35 Years after 55 for 444, No Apologies for FUBAR

Yes, it really has been 35 years (yesterday, 4th November) since Iranian "students" occupied the American Embassy in Tehran. 35 Years since the beginning of the events in Argo (a great film, pity they misrepresented the actual role played by the New Zealand ambassador, but never mind).

Yesterday on Facebook I posted "35 years since Iran invaded US sovereign territory (embassies are sovereign territory). Until Iran formally apologies, they can, and should, stay out in the cold. Remembering 55 Diplomats held hostage for 444 days!"  55 diplomats who served their country, and could have died for their country. 55 diplomats abused by Islamic fruitloops steeped in an international culture of "blame the Americans" for every single FUBAR in their own countries.

I should have known, that with my international circle of "friends", that someone would take umbrage (nationality not mentioned here, because it is not relevant).

You see, as those of you who have lived outside the US as Americans know, every sin committed by the US is current, extreme, and you probably had something to do with it. Hell, you condoned it by being American. And there really is no hiding. With smiles our actual friends hide their disdain for, and in extreme cases loathing of, the US behind friendship with you as an individual.

But, you also are known by your love of something called the Constitution and the associated Bill of Rights. You have also had to put up with, for decades, ignorant people who have been told that everything wrong with their country, every bride paid or asked for, every overthrown government, every burst water main, every power outage, was somehow America's fault. Blow that!

So let me say a few things here:

1. I am proud to be an American (and of other things and nationalities that I'm equally proud of).
2. I have never tipped (oops, bribed) anyone that was not looking for a tip (oops, bride).
3. The US didn't start Vietnam, the Vietnamese did, and the French made it worse, then we really screwed it up.
4. Yes, bribes were paid to overthrow Mosaddegh (and I really don't care who did overthrow him - after all, it was Iranians, driving Iranian army tanks - bought by pre-Shah Iranians who overthrew Mosaddegh). Mind you, Mosaddegh was no paragone of democracy. He was also guilty of manipulating the political system. He played the game. He lost.
5. But lets move on - host Countries, as a rule, grant sovereignty over the land that an embassy is on to the country of the embassy. This has allowed political dissidents around the world to claim asylum in embassies (including Mr Assange [we'll assume for a moment that he  is a political dissident] in London, at the Ecuadorian embassy)
6. Lets look at the Vienna Convention on Diplomatic Relations of 1961 (of which Iran is a signatory) "Article 22. The premises of a diplomatic mission, such as an embassy, are inviolate and must not be entered by the host country except by permission of the head of the mission. Furthermore, the host country must protect the mission from intrusion or damage. The host country must never search the premises, nor seize its documents or property. Article 30 extends this provision to the private residence of the diplomats."
7. Moving away from Iran - the Greek military junta overthrew the Greek government, not the US (and the film Z helps show the lead-up - great film by the way, and a fantastic soundtrack). Greeks overthrew Greeks. How many times was I told that it was all America's fault?
8. So ITT helped overthrow Allende in Chile. And yes, Pinoche was a shit. Get over it. The Chilean airforce bombed the presidential palace, and the Chilean army overthrew him. Yes, ITT (and CIA) money helped, but bluntly, they probably would have done it anyway.
9. My family was evacuated from an American embassy when it became clear that the Iranians were willing to push the problem further.
10, My father stayed in that embassy for another 6 months, waiting for the Islamic fruitloops to come over the walls.

Has the US made mistakes? Absolutely. Have some of these been great mistakes? Absolutely.

I'll go out on a limb here. I was in favour of the invasion of Iraq in 2003. It was the right thing to do. Happy to discuss this privately. Did the US then manage to stuff-up EVERY SINGLE decision that they had to make after the invasion. Absolutely. The Bush/Cheney/Rumsfeld cabal believed what they wanted to, and were told lies that they believed. They also made FUBAR after FUBAR after FUBAR, resulting the mess we now have.


There are no excuses for how badly the screwed up, again and again. They should be tried in the Hague for war crimes.


But you know something; being Great as the US is, means that you do great things also. Yes the FUBARs are great, but so are the decades of quite development aid, the Marshal Plan, the food aid, the Peace Corps, the (too often too late) interventions like Serbia to stop ongoing genocide. America is great, and with that comes great failures and great victories, great successes, and great support for the oppressed. And yes, great FUBARs.



