Tuesday, 31 January 2017

And so has the dream come true?

Seeing I thought I had some stuff to say and I hadn't bloggged for far too long, I thought I'd look back at my early posts. When I started back in 2011, 2,000 companies had made their first fledgling filings. Now 11,000 plus companies have made over 170,000 filings (Source: XBRL to XL database). Now that we are swimming in a sea of XBRL, are we living in a world where analysis is easy, accurate and free (well cheap at least!)?

When XBRL started, there was a tremendous euphoria that we were on the cusp of analytical nirvana. The first mandatory filing season quickly burst that bubble. XBRL it appeared (or certainly the FASB/SEC implementation) wasn't all it was cracked up to be. Those problems are well documented but all the same I thought it would be worth listing them here to see what if anything has changed. Has nirvana sailed back into sight or is it still a case of manana?

So why couldn't I use XBRL?

There wasn't enough of it. If I'd only got a few 10-K and Q filings, how could I do any meaningful historical analysis?

There was too much of it! Over 16,000 tags, but I'm only interested in two or three hundred data points at the most!

It was complicated. A lot of the interesting numbers that were being structured for the first time were held in weird structures - multi-dimensioned hypercubes. And what the hell is a tuple?

I couldn't access it. Yes I could go to the SEC website and download it for free but then what? It certainly wasn't playing nice with Excel which was somewhat of a surprise for structured data.

This structured data didn't have any structure. Why could I get a tagged figure for Revenues for Google but not for Microsoft. How does that work? And what was I meant to do with extensions which seemed to allow Filers to bypass completely any semblance of standardisation that might exist.

So apart from too little data, too much data, obscure complicated structures, poor accessibility, evanescent structures, extensions, what else was wrong?

...Oh did I mention the errors? Filings in the early years were plagued with errors. The top three spots on the podium of errors were taken in reverse order by missing required values (like err, earnings per share), negative values (due to yet another layer of complication) and right at the top, invalid axis combinations?? Exactly! (Filers were tying themselves up in tuples trying to dimension this stuff). The most oft cited error - the mis-used extension didn't even get a look in. Pushed way off the rostrum by more basic booby traps.

So given what I've just said, the next question might seem a little rhetorical - could I trust the source? There ought to have been a simple answer to this question. Something along the lines of yes. I was no longer having to deal with a middle man to get my structured data (a vendor), it was being signed off by the company and of course audited. Except it wasn't - the audited accounts were a separate filing, the html 10-K. The xml XBRL was in a seperate file which wasn't audited and for which the Directors had no liability.

I've mentioned the missing data values but I haven't mentioned the missing data. Not everything was being xbrl'd. It only applied to the financial statements and accompanying notes. Not for example the MD & A (Management Discussion and Analysis) into which companies often like to lob a lot of interesting and important values. And yes the 10-K got the treatment but not the preceding earnings announcement.

So apart from too little data, too much data, obscure complicated structures, poor accessibility, evanescent structures, extensions, errors, unaccountability, missing tranches of data, was there anything else?

Well...it was only for US companies and so in an increasingly globalised world in which the conventional orthodoxy of free trade prevailed and your competitor could be on the other side of the world then even if you managed to straighten out your data you might not have any companies to compare all this comparative data with. Is it possible that Donald Trump could be the saviour of XBRL?

Realising that Donald Trump is not a satisfactory answer to my question (or indeed any question for that matter), I will address each of these issues in turn in my next few posts to see whether this dream is still giving analysts nightmares. For now I've run out of blog.