CESR calls for evidence on the use of a standard format for financial reporting

Opportunity exists to align the EU with the US market’s preference for the use of XBRL – with the option to standardise adjacent activities, such as corporate actions issuance

The Committee of European Securities Regulators (CESR) has issued a call for evidence on the use of a standard format for financial reporting by issuers having securities admitted to trading on EU regulated markets.

The adoption of such a standard reporting format EU-wide would, suggests CESR (the membership of which includes all EU securities market regulators and which is charged with co-ordination between its member authorities), enable automated processing of financial information, cutting out the need for manual re-entry and comparison. Investors, analysts, journalists and financial intermediaries would be able to search information about companies on the internet more easily, download it into spreadsheets, re-organise it in databases and perform analysis on it.

In its paper, CESR makes specific reference to eXtensible Business Reporting Language (XBRL) as a possible format on which to standardise. XBRL is already being used for reporting in a number of countries (the US, Japan, Korea, China - and by some EU market supervisors).

Importantly, XBRL can also be deployed to support standardisation for other  issuer-generated documentation, including corporate actions announcements. In this vein, an initiative between SWIFT, Depository Trust & Clearing Corporation (DTCC) and XBRL US is aimed at implementing XBRL for corporate actions data in the US.

Together, the three companies are building a corporate actions XBRL taxonomy with data elements aligned with the industry standard ISO 20022 repository elements. This will enable issuers to electronically "tag" data using off-the-shelf software when preparing a corporate action announcement. The tagged data can then be transformed into an ISO 20022 message for downstream processing throughout the chain, from intermediaries to investors.

In short, XBRL holds the key to bringing the issuer community into the corporate actions standardisation fold - and unlocking new levels of processing efficiency for the industry as a whole. The SWIFT/DTCC/XBRL US initiative is starting in the US, but has global applicability.

Through its consultation on a standard format for financial reporting, CESR is seeking responses to nine questions, including:

• Do you consider that there should be a standard reporting format for financial reporting of issuers having securities admitted to trading on a regulated market? What kind of pros and cons would a standard reporting format have?, and
  
• If yes, do you consider that XBRL would be an appropriate format?

This consultation is also a clear opportunity for any market participants keen to see the industry reap the maximum possible benefits of investment in XBRL to provide feedback on the value of its widespread adoption in Europe, not just for reporting, but also for corporate actions issuance. (CESR's last question is, "Are there any other issues CESR should take into account in the analysis of the issue?")

CESR will use the responses it receives to this call for evidence as the foundation of its analysis of the issue of introducing a standardised format for financial reporting. On the basis of this analysis, CESR says, it may address the issue in more detail in the preparation of a report to the European Commission.

CESR invites responses to the consultation, submitted online at http://www.cesr.eu/, by 30 November 2009.