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XBRL

Dear Congress: This Is Why Investors Need XBRL To Succeed

By April 29, 2015No Comments

Dear Congress:

As you consider removing the XBRL mandate for a significant portion of public companies, please consider how such a move could be detrimental to investors over the long run. Tomorrow’s investors will demand accurate information from the companies they’ve entrusted with their capital. The world is becoming a smaller place and capital will flow across borders to where it is treated best. To attract capital you need trust between investors and the companies they invest in. To build trust, you need to develop a track record of performance and accountability. To accomplish that, you need quality information.

Our country’s capital markets have been the world’s envy for over 100 years. If we want to maintain this position in the global economy we need to lead on information access. Not just massive amounts of information, but quality information.

XBRL has the potential to take the quality of our financial information in the US to the next level. To do that it will need more than your pardon, it will need your support.

Here is an example of why you should support XBRL as a tool for improving the quality of information in our markets.¬†While processing this audited financial report we identified an error that neither the company or its auditors caught. Here is the disclosure for Earnings Per Share from Fresenius Health Care’s 20-F filed with the SEC on February 25, 2015:

fresenius_example

Here is the corrected data viewed in the TagniFi Excel add-in:

fresenius_excel

For 2013 and 2012, the company mis-calculated their diluted shares outstanding by 1.9 million shares and 4.0 million shares, respectively. At yesterday’s closing price of $42.64 per share, this is understating the company’s historical invested capital in 2013 and 2012 by $83 million and $170 million, respectively. This is an honest mistake that slipped through the cracks of the company’s auditors but it should have been caught.

The very technology that you are likely to vote upon this week has the power to catch these information errors before they end up impacting our capital markets. To achieve its potential in improving information quality, XBRL needs more than your pardon, it needs your support.
Chad Sandstedt, CFA
Co-founder
TagniFi, LLC