The ICAEW panel session on XBRL at the American Accounting Association conference took place yesterday, with a range of views on what we have learned about XBRL, and the adoption of technology more generally, over the last 10 or so years. Here are 3 key lessons I took from the session, plus a prediction for the future.
Lesson #1 - the pace of adoption
Panellists agreed that XBRL has undoubtedly been a "slow burn" technology and that there had been some degree of hype and over-expectation around its adoption. However, rather than overestimating the benefits, it was argued that the real lesson concerned the pace of change. Panellists were upbeat about the progress that has been made in recent years, and remained confident that the value of the technology would be shown in the coming years. However, the complexity of implementing XBRL was totally underestimated, including the time and resources that it would take. As a result, the expectation that XBRL would quickly change the world was unrealistic.
Lesson #2 - transparency is not enough
XBRL is all about making more data more available and useable and thereby creating greater transparency. However, transparency in itself is not enough to justify the costs of XBRL. The ultimate benefits come from turning data into "meaningful and actionable insights". To do this, we need more applications which do clever things with the data, make connections and comparisons and enable information users to make better decisions. We are still a long way from seeing this. However, without the data in the first place, it is difficult to envisage and create those clever applications. Now that we have increasing amounts of XBRL-tagged data, we are in an exciting phase of seeing what people find to do with it. That is an organic and evolutionary practice and not something that could be predicted in advance.
Lesson #3 - there are many vested interests
One of the really interesting things about XBRL is the number of different interests involved in the implementation and the driving of benefits. Regulators, information users, businesses, information intermediaries - all of these have very different interests and will benefit, or indeed suffer, as a result of more freely available information. As an example, in the panel, we looked at the possible future application of XBRL to corporate voting in the US and the potential "democratisation" of proxy voting, where retail investors can see how institutional investors have voted. However, while the release of this information might be great for individuals looking to judge institutional investors, such a move may not be so beneficial for the institutions themselves. As a result, we see resistance from many stakeholders where the use of XBRL would result in a loss of control or greater scrutiny of activities. This makes adoption much more challenging to achieve in practice and has been another reason that widespread adoption has been slow.
Finally, we had a prediction. One of the key observations about XBRL was that it essentially replicates in the electronic world what is done in the physical world. While there are benefits to doing this, they are fairly limited. This idea of replication may be the starting point for many technologies.
However, it usually is just a precursor to far more radical change, where new technology fundamentally changes the way that we do things as we start to realise the possibilities. As a result, panellists argued that we may just be seeing the start of a much more profound shift which will ultimately result in far more publically available information about businesses. Implementing XBRL is not the end, but merely a starting point.