Five axioms and the future of tagging

1
Five axioms and the future of tagging

• Miklos A. Vasarhelyi
• KPMG Professor of AIS
• Rutgers Business School
• Senior Technology Consultant
• ATT Laboratories
• University of Kansas
• April 24, 2009

2
Outline

• Introduction
• 5 Axioms
• Additional considerations
• Conclusions

3
Knowledge and Structure
Measuring Business
Tagged Coarse Semantic Information
Tabular numerical Information
Tagged detailed Semantic Information
Free Semantic Format
Structured semantic format

• Understandability
• Automation understandable
• Expressing complex concepts
• Comparability
• Structured storage
• Globality
• Expressing Nuances
• Paucity

Expressing Complex Concepts
4
Outline

• Introduction
• 5 Axioms
• The educational context
• Additional considerations
• Conclusions

5
Axiom 1

• Tagging will accelerate the route to continuous
  reporting
• Tagging will allow low cost continuous repetition
  or addition to existing statements
• Statements will be very different in format / a
  new type of annual report with accounting
  principles focusing on atoms of data not reports
• Hyperlinks to external sources of data will be
  increasingly found in the corporate information
  portals
• Variable information update periods will be
  prevalent on the information portals

6
Axiom 2

• Tagging will create a language of its own
• There will be a move towards taxonomy recognized
  utterances limiting the types of information to
  be added to annual statements
• Focus of education will be on this dictionary
• Data elements within the ERP will dominate this
  dictionary
• Simple semantics will eventually prevail
• Predefined quantitative metrics will dominate
  over semantic utterances or ad-hoc measurements
• Computation of these metrics will be core to
  teaching but somewhat irrelevant as they will be
  provided by software and the formuli
  (calculations) in the structure of the taxonomies

7
Axiom 3

• Tagging will lead to greater granularity of data
• The mapping of corporate statement data and ERP
  structures will substantially increase allowing
  time sequential disclosure without manual
  manipulation
• Traditional limitations to the quantity of data
  are rapidly disappearing in the free storage and
  cycle area
• The difficulties are more in the willingness of
  management to provide transparency under the
  guise of competitive impairment and on the
  existence of obsolete, incompetent, and misguided
  legislation
• E.g. aspects of reg FD and Sarbanes Oxley

8
Axiom 4

• Universal tagging will follow tagging by sectors
• There are over 400 groups generating XML
  derivative standards to create system
  interoperability
• There has been little effort to create coherence
  in these standard to void obliquity of data
  structures
• There will be substantial societal costs to bring
  together these standards in the 2nd wave
• 1st wave development of many sectorial
  interoperability standards
• 2nd wave development of mapping and coherence of
  these standards
• 3rd wave development of clustering standards for
  macrointeroperabily

9
Axiom 5

• Tagging will force substantial standardization of
  reporting
• Extension taxonomies will be viewed negatively as
  presenting lack of transparency
• IFRS dialects will present the apples and oranges
  of measurement in the global context
• Foreign currency conversion will make these
  substantially more complex
• Prior to the 2nd wave there will be
  rationalization of mandatory reporting structures
  (expanded Dutch model)

10
Outline

• Introduction
• 5 Axioms
• Additional considerations
• Conclusions

11
Financial Statement Presentation

• Purely electronic and a part of a wide corporate
  information portal
• The question is who controls this portal the
  firm or value adders such as Bloomberg / Edgar
  Online
• Consequently students will have to have
  analytical skills that involve gathering and
  managing data from different sources
• In particular accountants will be more like the
  financial analysts of today as opposed to
  bookkeepers
• Standard setters will eventually focus on the
  content /comparability of data provisioning by
  companies as format will be irrelevant
• Consequently students will have to have skills of
  data integration and decision support

12
Information Theory Reapplied

• Valuation bases can be reinstated (fair value)
• Decision relevant bases must be created and kept
  updated exit values, market values, competitive
  position valuation, price level valuation, etc
• Tradeoff of information provisioning must be
  changed and re-evaluated frequently
• For the students
• Improved expertise in archival search
• Substantial training in valuation / appraisal
• Understanding of information versus decision
  context
• Obsolescence of substantive part of the current
  curriculum

13
Better Data and Better Analytics

• Should accountants be the providers of data or
  analytics?
• Should accountants be involved in strategy
  setting?
• Should accountants be designing ERP systems?
• Should accountants be designing ERP information
  structures?
• Should accountants be designing the tens of
  thousands of ERP reports?

14
Outline

• Introduction
• 5 Axioms
• Additional considerations
• Conclusions

15
Will tagging prevail?Inevitably!!!

• XBRL is infrastructure therefore will eventually
  be forgotten
• Measurement structures will be affected by a
  feedforward effect
• Granularity
• Pressure to comply
• Standardization
• Who has dominance? Business prevailed in the last
  decade government will have an upper hand for a
  while
• Integration of reporting structures a la Dutch
  Effort
• A conspiracy theory
• Democratic forces favor heterogeneous reporting
  structures and porous controls