Juggling IFRS and XBRL

What was the reason behind trying to introduce both IFRS and XBRL at the same time?
OS: XBRL and IFRS were meant to be two separate initiatives, and it’s a coincidence they’re happening at the same time. Converting from Canadian GAAP to IFRS can be done more simply with XBRL, which maps concepts, than with Excel, which maps cells. A tool that converts Canadian GAAP to IFRS automatically is being released in August by XBRL Canada. It will also benefit Canada to go from French to English.

CM: The move to IFRS was a decision made a while ago by our Canadian accounting standards setters. We have to think carefully about the timing for XBRL, given the significant shift going on with IFRS, which is going to require considerable resources from our issuers. I’m still a bit unclear as to how XBRL can be a tremendous help in converting from Canadian GAAP to IFRS, but I’m certainly willing to listen. Olivier has created a mapping tool that will help create financial statements in IFRS; this is helpful, but companies will have to do a lot of work to understand all the disclosure differences before they can come up with the numbers. It would be more helpful if the tool converted your file into XBRL format for you; unfortunately, it doesn’t go that far.

Would you say XBRL has faded in importance?
CM: There’s a lot of effort that needs to go into IFRS right now, and we need appropriate time to embrace that learning. We’re wondering how we should sequence these events and whether we should wait until IFRS is in place in 2011 before we consider any mandatory XBRL program.

How can you convince more Canadian companies to begin voluntary XBRL filing?
OS: I can understand that XBRL might not be at the forefront of IROs’ minds, but they’ll definitely appreciate having things done automatically and not having to retype data. One of the SEC’s reasons for implementing XBRL is to provide immediate feedback to the issuer that the data is correct. There’s no doubt that preparing financial statements will be easier and faster in XBRL.

CM: For a while we’ve wondered about how to encourage firms to convert to XBRL, knowing that we’re going to IFRS. We’re using this voluntary program to try to communicate to our market about XBRL because, up until a year ago, there was very little knowledge of XBRL. I think the US move to a proposed mandatory state is going to help educate our market, too.

What support is the IASB offering to the OSC?
OS: We’re providing direct access to IFRS taxonomy to make sure the OSC fully understands how we’ve built it. We’ve also involved the OSC in the French translation to make sure it’s being done in the best way. We’re on hand to help Canadian companies prepare their files for the voluntary filing program, too.

CM: Olivier is being very helpful in trying to think about how he can enhance our market with XBRL, and we’ve been trying to communicate more about what we can do.

How well informed are Canadian IROs about XBRL and IFRS?
OS: We are reaching out to Canadian companies to make sure they are informed. During the last IFRS event in Toronto we invited the OSC to be part of our conference, and my team and I are planning to travel to Canada to take part in seminars and conferences.

CM: Our market participants are now at a learning stage with XBRL and are becoming more educated through the voluntary program and with the US efforts. With IFRS, our country is well aware of where we’re going and IROs understand this better all the time.

How well informed are investors in Canada?
CM: There’s low awareness about XBRL. Investors and analysts realize the conceptual benefits, but they’re just not asking for the information yet. It’s a catch-22: until there’s a large enough pool of XBRL data for analysts to change their systems, they won’t change the way they do their analyses.

How proactively has the Canadian stock exchange encouraged XBRL?
CM: I wouldn’t say it has been encouraging XBRL at this point. We’ve had a lot of discussions, but the exchange hasn’t taken the same step as us in creating a voluntary program to educate our market.

Why is XBRL so important for IR professionals?
OS: Investors and analysts will be able to get the fuller picture, rather than making do with the information the IRO chooses to provide, so communication between these groups and IROs will be improved. Now, analysts are coming back to IROs to ask for specific details; with XBRL, things can be much more streamlined.

Won’t the IR role be weakened if IROs need less interaction with investors?
OS: Perhaps, but it’s the same principle that Henry Ford applied more than 100 years ago when he automated supply chains as much as possible, to keep human intelligence for valuable – rather than futile – issues.

CM: The risk of not learning about XBRL is pretty grave if you need to communicate to your investor base. The marketplace won’t know a lot about XBRL in these early days, and there will be a lot of questions for IROs. Initially, they are going to be on the front line of this new XBRL world.