Corporate reporting: New technology brings optimism – but is not a panacea

By Mark Vaessen, Global IFRS Leader at KPMG

Many of the business leaders we spoke to for our publication on corporate reporting were optimistic about the impact of new technology. They highlighted two developments that are likely to help investors find their way round corporate reports.

 

The first is Extensible Business Reporting Language (XBRL), a standards-based method of exchanging information between business systems designed to make financial disclosure more accessible to users. The SEC began asking some public companies to submit their financial statements in the XBRL interactive data format for fiscal periods beginning on or after mid-2009. Other regulators are following suit.


The second development is software to analyze Big Data, a collection of information so great and complex that it becomes too difficult to process using traditional data applications. Big-data analytics has many applications, including the collection and analysis of financial data by companies and investors. Users are finding it harder to keep up with the growth in the volume of business data worldwide, which is estimated to double every 1.2 years.


The two are linked: XBRL makes it easier to standardize information and thus more accessible to analysis by software, thus enabling people to track and investigate bigger and bigger sets of financial data. Most proponents of these technologies are realistic about the potential. They can appreciate the power of them but agree they are not a panacea.

 

There is no substitute for human judgment: it will require highly trained financial analysts and public accountants to understand and explain the significance of the corporate data, not to mention corporate executives with a keen understanding of risk and opportunity. If anything, accounting standards should be raised even higher, perhaps to take account of the faster speeds at which data can be processed.

 

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