From Counting Wealth to Creating Wealth — XBRL Conference Day 2 Covers Evolution of Business Reporting Standards

SANTA CLARA, Calif. — Day 2 of the XBRL Pacific Rim Technology Workshop and Summit included calls for business and government to use open business standards to disclose information about spending, pollution, and important business changes.

Representatives from DTCC and SWIFT, the consortia responsible for technology to support securities and cash transactions around the world, spent most of Wednesday morning presenting detailed explanations of the benefits of using technology standards to improve the reporting of “corporate actions.”

Involvement by DTCC, which solved Wall Street’s “paperwork crisis” four decades ago, ain’t beanbag. They’re interested because improving the automation of capital market transactions, ranging from special dividends to spinoffs to a vast universe of actions that capitalists use to support commerce, will have measurable benefits.

XBRL US posted a preview of its corporate action taxonomy development work and an XBRL tool to create ISO-compliant reports.

Contemplate it: in theory if not always fact, the purpose of every corporate action is to empower people to put capital to its highest and best use. Making the system work faster, better, and cheaper, as DTCC, SWIFT, and XBRL US suggested Wednesday, should ultimately mean more effective uses for scarce capital.

That’s the same thinking behind using technology to disclose government spending and environmental pollution. Government taxes, government debt, and business pollution are all what economists call “externalities” because the real costs of production are aren’t borne by the people making the production decisions.

Pollution, taxes, and government debt are all costs of doing business shared over a large population instead of paid for by those who make the decisions that create those costs. Data standards that empower people to more accurately know the costs of externalities enhance the chances of better governance to support more wealth creation and less wealth destruction — not a bad goal.

A second topic related to improving the efficiency of global capital markets is convergence of global financial reporting standards. While U.S. GAAP and International Financial Reporting Standards now share some common data tags, the information tagged is prepared according to different accounting policy standards. As more financial information is tagged using common data standards, user demand to align preparation standards is likely to grow.

Data tag development is likely to continue to accelerate as organizations around the world improve their abilities to create standards. XBRL US explained the lessons they learned in developing the U.S. GAAP taxonomy and previewed a beta tool on its Web site reminescent of Wikipedia’s “discussion” page, making it easy for anyone with Web access to track taxonomy development managed by XBRL US.

Most of the software XBRL US uses for taxonomy creation is available off-the-shelf.

Fujitsu and XBRL US also discussed the sequence of work that resulted in many of the same people working on accounting taxonomies for Japan and the U.S. in 2008 and tactics to help future projects leverage development experience, including support of the XBRL International Best Practices Board.