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The Freon Effect and The XBRL Mandate

What makes a mandate good?  Yeah, I know, using the word “mandate” and “good” in the same sentence seems counter-intuitive.  Unless, of course, you are freon.  Now’s there’s a mandate on it’s way to success.  Starting back in the late 1980’s and continuing on until 2020, a global effort was put in motion to eradicate harmful CFC’s/HCFC’s (generally referred to as “freon”, a DuPont trade name) from common use.  Given freon’s widespread market use at the time (cars, refrigerators, air conditioners, etc.), the initial reaction was one of considerable fear in the eyes of those impacted.  Fast forward to the present and my guess is that you don’t miss freon at all and in fact, haven’t thought about freon in years.  Net net:  A mandate that’s gone good.

There, I said it.  A mandate that worked.  The equation for success?  Simple I say.  A government mandate with teeth that met producers/suppliers/manufacturers who stepped up to the plate and delivered a replacement technology.  A mandate initially Born of Frustration, implemented without pain, and is now a distant memory. Let’s call this the “Freon Effect:  The natural evolution of a good mandate, from fear to complacency.”

And how about the XBRL mandate?  Has it achieved the Freon Effect?  Hardly. In fact, almost the polar opposite; see this “Controllers from Top Firms say XBRL Costly and Useless” and this “Companies Grow Weary of XBRL.” Over 3 years in the making and to most finance professionals, XBRL still feels like it did at the start:  A burden with added cost, little or no benefit, increased risk and more work.  Wow… there’s a recipe for mandate success!  So can the XBRL mandate achieve the Freon Effect?  Yes, it can, but not in it’s current state.  In order for XBRL to achieve the Freon Effect, three key success criteria must come into play:

1.      Increased XBRL validation

2.      Mandate support for iXBRL

3.      Vendor “functional evolution”

Increased XBRL validation is important to the Freon Effect as it will help people that aren’t in compliance with the mandate know they aren’t sooner…as in before they ever live-file. iXBRl, is incredibly important (maybe the most important of the three) as it helps the mandate move from “two things” (HMTL and XBRL separately) to “one thing” (XBRL and HTML together).  Finally, the supply chain vendors need to make XBRL more seamless and provide enhanced review functionality to help ensure compliance with the mandate.

BLAKE’S TAKE:  Each of the identified success criteria is not able to help XBRL achieve the Freon Effect taken alone.  Together though?  Different story.  All three will put the XBRL mandate on Freon Effect trajectory.  They will help XBRL move from pain and frustration to simply part of the current state.

Don’t believe or agree with me?  Understood. But given that 2012 saw very little from the SEC when it comes to XBRL, you don’t think we’ll see another year of the status quo do you?  I don’t think so, but in recognition of that status quo…a special Blake’s Take shout-out to past Chairperson Schapiro as I think she served her entire term without ever publicly mentioning the letters “X-B-R-L”… but I digress.

I’ll admit that XBRL in its current state is far from achieving the Freon Effect. But that doesn’t mean it’s impossible.  Should all three of the XBRL Freon Effect success factors be implemented, I believe the XBRL mandate will be back on track.  Worse-case, at least change would be afoot to help address the most recent comments from the SEC around the need for companies to take XBRL errors/filing issues more seriously.

Happy New Year!