Five axioms and the future of tagging Miklos A. Vasarhelyi KPMG Professor of AIS Rutgers Business...

Five axioms and the future of tagging

Miklos A. VasarhelyiKPMG Professor of AIS

Rutgers Business School

Senior Technology ConsultantAT&T Laboratories

University of KansasApril 24, 2009

2XBRL Research Symposium – University of Kansas - Miklos A. Vasarhelyi

Five axioms- the future of tagging

Outline

• Introduction• 5 Axioms• Additional considerations• Conclusions



Knowledge and Structure

Tabular num

erical Inform

ation

Free S

emantic

Form

at

Structured sem

antic form

at

Tagged detailed S

emantic

Information

Tagged C

oarse Sem

antic Inform

ation

•Understandability•Automation understandable•Expressing complex concepts•Comparability•Structured storage•Globality•Expressing Nuances•Paucity

Measuring Business

Expressing Complex Concepts



Outline

• Introduction• 5 Axioms• The educational context• Additional considerations• Conclusions



Axioms

• Tagging will force substantial standardization of reporting

• Tagging will create a language of its own• Tagging will lead to greater granularity of

data• Tagging will accelerate the route to

continuous reporting• Universal tagging will follow tagging by

sectors



Axiom 1

• Tagging will force substantial standardization of reporting– Extension taxonomies will be viewed negatively as presenting

lack of transparency– IFRS dialects will present the apples and oranges of

measurement in the global context– Foreign currency conversion will make these substantially

more complex– Prior to the 2nd wave there will be rationalization of mandatory

reporting structures (expanded Dutch model)



Axiom 2

• Tagging will create a language of its own– There will be a move towards taxonomy recognized utterances

limiting the types of information to be added to annual statements

• Focus of education will be on this dictionary• Data elements within the ERP will dominate this dictionary• Simple semantics will eventually prevail

– Predefined quantitative metrics will dominate over semantic utterances or ad-hoc measurements

• Computation of these metrics will be core to teaching but somewhat irrelevant as they will be provided by software and the formuli (calculations) in the structure of the taxonomies



Axiom 3

• Tagging will lead to greater granularity of data– The mapping of corporate statement data and ERP structures

will substantially increase allowing time sequential disclosure without manual manipulation

– Traditional limitations to the quantity of data are rapidly disappearing in the free storage and cycle area

• The difficulties are more in the willingness of management to provide transparency under the guise of competitive impairment and on the existence of obsolete, incompetent, and misguided legislation

– E.g. aspects of reg FD and Sarbanes Oxley



Axiom 4

• Tagging will accelerate the route to continuous reporting– Tagging will allow low cost continuous repetition or “addition”

to existing statements– Statements will be very different in format / a new type of

annual report with accounting principles focusing on atoms of data not reports

– Hyperlinks to “external” sources of data will be increasingly found in the corporate information portals

– Variable information update periods will be prevalent on the information portals



Axiom 5

• Universal tagging will follow tagging by sectors– There are over 400 groups generating XML derivative

standards to create system interoperability– There has been little effort to create coherence in these

standard to void obliquity of data structures– There will be substantial societal costs to bring together these

standards in the 2nd wave• 1st wave: development of many sectorial interoperability standards• 2nd wave: development of mapping and coherence of these

standards• 3rd wave: development of clustering standards for

macrointeroperabily



Outline




Financial Statement Presentation

• Purely electronic and a part of a wide corporate information portal– The question is who controls this portal: the firm or value

adders such as Bloomberg / Edgar Online– Consequently students will have to have analytical skills that

involve gathering and managing data from different sources– In particular accountants will be more like the financial

analysts of today as opposed to bookkeepers

• Standard setters will eventually focus on the content /comparability of data provisioning by companies as format will be irrelevant– Consequently students will have to have skills of data

integration and decision support



Information Theory Reapplied

• Valuation bases can be reinstated (fair value)• Decision relevant bases must be created and kept

updated – exit values, market values, competitive position valuation, price level valuation, etc

• Tradeoff of information provisioning must be changed and re-evaluated frequently

• For the students– Improved expertise in archival search– Substantial training in valuation / appraisal – Understanding of information versus decision context– Obsolescence of substantive part of the current curriculum



Better Data and Better Analytics

• Should accountants be the providers of data or analytics?

• Should accountants be involved in strategy setting?

• Should accountants be designing ERP systems?

• Should accountants be designing ERP information structures?

• Should accountants be designing the tens of thousands of ERP reports?



Outline




Will tagging prevail?Inevitably!!!• XBRL is infrastructure therefore will eventually be

forgotten • Measurement structures will be affected by a

feedforward effect – Granularity– Pressure to comply– Standardization

• Who has dominance? Business prevailed in the last decade government will have an upper hand for a while

• Integration of reporting structures – a la Dutch Effort

• A conspiracy theory– Democratic forces favor heterogeneous reporting structures

and porous controls

Five axioms and the future of tagging Miklos A. Vasarhelyi KPMG Professor of AIS Rutgers Business...

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