Paul Wilkinson recently blogged about day 3 of the recent XBRL Summit at Santa Clara, CA and had some great points to make about Steve Wright’s presentation on Impact Investing. This in turn reminded me that taxonomy-based reporting – the kind of reporting that Crossfire Reporting Platform natively supports –  is not just about financial numbers but also about standardizing any kind of useful business performance metrics, such as those proposed by IRIS – the Impact Reporting and Investment Standards body. IRIS is an effort to create a common framework for defining, tracking and reporting the performance of impact capital.

This effort is synergistic in many ways with Kaplan and Norton’s Balanced Scorecard idea, which reminded organizations that performance measurement is not just about measuring financial performance. IRIS adds new operational indicators that focus on metrics relating to Governance, Community, Jobs and Environment. The good thing about basing all this on a taxonomy is that it will make Impact Analysis – comparing and contrasting the social impact of global organizations – that much easier to do.

In September 2008, Rivet and Thomson Reuters began working on an XBRL-related project for the Reuters Fundamentals product. The project released earlier this month and the first stage of delivery, handling Japanese XBRL is now in production.

Reuters Fundamentals is created and maintained by an experienced data collection team that includes data on:

• Over 47,500 active companies, representing over 99% of world market capitalization
• Coverage of all constituents of all major indices
• Over 15,800 inactive companies
• 160+ exchanges in 107 countries
• 25 years of history for US companies, and 12 years for non-US companies

Some of the markets covered by Thomson Reuters have already adopted XBRL as the standard for financial reporting, and other markets are soon to follow. Thomson Reuters has an opportunity to streamline the data collection process with XBRL being center stage.

Rivet helps to build a bridge between traditional business intelligence and XBRL

During the process of creating a solution to assist Thomson Reuters, we have learned a great deal about how different each market could be in regards to the financial information. XBRL as a standard has provided a framework to enable financial transparency and financial data integrity, but to fully realize the benefits that XBRL can bring to the investors, software vendors and solution providers will continue to fine-tune the traditional processes already in place and invent new ways to best utilize XBRL.

With XBRL, financial data can be verified and validated before loading into any downstream systems for processing; the ‘quality’ of the information can certainly be highly enhanced. Also, the level of human resources previously required to get the data into loadable format is no longer necessary. I am not saying that all human interaction is eliminated, but with the incorporation of XBRL and automated, systematic processing, the human resources can be used to turn the data into valuable information. Delivering the financial information on a timely basis with lower costs and with greater accuracy is now an achievable goal.

Enhancing the Financial Information Ecosystem is “technically” simple

Thomson Reuters plays a very important role in the financial information ecosystem. Working with Rivet to add XBRL support to the complex information processing was not a huge “technical” challenge. Rivet brought to the table over 100,000 hours of collective XBRL experience and wealth of products/tools for supporting XBRL parsing, rendering. Under Thomson Reuters superb guidance, the project has moved from a conceptual model to a web-delivered solution in a short period of time. Since the first few markets the application supports are non-US, the project also gave Rivet a wider exposure to how XBRL was implemented in various global markets.

It was a valuable and enjoyable project for Rivet. Collaboration was formed and strengthened with each party walking away with a better understanding of how XBRL can be best used to benefit the investors.

In July 2008, the SEC put out a “request for proposal” (RFP) to solicit software vendor’s help to create a “rendering engine” that can present the XBRL-based financial statements in an easy to read, attractive format. As stated in the RFP, “The commission proposal views interactive data as an important way to increase access to information in the financial marketplace. The ability to accurately generate human-readable XBRL documents from raw XBRL content in EDGAR submission is central to this work.”

Forgive me for bragging a little here, during the last 18 months, Rivet has successfully developed, deployed and supported the two SEC Viewer Prototype systems that were visited by over 150,000 visitors from all over the world! For the past four years, the Rivet team helped many companies prepare their VFP filings for the SEC. During these engagements, and through supporting the two SEC XBRL prototype viewers, we have learned a great deal about how users prefer to view financial and mutual fund information. Clearly, to visualize the data in a familiar, friendly format is a “must have” requirement for SEC filers and investors.

We believe that we are best qualified to create the important “rendering engine” for the SEC, and fortunately, the SEC shared the same view. The project started in October 2008 with an extremely aggressive schedule to meet. We understood that the success of this project would be an important factor in determining if the SEC can pass the historic mandate requiring the filing of financial data in XBRL interactive format. Rivet was ready for the challenges.

It’s all about looks, isn’t it?

The most challenging part of this project was the testing of 400+ SEC filings to date; the astonishing “creativity” of every filer uncovered lots of unexpected variations which resulted in issues that had to be addressed. Many adjustments have been made to the code to deal with the variability and complexity of the filings. This doesn’t reflect on the quality of the software, but rather on the fact that no amount of reasonable design can automatically anticipate the seemingly infinite number of ways filers can complicate an instance document. Data accuracy is without a doubt the most critical factor for a preparer, but in the end, one of the most important questions everyone asked is how does the financial statement look?

As a software vendor that specialized in all aspects of XBRL, we had the advantage of looking at the rendering issues from both sides.

On one hand, we understand the SEC’s desire to make the “rendered” financial statements look and feel like the published financials, and have worked closely with the SEC in developing the rendering rules and creating instructions to help preparers achieve the desired rendering results.

On the other hand, we understand the importance of making our “tagging” products (Dragon Tag and CrossTag) seamlessly incorporate the “rules”. If you were using one of our tagging products, it’s easy to make changes to support the intricate rules proposed by the SEC — creating rich, HTML-formatted footnotes, create complicated equity statements easily, and identify where to add “underlines”, or reverse signs for display in the reports, just to name a few. Most importantly, when a preparer finished the markups in our tagging product, he/she can easily “preview” the rendered report exactly the same as what would be rendered on the SEC website.

A happy ending – for the SEC and our customers

The SEC has passed the historic mandate requiring the filing of financial data in XBRL interactive format with large companies being required to file as early as June 15, 2009! The successful delivery of the rendering engine is surely one of the reasons the SEC has made the courageous decision. We are proud that Rivet was chosen to work on the project, and are excited that what we learned from working closely with the SEC can benefit our current and future customers.