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Dear CPA Financial Planner:
XBRL – A Factor of Change
In my March PFP Section chair letter, I mentioned three trends that I feel are impacting our profession and changing the financial planning landscape. In this letter, I would like to elaborate on the impact of one of these trends – interactive data enabled by XBRL – and how it is affecting our personal financial planning practices. There is little question XBRL is playing a large role in improving the business reporting process and protecting investors by making company financial information more timely, transparent, accessible and useable. The importance of XBRL interactive data is being acknowledged more and more by regulators, analysts and investors around the world as a factor of change in financial reporting. In fact, in a Financial Times article published May 10th, U.S. SEC Chairman Christopher Cox said that a new SEC rule will require all publicly traded companies to report their financial information in XBRL format in a few years. In light of this news, it is increasingly important for us as trusted business advisors to educate ourselves about XBRL and XBRL-enabled tools so that we can keep our PFP practices current with methodologies that can enhance our services and value to our clients.
CPA Financial Planners Can Achieve More with XBRL
At a time when the majority of American consumers have some portion of their nest eggs – including retirement savings -- in the financial markets, investors are taking a more proactive approach to managing their money. XBRL is being introduced as a means by which investors can easily access accurate, useable data to help them make better informed financial decisions. XBRL streamlines the preparation, delivery and analysis of business financial data. In addition, it offers the benefit of providing plain English disclosure for mutual funds, variable products and other investment data.
As financial advisors become more knowledgeable about XBRL and begin to use it in their practices, they will be able to increase their efficiency, save costs and expand the depth of PFP services they provide to clients. XBRL-enabled software products make it possible to enhance financial planning tasks in several ways:
· Gain faster access to information. For example, you will be able to acquire information like financial reports, company prospectuses, and facts and figures on a mutual fund's risk, expenses and strategy in a fraction of the time that it typically takes to gather this information.
· Expand the analytical capabilities. XBRL allows you to compare, analyze and benchmark data from a variety of companies and funds within seconds.
· Harness the power of more transparent information. XBRL increases the clarity of business information and allows you to easily pick out key statistics and disclosures that are necessary for making informed financial decisions.
· Take comfort in accurate data. XBRL eliminates the need to re-key information into software programs and reports, therefore preventing erroneous information.
Taking this a step futher, as accountants, we have an inherent advantage over some other financial advisors. Specifically, XBRL provides financial data which will need explanations to the investing public. As the flow of information increases and becomes more accessible, third party providers will surely step in to provide analytical tools. Our role will increasingly be about helping the clients understand the deluge of information to make the best decision for their specific situation. Who is better suited to explain this information than a CPA?
Seek More Information About XBRL
As you contemplate ways that XBRL may impact your individual practices, there are several places you can find resources and information about it. The official XBRL International Web site provides education, technical support and a listing of XBRL-enabled products. Also, the AICPA’s Center for Audit Quality Web site offers a range of resources on the XBRL initiative.
The AICPA is strongly in favor of CPAs using XBRL to increase their efficiency, accuracy and cost savings. I truly believe that CPAs and financial planners that utilize XBRL interactive data will prosper the most in their practices and provide extra value to their clients. However, to optimize this value, you may want to be ahead of the curve.
Warmest regards,
Dick Fohn, CPA/PFS
Chair, AICPA PFP Executive Committee
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