A successful pilot project to automate corporate actions processing for American Depositary Receipts has inspired XBRL International’s Standards Board (XSB) to think seriously about a global corporate actions taxonomy (dictionary) for a digital language — the eXtensible Business Reporting Language (XBRL) — that could bring a new order to the reporting of corporate actions data.
The big goal is the elimination of “many of the costs associated with manual entry, reconciliation and operational errors that plague institutions that must use corporate actions data,” says John Turner, CEO of XBRL International, in a prepared statement.
As reported via FTF News, the ADR automation effort involved BNY Mellon, Citi, JPMorgan, and redistributor GlobeTax in a collaborative effort for the communication of corporate actions from depositary receipt issuers. The XSB wants to use their work as a blueprint for automating corporate actions processes beyond ADRs.
The XSB is a key group within XBRL International, a not-for-profit consortium dedicated to the proliferation of XBRL, a variation of the Extensible Markup Language (XML). The consortium consists of 27 country-specific jurisdictions, including XBRL US, which is a separate, nonprofit organization headed by Campbell Pryde, president and CEO.
Simply put, XBRL allows financial services firms to present key information in a hypertext mode so that it can be collected, shared, processed and stored much more efficiently than manual or semi-automated systems. In 2009, XBRL got the blessings of the SEC, which thinks highly of the interactive data formatting qualities of the language and has mandated that publicly listed companies use it for their financial statements and via their corporate websites.
“In this format, financial statement information could be downloaded directly into spreadsheets, analyzed in a variety of ways using commercial off-the-shelf software, and used within investment models in other software formats,” SEC officials said five years ago.
“The rules,” the SEC added, “will apply to public companies and foreign private issuers that prepare their financial statements in accordance with U.S. generally accepted accounting principles (U.S. GAAP), and foreign private issuers that prepare their financial statements using International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).”
Given the SEC mandate, it’s not unexpected that the next step might be to use XBRL for corporate actions processing.
For the moment, most corporate actions are distributed via press releases issued by the company or through a filing submitted to securities regulators, points out XBRL International. These releases are not made available to processors and investors in a format that is not computer-readable. The answer, argue XBRL International officials, is to transform manual corporate actions data into an XBRL format and thus eliminate “the need to re-key the data, thereby improving timeliness, accuracy and functionality of the information.”
But, to achieve this nirvana of operational efficiency on a global scale requires industry participants to create usable XBRL taxonomies, which are the reporting-area specific hierarchical dictionaries that define the tags used for individual items such as net profit.
Taxonomies also define attributes and interrelationships for complex processes such as corporate actions events. In addition, XBRL taxonomies can be adjusted to the needs of particular business reporting purposes and national jurisdictions that have localized accounting and reporting practices.
The new working group will push to make the ultimate taxonomy less U.S.-centric and more international, incorporating in particular European and Asian infrastructures, which will involve a lot of requirements gathering, Pryde says. “The [ADR] taxonomy was mainly developed by the U.S. jurisdiction of XBRL.”
The time frame for the process certainly won’t be overnight. “I don’t think there’s necessarily an end date [initially],” Pryde says. “It really depends on where folks are in their development cycles.”
XBRL International began its outreach on May 27 to financial regulators and listed companies to help form the working group to define XBRL taxonomies on a global basis and facilitate the undying dream of straight through processing for securities transactions.
The working group to come will build upon the early efforts of the DTCC, SWIFT and XBRL US done in 2009, which led to the development of a draft taxonomy and business plan, and helped the subsequent ADR effort.
The new group will have lots to do with an agenda that will likely cover stock splits, reverse splits, dividends, stock dividends, share buy backs, mergers, exchanges and name changes, among other corporate actions. Those interested in joining the working group are also being asked to help with:
- Corporate actions product management
- Corporate actions business analysis
- Corporate actions technology
- Corporate actions operations, production and consumption
- XBRL and ISO 20022 standards
- Data intermediaries
- Investors/consumers of corporate actions messages
A key element of this new mission would be the tight integration with “relevant ISO 20022 messages,” XBRL International officials add.
XBRL International is asking that interested parties contact it via corporateactions@xbrl.org and/or by attending a June 11 (Wednesday) meeting that will take place at the XBRL International Conference in Orlando Florida (http://conference.xbrl.org).
With so much at stake, it will be extremely interesting to see how the new working group progresses.
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