Great article in Accountancy Age about the January 1, 2020 EU law that requires the more than 6,000 EU-listed companies to report their financial statements using the European Single Electronic Format (ESEF) on the new EU Financial Transparency Gateway. This global digital reporting format requires the use of the XBRL global data format that makes financial reports machine-readable for better data analytics and fraud protection on the new cloud-based data platform across the EU. The IMA is a founding member of the XBRL Consortium. XBRL is required by more than 100 government regulators in more than 70 countries to promote better transparency and accountability using a machine-readable data format for external reporting to support better data analytics that can be used by investors and other stakeholders using evidenced-based data for better investment or oversight decisions. More than 2/3 of the world's capital markets are using XBRL for better financial transparency.
With ESEF, the European Commission aims to facilitate access, analysis and comparability of financial statements and make reporting easier. This eventually serves to support investors in their investment decisions. Cloud-based, blockchain technology using distributed ledgers, smart contracts and crypto-currencies are planned on being used to support the new EU-wide electronic reporting platform to help investors, promote cybersecurity and privacy requirements.
The public company financial statement data – like the required US Securities and Exchange Commission requirement for US public companies financial statement reporting – will be housed on a new cloud-based EU Financial Transparency Gateway that will allow investors around the world to access the data and perform analytics using tool vendors around the world – similar to the tool vendors accessing the data required by the US SEC on the US EDGAR SYSTEM using XBRL.
There are clear benefits in using a machine-readable data format for financial - and soon to be non-financial data (such as human capital, sustainability, environmental, intellectual capital, and social governance) so that investors can direct funds to public companies that link both financial and environmental, social and governance data sets together to show better performance to meet public interest goals.
Would it be possible to move this effort to promote transparency and accountability using a machine-readable data format like XBRL to other asset classes under regulatory supervision such as hedge funds, mortgage-backed securities and municipal bonds where better transparency and accountability is required? Could we create a new “Citizen Regulator” that can help keep watch of pensions and other state assets to protect the public interest and promote better innovation and diversity and inclusion?
Could ESEF and the US EDGAR SYSTEM be linked together through technology to support comparability? Could one global accounting standard be created and used on a global basis so that public companies only have to submit one financial/ non-financial report that can be used by investors around the world to support better globalization and utilization of resources in a thriving transparent and accountable global capital markets? Could data assurance of the XBRL machine-readable data be applied to offer additional assurances as the data elements are used in other reports by other users? Can this transparency initiative help prevent economic systemic risk and minimize impact on marginalized population segments to economic crisis and political instability through better transparency and accountability using machine-readable data formats like XBRL linked to LEI?
Stay tuned as the capital markets continues to move forward with creating an infrastructure that better supports the use of data analytics for evidenced-based data decision making both in the capital markets and government reporting.