But getting back on track - The Iranian Government enabled, allowed, and supported the invasion of sovereign US territory 35 years ago. What the US may or may not have done is NOT relevant.There has been no apology.

Therefore, I will not apologise to calling Iran on their great FUBAR.

Why Worry?

In 1985, Dire Straits released their their iconic album Brothers in Arms. While there are so many great tracks on that album, I keep finding myself singing "Why worry? There should be sunshine after rain, these things have always been the same, so why worry now". (You can listen in here)

So, sunshine after rain.

What on earth does this have to do with XBRL? 2nd quarter filings are flowing in to the SEC, including the associated XBRL versions of the filings. And what is notable about these filings? These filing represent at least the ninth XBRL filing for all SEC filing companies other than those spared by the inability of the IFRS to create a taxonomy acceptable to the SEC (although that really is a different, sadly disturbing, topic). That means that all filers have now left their period of "litigation relief".

The SEC was, of course and as always, very clear - there is no mandated requirement for XBRL to be audited. After all, Chairman Cox was famously worried that requiring audit or XBRL would spell "crib death" for the XBRL project. How right he was, yet how wrong at the same time.

After all, who would be supportive of the additional burden of having to pay for production of XBRL, and then have to pay for an audit of the XBRL. 

This left the SEC with a small problem when it came time for the Final Rule. How to require a new reporting format from filers with one of the stated purposes being to improve the quality of information provided to the investing community - while at the same time keeping to the promise to not require an audit of the XBRL?

The answer; give filers two years to learn how to get their XBRL right, then make the XBRL carry the same legal liability as the HTML filing, but without a requirement for an audit.

Here is the problem; the two year window did not give enough time for the development of a deep enough reservoir of resources that actually understand XBRL, and the development of enough skilled individuals within companies to produce XBRL that is "the same" as the HTML. Certainly not to any meaningful level of confidence.

Now CFOs should be asking themselves "Why Worry?" Our providers know XBRL, shouldn't they, even if we don't? Right? And the SEC isn't really serious about this stuff, are they?

Too many filers simply do not have the resources to have dedicated XBRL expertise in-house. And the increase in total XBRL resources required to support production of XBRL filings has grown by over 100 times in five years. So, in 2009, for every 1 "XBRL resource equivalent unit" then we now need almost 100 today. (I'm inventing a new unit of measure here - the XBRL resource equivalent unit (the XREU, but I promise to avoid using that). The XREU is a unit of measure equal to the person resources, trained in XBRL, required to produce the equivalent of a first year "block tagged" XBRL filing. So I'm assuming for simplicity that each filer required 1 unit equivalent for their first year of filing. I am also, from personal experience and wide discussion, that “detailed footnote tagging” (DFT) represents three times the first year effort, and therefore equals 3 XREUs. Finally, I am also assuming that assurance over the XBRL requires 1 XREU per filer. I know, a very blunt instrument of an estimate, but let’s go with it for a moment.)

So in 2009, we needed 500 XBRL resource equivalent units. And for estimation purposes only let's imagine that detailed tagging requires three times the effort, so in the second year, production of XBRL required the original 500 units (for the first filers) plus 1500 units for their detailed tagging requirement, plus another 1000 units for the second wave of filers.

For simplicity the following chart shows the growth in required XBRL resource equivalent units.

Oh, and just in case, I've also added the equivalent of 1 XBRL resource equivalent unit per filer for assurance starting in each filer's third year - the year they leave their litigation relief.

So why worry? Because a close look at the chart above shows a growth from 500 XBRL equivalent units in 2009 (basically, one filer's basic tagging of face financials equals 1 XBRL equivalent unit in this analysis) to over 50,000 XBRL resource equivalents this year; 2013.

Most CFOs, even if they have not see the chart above (or one like it) instinctively know that they are exposed. There simply has not been the time to train and retain the skill sets and individuals required to actually produce over 50,000 XBRL resource equivalent units. The additional small problem is that this pool of resources are needed simply to meet US SEC registrants only. There are many other XBRL implementations around the world, including India, that are competing for the few existing and established resources.

And knowing that the resources simply are not there, then it is only prudent of those CFOs to worry about their XBRL, and the liability that they now carry.

Why worry? There should be sunshine after rain. But for now, it is still raining brand new, freshly minted XBRL resources.

Put bluntly - the CFO that does not worry about their XBRL is a worry.

