Like the terms ‘Golden Record' and ‘Golden Copy' before it, we are no doubt hearing the use of the term XBRL as the ‘new' thing to standardizing data and reducing corporate action announcement risk.
However, currently, public company press releases and prospectuses do not follow a standard in how corporate action events are defined.
Let's take an example of a simple Stock Split by Japanese company Mizuho, originally announced in May 2008. The headline on Reuters was "Japan's Mizuho plans 10-for-1 stock split"; sounds simple enough. Reading further into the article it states "the bank
will issue 999 new shares for every one" and raise the minimum trading unit from one share to 100. So now is it a 999-for-1 stock split?
Let's also include the interpretation of the announcements from a UK-based custodian and a US-based data vendor. The UK custodian decided it was a ‘Bonus Issue' and shareholders will receive 999 additional shares for every one share held. The US data vendor
announced it as a ‘Stock Split' and shareholders will receive 1000 new shares for every one old share held.
Both companies' announcements resulted in the same number of new shares, but they were announced differently because of different local market practices. Had both sources announced to a US Asset Manager who then misinterpreted the data this would impact
NAV calculations and lead to further errors.
The point of this is to illustrate that there are still local market practices that also lead to incorrect interpretations, irrespective of the details announced by the issuer. The use of standard event types from the issuers, based on their local market
guidelines, will go a long way to resolving these types of problems and again reduce the need for interpretation and the associated risks. Hence this issue must also be addressed to ensure the success of the XBRL announcement initiative.
Blog updated: 20 May 2015 06:26:40