Tony Zuck offers an interesting post that compares XBRL to cookie labels and also makes the case for the vision and performance of a company being about more than just the numbers. However there are some other perspectives on this take that call Tony’s logic into question. One being that he could have used our CrossView as the reference point for his post but never mind…I have a minor nitpick that relates to the kind of context that XBRL tagging brings to information transparency. The point about a cookie label is not just that the information is presented at all and in a reasonably easy to digest style, but also that we pretty much all agree on what ‘carbohydrate’ or ‘cholesterol’ mean. However when we compare ‘revenue’ from one company to another, we don’t – unless these revenue numbers are both based on an agreed, taxonomized definition. So it’s important to remember this basic level of ‘comparable context’ that XBRL brings to reporting the numbers.
Clearly, XBRL does not generate the kind of narrative storytelling context that Tony refers to, which provides essential ‘rich context’ to the numbers. But the trouble with corporate/governmental storytelling is that much of it is not actually based on the ‘community of reality’ that is where XBRL-based numbers live. Stories can be spun. Taxonomies, generally speaking, can’t.
If you are not sure what ‘community of reality’ refers to then you should check out Christian Salmon’s book Storytelling: Bewitching the Modern Mind. This quote from the cover blurb gives a clue about the content:
Politics, as currently practiced, is no longer the art of the possible, but the art of the fictive. Its aim is not to change the world as it exists, but to affect the way it is perceived.
Switch ‘politics’ for ‘financial reporting’ and you’ll understand the connection I’m making. Once you’ve read the book, you might be minded to think that we need a little less corporate/political storytelling and a little more taxonomy based reporting. The fact is that the hard, comparable numbers and the soft story are both needed to get a balanced perspective on any organization’s performance. The problem in recent years is that too many investors have been entranced by the stories and have been unable to be engaged with the numbers in the truly comparative, peer-group kinda way that mechanisms like XBRL facilitate.
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