In this, the third in a series looking at funding models for XBRL International, and fundamentally the funding of the standards development, maintenance and advocacy organization, I look at the "Direct XII Membership Model".

For years, well, almost since the beginning of XBRL as a concept, the jurisdiction model has been in place. The idea has been to promote local adoption through local membership and local funding, with a portion of locally raised funds (above a baseline) being remitted to XBRL International for global standards activities. This model worked well at first, but also has drawbacks.

After all, formation of a jurisdiction was not really required to achieve in order to leverage the expertise of the XBRL community. In fact, for some locations the formation of a jurisdiction simply added a level of costs that it was not possible for the jurisdiction to meet. Then as previously discussed, the jurisdiction model also creates incentives to avoid full sharing with XII, in effect starving XII while gaining all the benefits of being a jurisdiction such as monopoly control over access to XII working groups or pre-release versions of specification recommendations, etc.

And most importantly, the model creates distortions for companies with significant presences in multiple jurisdictions, or in none at all.

Allowing direct membership in XBRL International has been an option only for companies based in or operating in geographical areas that do not have an XBRL jurisdiction.

Benefits:

1. XII can set be assured of a revenue base commensurate with the 600+ membership identified in the literature.

2. XII can build a program based on that level of funding.

3. Local jurisdictions could "bid" for funds to support adoption-critical projects, instead of relying on what money is left after paying their XII fees.

4. Local jurisdictions with the greatest opportunity can be supported directly from XII. In effect we can do away with the pretence that places like Hong Kong and Singapore are not receiving support because they are not jurisdictions, and give them the support that they actually need, under the umbrella of XII.

5. Jurisdictions could continue to raise funds for jurisdiction-specific projects or priorities.

Weaknesses:

1. Some jurisdictions will lose control over funds that they currently collect and allocate.

2. There is the danger of an eventual cannibalization of revenue as companies go from multiple memberships to a single membership.

3. Greater control would pass to XII, which may be against (or perceived as being against) the interests of some jurisdictions.

4. The cost of global membership may be too high for larger companies - especially in cases where local membership falls within local delegations of financial authority (and we know how difficult it can be to get "global" money sometimes, as opposed to "local" money).

Some residual questions:

1. What unintended consequences may result? (Of course, if we could identify all the consequences, would there be any "unintended" ones?)

2. Will the jurisdictions be willing to cede authority to XII in matters of allocation of resources?

3. How would such a funding model change the behaviour and authority of the jurisdictions in the XII International Steering Committee?

4. How could a transition be effectively managed?

This model should not of course limit or restrict jurisdictions from raising funds to support jurisdiction specific activities or projects. It may actually provide a cleaner differentiation between jurisdiction funds and XII funds, making it easier to gain and allocate funds locally. Access to the benefits of membership would only come to those companies (and individuals) who are actually members of XII.

To a limited extent, a move toward a direct membership is inevitable. Major companies already determine which jurisdictions they will belong to based on cost and access. A multinational can elect to join a "low cost" jurisdiction and gain all the advantages of XII membership for a fraction of the cost of membership in "high cost" jurisdictions. In such a case, it seems to me that XII (and the local XBRL efforts) are the net losers. A global membership option would deliver global membership benefits, but would also ensure global benefit to the XII program.

Transition:

Moving to a Global Membership model should not be too difficult. I would envision a multi-year transition in which during the first year, membership fees remain at local rates but membership transfers to XII from the local jurisdiction. Also in the first year, the allocation process could be put in place to solicit funding proposals from jurisdictions and an evaluation committee put in place to provide recommendations to the ISC on which projects to fund. In the second year, a consolidation of membership fees could take place, and offers to companies with multiple memberships to consolidate into a single membership.

I've heard great expressions like "If it was easy we would already have done it". Well, XBRL is not easy and we are doing it. Building and flying airplanes is not easy, but we do it all the time. Changing to a more effective membership structure and funding mechanism to XII is, compared to the above, easy. So lets do it.