XBRL: Mutual Funds vs. Public Companies

As an organization that is on the forefront of the XBRL mandate and transition, one question we have been asked is exactly what the differences are between the new rules for mutual funds vs. the current rules for public companies. As a quick synopsis and tutorial, we have provided this basic chart which we will be going into more detail on in the upcoming weeks:

Mutual Funds	Public Companies
No Phase-In	Phased-In across Years by Size
Only Risk/Return Summary section of prospectus	Four (4) Financial Statements, Footnotes
400 elements in the taxonomy	17,000 elements in the taxonomy – “fineness”
Concise set of tags for selection within taxonomy	Granular review & analysis for selection of appropriate tag

What Precious Metal is YOUR Data?

Gold standard...Golden idea...Golden ticket.

Despite what the market says on any given day, verbally, gold is the entity that is most closely associated with those things being of the highest quality.

This is why, in the world of financial services companies, data that is this stored in the Security and Exchange Commission's EDGAR database is considered the "golden" data set because it is pure with 0% chance of content changes.

As the entire industry continues to move towards XBRL for electronic communication of financial and business data, the idea of this "golden" data set becomes more important. A company that is choosing a vendor to work with on their XBRL transition should be asking how and from where their data is being drawn to be tagged. The more moves it makes from non-EDGAR sources (through content management software, composition systems, etc.), the greater the chances that edits could be made to the information at some point during the workflow, and when working with XBRL, the most up-to-date version of the content has to be used.

So, while chromium, strontium and osmium are all fine elements on the periodic table, it is their fellow metal gold that needs to be the word to describe the data from your company that is utilized in the XBRL process.

Let the Good Times Roll with XBRL

With the XBRL implementation clock still running towards January 2011, we at Merrill Corp. continue to prepare for the pending mandate. We will have some important announcements on this topic in the near future, but in the meantime, lets revisit the basics of XBRL with a blog I put together earlier this year:

“Tony, I need 400 words on XBRL. Make it funny, whimsical and entertaining.”

Sure. Right after I put the finishing touches on my new sci-fi / romantic comedy / musical sensation, “Roland the Headless Thompson Gunner on Holiday in Cambodia” (you’ll laugh and cry, and that’s just when you buy the tickets).

Something must be up with this thing, though, because it has gotten to the point where random people have been stopping me in the streets lately and asking, “Tony, what exactly is XBRL and what does it mean to me?” Why just yesterday, a beautiful woman with flowing brunette locks approached me. Before she could get a word out, I said, “Yes, yes. eXtensible Business Reporting Language. I know, this thing is really gaining momentum!” She looked at me and asked in broken English, “Is this…how you say…Empire State Building?” Clearly she was impressed.

Truth be told, my knowledge on this subject matter is limited, but because the XBRL train is leaving the station, I decided to hop an Amtrak train that was leaving the station and head someplace where no good New Yorker should ever go: Boston.

Deep in Red Sox Nation is where I summon a Goliath of information named David Comeau, whose knowledge of XBRL is rivaled only by his utter disdain for the Yankees and Manhattan Clam Chowder (“a made-up soup,” is what he claims).

I open the conversation with some friendly banter. “So how ‘bout those Mets?”

Dave grimaces. It’s a fingernails screeching across a chalkboard moment. He responds with a deadpan, “I know you didn’t come up here to talk about lousy New York baseball. What’s really on your mind, Anzivino?”

“Dave," I say, “I know about a lot of stuff, but XBRL is not one of them. Can you give me a synopsis on what this is and why it is such a hot topic?”

“An uncharacteristically excellent question,” Dave retorts while clearly mispronouncing every letter “R” with Beantown flair. “XBRL, as you know, is an acronym for eXtensible Business Reporting Language. It’s Interactive Data. In short, XBRL is going to help investors match risk and return information. It will give people the opportunity to compare two or more funds, side-by-side, and get an apples-to-apples snapshot on performance in an easy to read form. It will also help companies prepare the data more quickly and accurately. Most importantly, it has been mandated by the SEC for January 2011.”

“Ah, I’m starting to see the light here, David.” I say, jumping on a follow-up question. “But what will Shareholder Communications firms like Merrill bring to the party?”

“It’s all in the 'tagging.'” Dave confidently confides. “Data becomes interactive when it’s labeled using computer markup language. The markup languages use standard sets of definitions - or taxonomies - to enable the automatic extraction and exchange of data. Merrill provides the experience and knowledge of tagging and filing in XBRL that will be quite helpful to our clients with this new rule.”

As I nod my head and start to truly believe New Yorkers and Bostonians might be able to agree on something, David ruins it by saying, “it is, what we call up here, ‘wicked-cool.’”

I walked away from my conversation with David with a much better understanding of XBRL and the belief that it is a topic that will be discussed a great deal leading up to the January 2011 mandate.

I know now that XBRL is very real and here to stay…not unlike this delicious bowl of Manhattan clam chowder (sorry Dave).