XBRL Continues to Attract Attention in the Municipal Bond Market
XBRL, or eXtensible Business Reporting Language as it is also known, has the potential to revolutionize digital reporting. As we’ve mentioned before, not only does XBRL allow for more accurate and accessible data in financial reports, but the costs of XBRL compliance are also falling.
Although XBRL and Inline XBRL continue to feature as part of filings with securities exchanges and regulators across the world, including the U.S. Securities and Exchange Commission (SEC), one area where XBRL has yet to be utilized is in the U.S. municipal bond market.
In a recent article in Forbes, contributor Barnet Sherman laid out the case for XBRL reporting in the municipal bond market. Sherman creates a compelling argument as to why XBRL reporting would be so beneficial in this area, and some of his key ideas are highlighted below.
Greater data transparency
One of Sherman’s core ideas is that XBRL should allow data within the municipal bond market to become more transparent.
This is because, among other things, XBRL creates a standardized reporting framework where every report should, in theory, be uniformly identified and defined. This means that, ultimately, an XBRL report should be a structured report.
By contrast, Sherman refers to current municipal reporting as “A Municipal Tower of Babel” where different terminologies are used across reports to describe the same thing. As Sherman aptly puts it: “Apparently, in the world of government accounting and reporting, a rose is a rose is an onion.”
XBRL isn’t just for regulators
One of the benefits of using XBRL for financial reporting is that all kinds of stakeholders can take advantage of improved data quality, transparency, and accuracy.
For example, it’s not just regulators that can benefit from receiving information in XBRL format. In fact, various parties have suggested that issuers and investors could also benefit from having access to clearer and more transparent information, as could those involved in auditing grants or other internal government reporting.
PDF is no longer fit for purpose
Typically, comprehensive annual financial reports (CAFR) have been filed in PDF format. While such a filing approach may have been fit for purpose a decade or so ago, technology has advanced to a point where a PDF report has not only become incredibly time-consuming to produce, but also offers very little when it comes to accessibility.
As Sherman points out “The PDF isn’t data. It is an electronic image saved in bits and bytes down to the last pixel.”
If CAFR were to be filed in XBRL format, then not only would data become more accessible and transparent, but it would also be much, much easier for users of the reports to find, analyze, and search for data – a much better state of affairs for all involved.
Thankfully, some change seems to be on the horizon, at least in the state of Florida. As we’ve previously reported, law HB 1073 states that local government comprehensive annual financial reports should be prepared in XBRL format from 2022, doing away with PDFs. Hopefully, it’s only a matter of time before other states follow suit.
DataTracks has extensive experience filing XBRL and iXBRL reports with regulators across the world, including the SEC, HMRC in the U.K. and MCA in India. Visit www.datatracks.com to find out how we can assist you with your regulatory compliance and filing, or reach out to us at firstname.lastname@example.org