social media being referenced are being used for more than general corporate purposes, such a marketing and significant non-financial events.

Following through those links, shows that many of them do use those social media referenced for the disclosure of information that would be of interest to investors.

The study shows that the use of Facebook, Twitter and LinkedIn are evenly split among the companies and are the most used social media. The types of information used for these media are basically the same, and include items like earnings releases, dividend declarations, major acquisitions, and other major financial events.

The inclusion of earnings releases is particularly important, as such releases are known to be a major determinant of stock market price changes and by inference a signifiant element in investor decision-making.

Youtube follows next in frequency of use, and is a vehicle for such events as CEO and CFO presentations, annual meeting presentations and other noteworthy events.

Instagram and Google+ follow, each with about a third of the useage of the leaders, but may be growing, particularly Instagram.

The use of social media for financial and business reporting for investors is growing and is now a significant part of corporate reporting. No doubt its use will evolve, just as the use of websites has done.

Wednesday, August 16, 2017

Standard Business Reporting Makes Sense

SBR (Standard Business Reporting) is a strategy concept that, at its root, is very simple. It involves eliminating duplication in reporting. Governments have been finding it very useful for reducing costs, both for themselves and for the organizations that report to them.

Essentially, SBR involves identifying all duplication in reporting requirements, standardizing those requirements, where possible, and then eliminating the duplication. For example, a national government normally has agencies to collect income tax information, statistical information and, in many cases, regulatory information.

Each of these agencies will usually collect information like sales, payroll expense, net income, etc. That means the filers must submit the same information to each of the agencies. Each filing costs them money. If the duplication were eliminated, their filing costs could be reduced substantially. If you think about it, there are many different kinds of information collected, and duplication in many of them. So the savings can be very large.

Of course, the items being collected by different agencies might be defined differently, so the duplication may not be exact in some cases. For example, net income for tax purposes maybe different than net income for statistical purposes. This is where standardization comes in. The definitions can be standardized so that elimination of duplication is possible. Sometimes this is straightforward; other times, it cannot be done, whether because of legislative constraints, or administrative constraints in one or more of the agencies. But often it can be accomplished, perhaps by identifying common elements to those items, as long as the standardization is diligently pursued.

Once standardization is accomplished to a satisfactory degree, the items of information can be collected by a data collection agency, working in cooperation with the agencies involved, so that the data only needs to be collected once, thus achieving the objective of making life simpler and less expensive for the filers and cutting red tape.

Numerous governments around the world have been implementing SBR. The most notable are Australia and The Netherlands, both of whom have achieved considerable savings. New Zealand has implemented SBR and most recently, the State of Indiana reported beginning an SBR effort. Other governments have conducted exploratory or preliminary work, including Denmark, Sweden, Finland, Turkey and Poland, among others.

The starting point for implementing SBR is to identify the information items being collected by a government and then exploring the ability to standardize and eliminate the duplication. This is the core of the effort and is a big job. Then a technology needs to be selected that is good for transmitting information among different platforms and computer systems. XBRL (extensible business reporting language) is most often used for this purpose, but there are alternatives, including XML, JSON, even Excel. This is a significant decision that needs to take into account the advantages and disadvantages of each technology. There are advantages and disadvantages of each.

SBR is an ongoing significant activity, but the benefits are likely to exceed the costs. It makes a lot of sense. More information is available from the SBR websites of Australia and The Netherlands.