We are a year or two away from sunshine.

Living in the Past

One of the most common nasty things said about New Zealand is that on arrival, you go back 20 (or 30, or 50) years into the past. I've always found that to be a cruel thing to say (and now quite untrue), but have to admit that in the 1980s it did feel a bit like the 1970s, or earlier. Quiet, terrible coffee, bright walls, plastic chairs, and bland food.

A few days ago I passed through Jersey's port of Saint Helier (Google Map) on my way to St Peter Port in Guernsey. Being much closer to France than the UK mainland, Jersey and Guernsey were the only parts of the UK to be occupied during the second world war, a legacy that lives on in the street names and attitudes. Occupation saw Russian POWs brought in to build the fortifications that dot the coast. Underfed and poorly treated, accepting any food surreptitiously passed over or under the wire by locals, already themselves burdened with inadequate rations.

Sadly the coffee shop at the port is also a reminder of days gone by. While the city is becoming a strange morphing of Canary Wharf's glass faced buildings and old French(ish) village square, there has been no modernisation of the restaurant at the port. Truly it feels like traveling back to the 1980s or earlier. The coffee is better (just), but the food and ambiance is dire. Oh, and in a nod to the occupation, all the accents are Slavic.

It should be impossible to make a bad cheeseburger. Should. But under wartime conditions, who would be surprised by a little sawdust to fill out the meat content? Still, it is nicely in context for the era, whichever era Jersey remains firmly locked in.

Telling your story, your way - Or why extensions are here to stay

There has been quite a bit of discussion about the idea that XBRL filings should be comparable, and if they are not, that somehow is a surrogate indicator of lower quality XBRL. Yet this flies in the face of one of the key promises of XBRL - "Tell your story, your way".

Companies are different, and after years of attempting to create one-size fits all reporting. The SEC tried, and IFRS continues to think they have a one-size fits most (except SMEs). It remains clear that it is what is different about companies that enables them to be successful.

Three Motivations to Create Extensions

For years the example used was that of a major computer manufacturer and service provider, which included a negative expense line for 'IP expense'. The expense was negative because the company was bringing in over a $1 billion in revenue from patent licenses. The problem was that the data aggregators consistently aggregated (well, it is in the name) would combine all of their expenses into one 'other expenses' line, thus distorting the company's position, and message. They were (are) proud of their portfolio of patents, and reflect that in their business reporting.

We also see the example of the giant Zombie banks. Looking at their XBRL we see extension rates well above 50%. They are telling their story, their way - by intentionally making it difficult for simple Zombie to Zombie comparisons to be run. Difficult in fact, for anyone to perform automated analysis, including regulators.

There are also companies that have limited resources to spend on their external reporting, and XBRL has added to their burden. Sometimes creating a new extension is simply faster and easier than digging through 16,000+ elements, reading detailed definitions, and wondering why their exact concept is missing. Equally, as the US GAAP taxonomy evolves year on year, how many companies are reviewing their extensions, confirming that an extension created in a prior year is still required.

Three examples, three motivations, one outcome: more extensions.

1. Transparency if wonderful. We are different, and we want the investing community to know that we are different. We have unique line items and footnoted facts because we want to demonstrate why we are the better investment.

2. We'll happily pay for opacity. We are different, and exploitation of our differences enables us to be successful. Enabling easy comparisons between us and our 'peers' actually will reduce our ability to exploit our unique advantages - whatever they are. Transparency helps regulators and competitors, not us.

3. We are too busy and with no benefit from investing limited resources in XBRL, we'll get this done a quickly and cheaply as possible. If we can produce XBRL that passes the SEC's validation checks, then that is good enough for us.

One example uses XBRL to improve the quality of available information and increase transparency. The other harnesses the power of XBRL to protect their opacity. "Our 'black box' is what keeps us profitable, reduces competitors ability to match us, and keeps the regulators in the dark (without appearing to want to keep regulators in the dark)". The third simply does not have the resources to waste on XBRL, there's real work that needs doing.

They are not going away

There is simply too large a need for extensions, and too many different motivations. There are also over a million extensions already created. These are not going away. Some, possibly most, are either duplicates or are so similar as the make if difficult to differentiate. Yet these are not going away. If anything, expect the total number of extensions to continue to rise.

After all, even if the SEC, the FASB, the IASB, or any group, attempts to analyse extensions to identify a reduced set of new taxonomy elements, the three motivations outlined above will act as a 'headwind' to companies migrating off their extensions. 

