Joint Solution for Corporate Actions In XBRL and ISO?
June 23, 2008
XBRL International's U.S. branch is talking with the Depository Trust & Clearing Corp. (DTCC) about establishing semantic interoperability between the extensible business reporting language and International Organization for Standardization (ISO) message types for corporate actions.
Though it is still in the early stages, many see promise in the initiative. But yet to be determined is whether the project can extend beyond the country's borders--and how far it will reach in the U.S without the Securities and Exchange Commission's imprimatur.
"We are investigating the creation of XML-based identifiers, or tags, for elements related to corporate actions in public company prospectuses," said Campbell Pryde, chief standards officer for XBRL US, at a recent corporate actions conference in New York. "The information could then be mapped more easily into ISO-compliant messages."
The goal would be to reduce the potential difficulties--and larger risks--that face market infrastructures and financial intermediaries who have to reinterpret information on a corporate event because of inconsistent descriptions from issuers. Intermediaries are financially liable if they give clients bad information on corporate action notifications or provide it too late for a decision to be reached.
"Just as significant is that firms may lose out on trading opportunities or make the wrong choices based on incorrect corporate actions notification," said Marc Bradanese, VP of Boston-based corporate actions solutions provider Fidelity ActionsXchange. "Time and accuracy are important risk factors."
Last month, the SEC proposed that all public companies be required to submit their financial statements in XBRL. If adopted, the new rules would replace what is currently a voluntary XBRL filing program.
Under the rules, about 500 of the largest companies using the U.S. generally accepted accounting principles would need to file XBRL-formatted financial statements for fiscal periods ending later than Dec. 15. Other companies using accelerated filing would migrate the next year, followed by a final group including foreign companies who adhere to the International Financial Reporting Standards.
While current filings made in HTML or ASCII formats include tagged data, investors who want to analyze information from a third party often have to extract it, or reenter it manually into spreadsheets.
"In an XBRL-based filing, the data is tagged in such a way that databases, financial reporting systems and spreadsheets can identify the type of information represented by each data entry and the value reported," said Neil Diamond, partner in the New York office of law firm White & Case. "The data can then be identified and extracted by investors for detailed company analysis. The tags are further defined in taxonomies, which are data dictionaries that describe individual items of information and mathematical and definitional relationships among the items."
Low-Effort Adoption
Since XML-based formats are widely used in data management, many companies are already using proprietary standards for interactive data and the adoption of XBRL will not tax their information technology departments. There are also numerous open-source software options and vendor offerings.
"Because some of the taxonomies used for financial reporting could also be used for some corporate action events--namely dividend and income payments--it would not be challenging to create new tags for corporate actions," said Pryde of XBRL US.
Max Mansur, senior product manager at Swift, which is the registration authority for the ISO 15022 and 20022 formats, said that "creating ISO messages would have been technologically difficult for issuers," adding that "this solution is far less invasive since most are already enabled with XBRL technology for financial reporting."
