Digital reporting: Why it’s time for Australia

Garreth Hanley:
This is With Interest, a business, finance and accounting news podcast, brought to you by CPA Australia.

Ram Subramanian:
Welcome to the With Interest Podcast. I'm Ram Subramanian, financial reporting lead in the policy and advocacy team at CPA Australia. In today's episode, we're talking about Australia's journey towards digital financial reporting, which is incredibly topical given the recent Productivity Commission interim report on harnessing data and digital technology, and the broader push to adopt more efficient digital financial reporting methods that are more in line with modern-day expectations. 
Today's guest is John Turner, CEO of XBRL International, the non-profit behind XBRL, the freely available global standard for digital reporting. With deep expertise in data transparency and international regulation, John has been instrumental in driving the global shift from paper-based to technology-driven financial reporting. 
As APAC economies really ramp up their digital transformation, John joins us to unpack how structured data is reshaping accountability, analytics, and investor confidence across the region. From policy to practice, I'm hoping the conversation explores what's next for financial reporting and why policymakers need to strike now while the proverbial iron's hot.
Welcome to With Interest, John.

John Turner:
Thank you very much, Ram. Nice to be with you today.

Ram Subramanian:
All right, let's start with the basics and the big picture for our audience, John. So why is digital so important in this area?

John Turner:
Well, in almost all aspects of our lives, we are pretty used to living in a digital environment. We take snapshots on our phones these days, we don't tend to carry cameras around. But when we've taken those snapshots, we then use them directly on our phones, what we don't do is waltz down to the chemist and get them to print them out. To a certain extent, we do that with our reports today. We spend a lot of time, money, energy on the preparation of reports of all kinds. We have pretty sophisticated technology that helps us monitor financial and non-financial disclosures or things we're going to disclose inside our business. That's all digital, it's held inside ERP systems and other systems of record. We consolidate that information, we work hard to do eliminations, we produce reports and then we spit them out in PDF.
And PDF is just paper under glass. You can read that information, but you can't consume that information with a computer. This has been a problem that has been recognised around the world and for the last 25 years, XBRL International has been working on that issue. These days, the vast majority of large markets are requiring companies not to put their information onto a paper-like format, but instead, provide that information in a way that can be understood by computers. That's not a question of doing templates, it's not a case of saying, "Hey, I want everybody to report exactly the same thing." Every report from every company is different, is unique, is telling that company's story. And it's really important that management is able to tell that story in an authentic way and provide that information in a manner that can be consumed directly by all of your stakeholders.

Ram Subramanian:
So John, you mentioned there that entities, companies effectively have everything digitally as far as their internal systems, their accounting systems goes. But once it comes to that external reporting to authorities, to regulators, they use PDFs, effectively, here in Australia at least. I suppose some would see it as a compliance exercise mainly, and so a PDF would be suitable for that reason. But why do you think digital reporting is so important for Australia to move from the current PDF-based reporting to a digital medium of reporting?

John Turner:
Well, look, reporting and disclosure isn't a compliance exercise. Reporting and disclosure is getting companies' stories across.

Ram Subramanian:
Yeah, I have to say there that I did say, "Some might view it as a compliance exercise." I agree with you. I agree with you totally.

