An interesting post at the Accounting Elf discusses how financial statements should be more like blogs. With the rise of social media and the generally higher expectations of information consumers, this is an important topic. Financial reports are after all just a channel of communication between an organization and its stakeholders and there’s certainly a lot that could be done in this area.
Most annual reports are now provided online and often in an easy to navigate form via a table of contents and a searchbox capability – like Microsoft’s 2009 Annual Report for example. This is what I would call level 1 of report transparency: I can view a report online, navigate the content and find stuff – if I know what I am looking for.
Level 2 of report transparency is concerned with picking out themes or searching for patterns. An important basis for this is that specific terms and numbers are cross-referenced within the report content (as Accounting Elf mentions – for example cross-referencing a footnote to the financial number it relates to). This cross-referencing is something that XBRL tagging can help with in order to facilitate various kinds of content visualization.
One of the simplest forms of content visualization is the tag or wordcloud. Below is an example of a wordcloud extracted from Microsoft’s 2009 Annual Report:
Microsoft 2009 Annual Report Wordcloud
When the words are linked back to the report content this provides another navigation mode and rudimentary ‘theme surfacer’ but actually this wordcloud doesn’t tell us much that is of interest. Text mining products like Clarabridge do a much better job of showing the forest and the trees from a number of perspectives but currently these products are not optimized for searching financial documents including both textual content and XBRL tagged numbers. The whole semantic web area also offers plenty of other avenues for facilitating text mining and content visualization.
Level 3 of report transparency is the stakeholder interaction layer that includes the ‘crowdsourcing’ capabilities that are such a feature of today’s social media tools – such as commenting, rating, relating, sharing and tagging. How much value this final layer can add to enhancing the communicative value of a financial report is debatable.
But certainly if at least bona-fide shareholders could comment on and rate aspects of a report and tag content items from their own specific perspective then the annual report content will be significantly enriched. This enriched content could become a genuine foundation for a two-way communication stream rather than today’s typical annual report, which smacks of the old command-and-control mentality.
