Posted on Friday, December 2, 2016

Alan Smith, Chair, XBRL International Corporate Actions Working Group

Inline XBRL could just tip the scale towards the adoption of standards in corporate actions.

Inline XBRL is becoming more commonly known in the U.S. since the Securities and Exchange Commission (SEC) issued an exemptive order on June 13, 2016 allowing public companies to submit a single inline XBRL filing in lieu of the dual XBRL and HTML combination that companies have been filing since 2009. The Commission notes on their web site “Inline XBRL could decrease filing preparation costs, improve the quality of structured data, and by improving data quality, increase the use of XBRL data by investors and other market participants.”

Inline XBRL has been in use outside the U.S. for years, most notably in the U.K. for private company tax submissions to HMRC (Her Majesty’s Revenues & Customs). Close to 2 million companies use the inline XBRL technical spec in that one implementation alone.

But inline XBRL is the perfect vehicle for many other financial communications beyond just financial statement filings. The XBRL community, and many in the securities processing world, have long seen financial data standards as a solution to the highly manual and costly management of corporate actions messages that are conveyed by public companies to their investors.

Over 5.3M corporate actions were processed in 2015, according to The Depository Trust & Clearing Corporation (DTCC). A corporate action is any event that brings material change to a company and affects its stakeholders, including shareholders, both common and preferred, as well as bondholders. Examples of corporate actions range from dividend announcements and stock splits, to mergers and acquisitions. The messages are sometimes conveyed through press releases or through regulatory filings. But the common thread through all these announcements is that all are processed manually and often rekeyed multiple times through various intermediaries before finally arriving in the investors inbox, resulting in errors, time delays and unnecessary cost – that affects investors and issuers alike.

The biggest hurdle to bringing financial data standards into corporate actions processing is the work that issuers must perform to transform their messages into standardized, computer-readable format. A corporate action announcement is often authored and ultimately reviewed by multiple departments within a company which can include legal, accounting, finance and investor relations. And corporate actions messages are not produced on a regular basis like financial statements are (every quarter). Those two factors make it difficult for public company staff who create corporate actions to develop a skillset in XBRL creation so the learning curve each time a new corporate actions message has to be distributed can be pretty steep. Plus a traditional XBRL file must be rendered into human-readable format before it can be vetted by others who need to review it.

Inline XBRL is a technical specification that could pave the road to bringing data standards into corporate actions messages.

No duplication. The XBRL and HTML versions of the message can be created simultaneously, saving the time and expense of creating two documents
No translation risk. Since it’s one document there’s no chance of having differing versions of the same data.
Easy review. Because inline XBRL is both “human-readable” and “computer-readable”, the coded message can be reviewed by all the parties to a corporate actions with relative ease.

As inline XBRL becomes more commonly used around the world, adopting it for corporate actions processing is a logical next step. Inline XBRL makes the elimination of manual processing, translation risk and delays in corporate actions a goal that is well within reach.

Here’s an example of how a corporate actions cash dividend message issued by BNY Mellon appears as an inline XBRL document. The facts that are highlighted in orange all contain embedded contextual data that allows the receiver of the information to understand the time period, units, definition of the data, reporting entity and other descriptive information. This inline XBRL document is shown below in an open source software made available by the SEC. Click on any of the orange-bordered facts to see its associated metadata.

So what are we waiting for? Inline XBRL is a perfect vehicle for corporate actions messages. Go to this link to review this message in the inline XBRL format and let us know what you think.

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