John Turner:
No, no, quite. And look, it's fair, "Oh God, I got to do this report and it's a lot of work." Well, yeah, it is, but it's also the way that markets, domestically and internationally, judge you. It's the way that investors decide whether they want to put more money into you or whether they're going to look elsewhere. And whatever you can do to improve that process, and whatever you can do to make sure that that information is going to be consumed as broadly as possible, is very important. Now, it's not a case of just throwing something together and throwing it out the door, everybody knows that there's policy assistance procedures and controls that sit around reports. And that's for a very good reason, because you're accountable for it. But these days we kind of need to be digitally accountable for that information. We need to make sure that this is getting across to all of our stakeholders, that is it accurate, that it is rapid and that that information is visible.
It really goes down to things that economists talk about, cost of capital. And if the digital process, as we think there's plenty of international evidence, would support, is reducing that cost of capital even by a few basis points, 20 perhaps, then that's more than worth it for an economy. But I know that that's difficult if you're an individual company, "Oh, there's something new to do." And that that requires that you develop some new skills and some new muscles, but after a while it'll just be business as usual. This has been business as usual in the United States and in Japan and China and in Korea, and it's not quite business and usual Europe, but it's getting there, it's been there for a few years. But in those other countries and in a lot of other places, it's been there for more than a decade.
And if you go and grab an SEC filing, which I know lots of people do, go and look up the company you might've invested in, or that your super fund has invested in, that's in the United States and go and look up Apple or Tesla or whoever you happen to be interested in on the sec.gov EDGAR system, which is pretty straightforward. When you click through to that document, it comes up with lots of little orange underlines under all of the numbers and under most of the paragraphs, that's XBRL. And that information can be consumed directly by information providers, it can be consumed directly by more sophisticated investors, I mean, unsophisticated ones as well, but there are some very sophisticated investors that spend a lot of time consuming that information directly. And that information can be also looked at by regulators, it can be looked at by journalists.
And what we find in many markets around the world that don't use digital reporting, is a couple of things. First of all, information providers are very logical and they will do their very best to get information onto screens and into databases as quickly as they can. But in smaller markets, they will always prioritise the largest companies. They'll also prioritise the face financials, the biggest drivers perhaps. So the information from your face financials will end up in a report reasonably quickly. If you're a smaller company, that reasonably quickly could be quite a long time. If you got something that's really very important to your firm but is sitting in the notes, well, there's a good chance that's never going to end up on those screens. And that's one of the reasons why you really want to make sure you're getting your message across in a digital way. It's driving transparency in a modern age, and Australia is literally behind, it is one of the blank spots on the map, with a very small number of other countries. So that's why we're keen for Australia to look into this question and join some of their peers.

Ram Subramanian:
Okay. I'm going to ask you about costs in a bit, but before we get there, you talked about AI earlier and we know that AI has been around for a while, but the explosion in the use of AI has been a more recent phenomenon. And in the context of digital financial reporting, in some respects, digital financial reporting, as you've already said, has been around for a while now in other countries, definitely not here in Australia. So what's the role that AI will play in this context of digital financial reporting, and do we really need digital financial reporting given we've got AI that can actually explore the data that is presented, perhaps in a PDF format?