So while we should see fewer 'errors', we will not see significant drops in extensions that are there specifically to influence comparability or reduce the 'auto consumption' of financial and business information. Controlling the message is what business reporting is all about, not providing transparent reporting. 

Only once they have driven down the number of errors will the SEC have the energy or resources to drive down the number of extensions - and for each one, the SEC will need to demonstrate that the filer did not, in the filers' view, have an adequate justification for the extensions created and used. 

Laughing at the High Priests

The Wall Street Journal article on November 13th (Companies Grow Weary of XBRL) contains a lovely line:

"When Cyprus asked a panel of corporate controllers at the conference whether they were getting any value out of XBRL, the hotel ballroom full of corporate finance professionals erupted into laughter." 

In context, Nick Cyprus is the controller and chief accounting officer at General Motors, and this was at the FEI (Financial Executives International) conference in New York this week.

I do not know if the High Priests of the Cult of XBRL were in the room. They usually are. These were just the right venues to peddle the tired old promises that XBRL would achieve everything from faster, better internal communication, more efficient external reporting, faster closes, and a host of other benefits - most of which could be achieved simply by actually effectively implementing the already existing ERP systems. But it is long past time High Priests heard the message - no more bullshit about how XBRL will save my business! As I have said in previous posts, the only winners from XBRL so far (in the US filing implementation) are the SEC (so we are told again and again), the consultants, and Indian outsource providers.

There were options for the SEC, options that would have cost far less and that would have had a negligible impact on American public companies. These options were not taken.

When I chaired the XBRL US Steering Committee in 2005/2006, I had a meeting at the SEC discussing what it would cost to build the XBRL US GAAP taxonomy. My response, based on the detailed planning document provided to me by the XBRL US Taxonomy Working Group, said $4.5 million.

I gave that number, thinking "too high, we're dead".

The response I got was "Dan, we're the government. We really cannot solve $4 million problems. If you'd said $400 million, we might be able to do something." All tongue in cheek, of course.

Yet, how prophetic.

Because now the SEC does have a $400 million problem that they can solve. Let's hope they have heard what they need to hear from business.

As for the High Priests of the Cult of XBRL - I'm afraid they will never hear the laughter - even when it is no longer behind their backs.

The Future of XBRL

I've been watching the rise of "big data" and have seen analytic tools that are simply mind-blowing. Tools that do not care about the format or content or meta-structure of data, yet can perform analysis across massive datasets, with speed and ease. It has made me think hard about the future of XBRL. 

XBRL has come a long way, from its humble roots to a self-fantasised future of business reporting. Unfortunately, XBRL has, through its life, performed a sort of inverted Moore's Law - doubling in complexity as it doubles in self-proclaimed benefit.

In 2000 someone said that XBRL would be fully implemented 'within a couple of years'. Sadly though, an idea that is a fast approaching it's 15th birthday is now looking like the old dame of an idea - still lingering at the dinner parties, still hoping that the limelight will finally shine on her, still dreaming of the red carpet.

The good news for the old dame is that she has a great future, just as do all those wonderful old black and white films that she was in when she was young, alluring, sexy and oh so much 'the future'.

Her future now is as the example of perfection, to be studied and emulated, even though the 'real world' has long passed her by.

XBRL's place in the future is in the universities, as a tool that can be used to teach students about the fundamentals of business and financial reporting. In an age when we are becoming disconnected from the inner components of the world around us, it is important to have educational tools that require the student to dig deeper than the superficial concepts, and into the nitty gritty of actually constructing financial statements, and the analysis of those financial statements.

The beauty of XBRL for accounting education is that is molds both accounting standards and 'almost' programming. The deconstruction of individual 'facts' and the need to effectively and fully define the 'fact'. XBRL documents are logic puzzles as much as anything else, and the process of construction (and use) of these logic puzzles provides a playful way of learning and exploring financial and business reporting.

But just like the dame's days as the beautiful young star of every screen are well past, so are XBRL's days of being the future of business reporting and analysis.

Maybe it is time for the dame to be a little more graceful, recognize that there are new stars, new methods, and new media. Maybe its time for the old dame to put her skills to use helping ready a new generation of stars.

The alternative is to continue to flash the same old jewelry, the same low cut dress, while continuing to expect the call. The call that will not come.