Why Governments Fail to Gauge the Full Potential of Standard Business Reporting?

IRIS has been instrumental in the implementation of many XBRL projects around the world and basic approach of XBRL Implementation falls under 2 categories – the Standard Business Reporting (SBR) camp and the “go it alone” camp. The benefits of the SBR approach are easily the greatest, yet most government regulators choose to go it alone. Why is this and what do we recommend?

What is Standard Business Reporting ( SBR)?

Firstly, what is SBR really?  It is an approach where several government agencies of a country cooperate to build an XBRL taxonomy that harmonises their requirements of data reporting. It reduces the incidence of duplicate or redundant reporting from business to government.The Netherlands pioneered this approach for 3 agencies (tax, statistics and corporate regulation), followed by Australia for 13 agencies.

The alternate is : a single government agency builds an XBRL taxonomy for its own requirements without consideration of what other agencies may require.

Why not many countries have moved to SBR?

The case for SBR sounds compelling, so why have only 2 countries done it?  The answer may lie in the requirement for several agencies to cooperate to build the XBRL taxonomy.  This is not as easy as it may sound. Most government agencies are bound to apply their resources to achieve certain policy outcomes.  It is not within their scope or culture to assist any other agency to achieve their outcomes, so cooperation is typically unnatural for them. It takes an enormous amount of political will and high level support to bind the different agencies together for a single purpose that benefits them all.

The 2 countries we have mentioned were fortunate to be in that position. Even so, neither country would consider that they have achieved all the benefits that were potentially on offer. SBR most definitely does deliver more benefits to business and government than the “go it alone” approach, but the jury is out on whether the additional effort and cost are worth it.

Points to consider before finalizing your XBRL Implementation approach

A key consideration in the choice of approach is the purpose of the project.  In the Netherlands and Australia the prime motivation was to reduce the regulatory reporting burden on business. In other countries, the prime motivation is to benefit the agency concerned so a common reporting platform for business is not so highly valued. In this scenario, the simplest and cheapest solution is preferred, which is to limit scope to only the singular requirements of the sponsoring agency.  This most often results in “paving the goat path” – i.e. replicating the existing reporting process. This was the subject of an earlier blog Aggregating Data? With XBRL, the Possibilities are Endless’.

In still others, the purpose is simply to be seen to be at the forefront of technology so the benefit does not relate to what the XBRL taxonomy actually does for either business or the government. As there is no objective to improve the process for anyone, this invariably results in paving the goat path.

But all is not lost. In fact there is much to be said for paving the goat path. It is a big ask for people to comprehend and exploit a revolutionary technology like XBRL, so using it in a familiar and well understood paradigm has its merits. It allows people to get used to the new technology in isolation to any other major change. This allows them to decide how the XBRL way of doing things can improve the process in their own time. Why rush it through if there is no urgency to do so?

A huge advantage of going it alone is that the agency that sponsors the project typically has a compelling reason to do so. It is rare that government agencies reach this point at the same time.

Our discussions in South Africa recently support this view. Of the several agencies that are candidates to join in an SBR approach, only one was at the point of needing new systems. This is the agency that should lead the charge and implement XBRL for its purposes. The key is then bringing in other agencies to reuse reporting concepts where they are common, harmonise through compromise where they are close, and expand upon the XBRL taxonomy where they are unique.

Get in touch with us today if you’re looking to produce high-quality XBRL reports.

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