John Turner:
Yeah, so let's discuss that in three ways. Let's start with that point, the question about, "Do I need this? Surely AI can do it, it's pretty magical." I've asked that question and came up with a pretty good answer. The problem with that assumption is that it's not taking into account the way that AI actually works. AI is, in terms of LLMs, your ChatGPT interfaces, those kinds of things, are incredibly sophisticated statistical engines. So sophisticated that actually it's hard, possibly impossible, for people to understand exactly how those mathematical relationships between words, because they're dealing with words primarily, even works. But leaving that aside, that statistical engine is guessing at what is the most likely thing.
So if you are asking it, "What is this information on this page?" And, I don't know, it's a write down of goodwill. Well, depending on what words you put around that disclosure, it may well guess that. But if it is a slightly subtle disclosure, there's a very good chance it won't guess it correctly and it won't guess it in the same way that would guess with another company. Meaning that nobody will be able to compare your company with another company in an accurate manner. There's been a whole bunch of tests by academics on this, some information on our website if you go and look there. But at the moment, AIs are really very bad at doing, in a consistent and accurate manner, or at least a consistent and accurate manner to the extent that an investor or any really reasonable user would accept. They're just not there.
Because every company is different, it seems unlikely, and the AI scientists agree, it's unlikely that AI will suddenly gain a superpower and understand what's in the mind of every management team everywhere on the planet. So that's the core of the problem, it's just not smart enough to be able to understand every management team everywhere on the planet. So we need management to get that idea across themselves.
So we think AI will help in two different ways, and actually that's really exciting. The first way is that in order to produce one of these digital reports, you're just producing a report as you always have, but you are looking at each component of it and you're saying, "Ah, well that's profit. Okay, well what's the IFRS tag?" The tag is like a barcode, "That I'd apply to profit? Oh, there we go, it's called IFRS Profit." That exercise is lengthy if you're doing a huge report. And what we find in most contexts, is that there is an upfront investment in time and learning to be able to do that first round of tagging the first time if you've ever done it. After that, you're only dealing with a small number of things in the disclosures that have changed from year to year, so the process is vastly simpler.
But even that first step, which can be painful, can be radically improved if the tool that you're using is using AI to get you 80% of the way down the track. And that's exactly what a number of new tools which have just come into the marketplace this year, and we're pretty confident there's a whole bunch brewing, will do. They'll go through, they'll tell you, "Alright, this is the right tags for 80%, ah, but this last bit, we don't have the level of confidence that means that we know, so therefore we need some help. Hey, management is this this, is it that, is it something else?"
And it's worth saying, because this is a question we get, "Oh, but hang on a second, I do some unique things in my disclosures." And of course you do, every company does. So there are mechanisms to permit what we call extensions, to capture exactly what companies are doing. That's, if you like, adding a word into a dictionary and just saying, "Right, here you go, this is my word," and that's part of the process. But obviously if you've got something truly unique, then how's AI supposed to know what that is it? It won't.
But we think that this next generation of tagging tools, and by the time that the ASIC and Treasury and others have done their work and we assume, decided to adopt digital reporting, that process will be well and truly embedded and there'll be a number of pieces of software that lets you do exactly that. So that's the second way that AI is going to impact digital reporting, it's going to make the actual tagging process simpler. It'll also help in quality review and in those countries that involve assurance on it, and it's a pretty good idea to have a second set of eyes, an independent set of eyes over your disclosures after all, then the auditors will be able to use tools like that as well. Because if it's got huge confidence about 80% then they don't need to concentrate on that, they can just look at the last 20%. So that's the second step.
And then the third thing is analytics. And we already know that AI is proving extremely good at consuming large amounts of structured information and providing really interesting insights. We think that that is a new way of doing analytics, a really important way of doing analytics, but it's absolutely nothing without structured data, high quality data, to be able to do that work. If you're asking it to just look at web pages without any structure, or PDF without any structure, it will get it wrong, and we've got plenty of examples of that today.
So three ways that it's going to be impacting. No, it's not a magic wand, and it doesn't mean that you don't need to do this and continue producing a PDF, throw it over the wall and hope that somebody else's AI will get your information right, because you shouldn't have confidence in that. That's just wishful thinking I'm sorry. 
I just close that out with one other point, which is that as we go around the world and talk to companies, it's very interesting to hear their perspectives of what inside their organisation is going to change. Because corporates embrace this, "Hey, this is going to be really exciting. It'll help us with this process or that process." And some of those POCs have turned into nothing, but some of those POCs already turning into something pretty useful. And I think that people inside companies all over the world are realising that actually it's going to have a bigger impact than anybody thought at the outset.
Now, from my perspective, I think that creates a sense of urgency. If you haven't invested in AI and you haven't thought about which processes inside your organisation may improve. They're not all going to improve, but some of them may improve, some of them may be completely reworked and rethought about, then why not, because your competitors are. And that's the point, it's going to be a very interesting competitive world over the next few years. As these technologies, not just LLMs, but other advanced AI, starts to really change the competitive landscape, there'll be winners and losers. All the more reason to make sure that your winning performance is as visible as possible to investors all over the world.

Ram Subramanian:
John, I'm going to ask your help in decoding a couple of acronyms, which we all love to use, but it'll be good for the listeners I reckon. The first is, what's a POC?

John Turner:
I'm sorry. A proof of concept.

Ram Subramanian:
Of course. Thank you. And secondly, the big one, XBRL, you are the CEO of XBRL International, and what is XBRL and how does it relate to digital reporting, firstly? And secondly, is XBRL the only show in town?

John Turner:
XBRL stands for Extensible Business Reporting Language, but that's a mouthful, so we don't bother with it, and we just say structured data, digital reporting, or XBRL. It was invented at the very end of the last century in the very late nineties, inside the US CPA organisation, the AICPA. Where a number of accountants said, "Hey, there's these new technologies that are coming along and if we don't take advantage of them, somebody's going to come and eat our lunch." AICPA quickly realised that that was true and that this technology needed to exist and that accountants needed to be well across it. But it also recognised that it's a very broad story, it's not just the US, XBRL is used in more than 70 countries around the world now. And they recognised that it wasn't just relevant to accountants, it's also relevant to regulators, it's relevant to investors, it's relevant to software vendors.
So it created XBRL International, which is a global standards development organisation. We're a not-for-profit, we work in the public interest to help enhance accountability and transparency in a digital age, and we mostly work with regulators around the world as they move down their digital journey.
The second part of your question is, is there something else in town? And there really isn't. There are specialised reporting frameworks for very, very specialist things like international statistical standards. And our biggest competition is Excel, but everybody's Excel spreadsheet is different, and if you want to compare 10 spreadsheets that are being produced containing a profit and loss from 10 different companies, it's going to take you a long time. And that's what XBRL does, it joins up those cells, if you like, by giving unique names to important reporting concepts. It's used for financial reporting, it's used very heavily in prudential disclosures or prudential reporting, which tend to just go to the central bank or to the prudential regulator like APRA. But that happens behind the scenes, nobody else gets to see that information, it just goes to the regulator and stays there.
It's also used for tax reporting in a number of countries, statistical reporting, it's used for things like energy disclosure, it's used for sustainability disclosure, and this is obviously a big new wave and very important. But we're just the plumbing, we're just providing the rules of the road to ensure that companies' digital disclosures can be prepared, can be produced by one piece of software and consumed by another one, in a way that nobody has to worry about, it just works. And that all of that information is valid. Different regulators do this in different ways, but it is possible for the regulators to say, "Hey, don't give me this report if the balance sheet doesn't balance. Don't give me this report if the opening and closing balances don't line up." As I say, different regulators act in different manner in that field, but the provision of data quality rules is a big part of reporting in some countries.

