One year ago, George Francisco and I completed the Preliminary Study for the Corporate Services Segment of the Philippine IT-BPO industry sponsored by ICTO and IBPAP. Starting today, I will post some of our notes from that study starting with our insights on XBRL or eXtensible Business Reporting Language. If you are performing an accounting role for an F&A service center or BPO, you will want to be familiar with the developments regarding this emerging technology – your job may depend on it.
What is XBRL?
XBRL is a standards-based means of exchanging business information between systems built on XML (eXtensible Markup Languge) protocols. XBRL allows data to be tagged and enriched to allow the reader to understand the business facts being reported. For example, data tags for Foreign Exchange Reserve accounts could contain, among others, information regarding the company or trader involved and the time period for which the data is valid.
Because the data reported contains imbedded information that uses a standard set of definitions or taxonomies, this allows the recipient to automate the extraction and exchange of data. These interactive data taxonomies allow reported data to be identified, in the same way that bar codes identify products, and feed these to the appropriate analytical tools. Using XBRL will allow individual investors, for example, to quickly sift through financial reports without having to deal with voluminous footnotes and disclosure statements.
Put simply, the bar code type capability eliminates many of the basic data capture, classification, and summarization that accountants perform when they prepare their reports. No doubt, the more senior accountants will be quite pleased that they will not have to perform any of the grunt work anymore. However, this technology can also wipe out many of the entry level roles in the field of accounting today, and with it the centuries old traditions on apprenticeship.
Why is XBRL an important development?
In a major development US Federal Reserve Bank and the US SEC has adopted XBRL as the standard for reports filed by large listed companies. The IFRS Foundation now has its XBRL initiative. Europe has followed suit with Brussels-based XBRL Europe.
These developments will have an enormous impact on the business models of the organizations in the F&A and Audit segments of Corporate Services and will most likely consign a large number of lower skilled roles currently outsourced to the Philippines to obsolescence. Yes, jobs will disappear.
On the positive side, the next few years will see a large demand for accountants with the expertise to apply XBRL tags to the data in numerous financial reports. Many companies have issues with the quality of their XBRL data and will be on the lookout for reasonably priced expertise that can resolve these data integrity problems. Why can’t that value can be part of the Philippine Brand?
Will the Philippines IT-BPO industry be a winner or a loser when XBRL gains even more traction? Let me hear your views.