XBRL: The View from Europe

Anne Leslie-Bini is a Paris-based freelance consultant who began her career in capital markets, working for major international banks such as BNP-Paribas and ABN Amro Group. Since 2009, Anne has been acting as an international business facilitator, accompanying European companies who wish to join the XBRL community and take advantage of the many opportunities offered by the technology. She can be contacted by email.

In one of his recent blog posts, Dan Roberts referred to Europe as “the quiet revolutionaries.” It is certainly true that there is a feeling in financial information and business reporting circles that the “old order is being swept away” and that XBRL is stepping in to the fill the breach.  

Unfortunately, what is sorely lacking in Europe is a harmonized pan-European equivalent to the SEC mandate for the disclosure of financial statement information in XBRL format or, as Dominic Jones so succinctly put it, “will Europe ever get its own EDGAR?” Vested interests, legacy investments, and the difficulties inherent in arriving at a binding Union-wide consensus mean that, while commendable progress can be made, the US experience has shown that a top-down regulatory mandate is indispensable in giving the jumpstart needed for the widespread adoption of XBRL.    

Within Europe, while national initiatives are extremely important, their scope and effect tend to be limited by their jurisdiction. The recent blog post by Bob Schneider highlights the danger that institutional myopia holds for the development of XBRL, and more generally, for the future of financial disclosure in Europe. What is needed is a high-level, cohesive and visionary initiative with sufficient resources and political clout behind it to propel it through the bureaucracy.

With 50 XBRL projects currently underway in 15 European countries, XBRL is clearly becoming increasingly pervasive with such large quantities of XBRL data circulating in Europe. Each of the three regulated sectors has its own views on XBRL, but the European banking regulator, CEBS, has been the first to make a positive move towards harmonization, with the FINREP/COREP framework project on prudential reporting scheduled for finalization in 2012.  

As with every area of pan-European policy-making, national interests can often override the supranational Union-wide interest; XBRL is no less affected.  However, in this instance, lack of harmonization and cohesion is ultimately detrimental to all. The weight of the administrative burden and other internal barriers still serve to keeps costs unnecessarily high and – despite the Transparency Directive — the ensuing opaqueness inevitably diminishes confidence in reported financial information.  

The main stumbling block has been identified as being the diverse accounting standards and disclosure requirements currently in existence throughout the European Union. XBRL Europe has recommended that the EU designate or create an official body to harmonize national accounting standards in line with the IFRS or to adopt a common set of accounting standards. XBRL Europe recently made a tentative proposal suggesting that EFRAG and the European National Standard Setters (NSS), in collaboration with the IASB, should take the lead on this, encouraging other European stakeholders such as CESR, CEIOPS, CEBS, the European Commission, and FEE to be involved in the effort to reach consistency throughout the EU.  

In light of this, the press release concerning the meeting held on November 12 between EFRAG and the IASB sends a positive signal. Representatives of both organizations emphasized their continued support for a single set of high quality global accounting standards, and noted the role that the EU’s adoption of IFRS has played in encouraging other jurisdictions to adopt international standards. They also highlighted the importance of broad engagement in the standard-setting process to ensure high quality standards that reflect input from all stakeholders.

At this juncture, the words of former SEC Chairman Christopher Cox resonate more than ever, when he said that “corporate reporting is not an end in itself, but a means to achieving our missions”.  Projects abound that focus on furthering the adoption of the XBRL standard; however, the adoption process, although essential, is just a step towards the final goal of having timely, accurate, and accessible interactive data that facilitates business decision-making. Long-range vision is the key, with the ultimate objective of creating and providing better information for better decisions being the guiding light. Internationally, the interactive data “genie” is out of the bottle; Europe must not be found laggard or isolated by failing to harness and coordinate its existing internal momentum.