While I am no longer a regular contributor to IT Counts the iXBRL debate is something in which I maintain an interest. Here's a few penn'rth.
In my view Gary Simon's piece
doesn't tell me enough about why I should care. Apart for the 'Oh My Goodness (OMG)' factor attached to CT600 filing it is far from clear why practitioners should be taking notice. I'd go so far to say that the preponderance of articles I see on the topic fall short by focusing on regulatory compliance. In comments, Gary provides hints by talking about BigCo adoption
but still falls short of explaining why this is happening.
In a recent conversation with Richard Anning
, he said the take up of seminars on the topic in the regions has been very good. I'm not surprised. No-one wants to get caught short wondering what the heck to do come the day when you've to file your clients' returns.
The problem with compliance is that practitioners are understandably left with that 'here we go again' feeling. Government foists legislation requiring more work that we'll likely be doing for free as clients don't care about these things.
That is looking in the wrong direction. I'll get to why in a moment.
Paul Booth reinforces my view
by opining in comments that:
The function of such systems is to record individual transactions
throughout the year, not to produce year-end accounts - albeit that an
output of ledger balances will provide a starting point in the accounts
production process. I'm not aware of any mainstream accounting package
whose supplier is even attempting to make it iXBRL-ready. Businesses
will need to ensure that they have a means of getting their year-end
financial statements into iXBRL format. At the risk of over-simplifying,
that will in many cases mean the business's external accountant using
an upgraded accounts production package; in many other cases it could
mean that the business produces its year-end accounts exactly as it does
Paul is understandably taking the position that iXBRL is something that has one purpose - regulatory compliance at a single point in time. That misunderstands its REAL purpose and a key reason why professionals should be taking more notice AND pressuring their software suppliers to get their house in order.
Fundamental to iXBRL is the idea of consistency. In other words I should be able to take any number of accounts sets, line them up, look at the tag values and know that they are providing me with consistent data. Think about it for one minute. What does that mean?
- The old joke about six accountants analysing six sets of accounts and coming to six different conclusions is at least partially solved.
- If I am HMRC then I now have a mechanism by which I can aggregate data as part of a broader exercise in understanding patterns of activity.
- If I can aggregate then I can analyse. If I can analyse then I am in a much more powerful position to challenge key figures on the P&L or balance sheet. I can for example look for regional variances in performance around key metrics as disclosed in the CT600 report. As a side note, this ability to aggregate datasets has been one of my key reasons for going with a SaaS provider - but that's another story.
- If HMRC can do it then so can I. This means I now have a means to start thinking about benchmarking my client portfolio both internally and locally as well as more broadly. That's a new service I can bring to clients that didn't exist before. Or if it did then it relied on intuitive thinking, deep experience and a whole lot of other factors you cannot replicate except in the mind of individuals.
- Analysis is never a one time event but something that can be conducted over as many time periods as required. Quarterly or monthly? What about trend analysis or using these kinds of data as an entreé to risk management?
- What about the audit quality implications? Will this improve the ability of auditors to better understand the business they are reviewing? I think so.
OK - so that's a bit over simplified and sweeping but iXBRL opens the door to industrializing the analysis problem and offering a wealth of new opportunity. My advice in this area:
- Recognize where the value of iXBRL could lay. If you see it as I do then you should be actively embracing the concepts behind it and pushing hard with suppliers to deliver the tools you'll need.
- Be prepared to pay for those tools. They will add value to what you do.
- See iXBRL as offering the potential for business transformation in your practices and business.
- Understand that non-accountant advisory businesses will pick up on this with the potential of taking valuable work away. I already see that happening in the US where business and financial analysts are looking at XBRL as a way of significantly enhancing their buy/sell models and differentiating client value. That's a threat you cannot ignore.
As for the compliance issue? Sure - it has to be done. But it is a sideshow to the real story.
Cross posted at AccMan