Ram Subramanian:
So John, just to wrap up, you earlier talked about the benefits for investors and others who rely on information produced by companies, and if it's in a digital form, that's great, it gives them better access to the data, better ability to analyse it, et cetera. You also talked about that initial bump when preparers have to go through that initial tagging and coding exercise to get the information digitally presented. How do we convince preparers in Australia, this is a good thing?

John Turner:
You know what? It's very hard to convince preparers that this is a good thing if they can't see why it's a good thing. And they can't see why it's a good thing, unless everybody does it. Let you in on a secret, it's not a secret, but I don't know how many of listeners know this. It's been possible to provide a digital report in XBRL to ASIC for more than 10 years now. And exactly zero companies have ever voluntarily provided that information, because why would you want to be the first fax machine? Why would you want to go through that work when none of your competitors have done it? It is one of those things where the regulators have to come in and say, "Look, we're all going to do this all at once. It's going to be a requirement."
There are a very small number of rather unusual environments where a voluntary disclosure in digital form works across an entire market. But unless Australian companies can be compared with other Australian companies, then having one or two digital reports isn't all that helpful. So unfortunately, it isn't a case, really, of convincing each company individually, "Hey, you should think about the way you produce your report," because if their peers aren't doing it in your country, they're not going to do it either.
Now, as you can probably tell by the accent, I'm an Aussie, I left Australia 23 years ago, and I've been working in this field in one way or the other throughout that period. And have seen these conversations in country after country. And there tends to be objections from issuers, from companies, "Hey, we're not sure we want to do this, we already do a lot."
Okay. But think about the money and time you put into preparing your reports. It's pretty extraordinary, creates a lot of stress, creates a lot of pain to produce your PDF. And that PDF is in no way as useful as it should be. Providing the exact same information in another format creates information that can be used by domestic and international investors, can be used by companies themselves for benchmarking, much more sophisticated things than you can probably hope to do with a lot of Excel work. That exercise is something that needs everybody to do that work together. Which is why these tend to be questions for policy makers and regulators, rather than questions for individual companies. Because if an individual company goes and produces a digital report, well, we call that an example, in a market that hasn't been doing digital reporting. That's great and it's positive and it's good learning exercise, but it's not going to change things, you need the entire market to do so.
So that process is, really, a question for the entire country, and that's why the Productivity Commission has just been doing a consultation about that. So that process is a societal question rather than one down to individual companies. Companies shouldn't be afraid of this exercise though. Internationally, the costs associated with pairing a digital report the first time around, is between 1% and 3%, kind of depending on how you do it and how well you've shopped, there's a very competitive market for software, to produce that report the first time. And after that, you're just dealing with deltas, you're just dealing with small changes, so the costs come down very considerably.
So it's a societal discussion, it's a policy discussion rather than one that's for individual issuers. If you talk to investors that understand this space, they say, "Oh, why doesn't everybody do all of their reporting in XBRL?" And if you talk to preparers, and they never had to do it in the past, they say, "Well, why would we want to do that? Surely that's something that investors can do." No, that's the point, companies need to be accountable for their own information.

Ram Subramanian:
Thanks for that, John, and that's why we at CPA Australia are recommending a mandate for digital reporting by listed entities. And let's hope that transpires at some time in the near future. We better wrap it up there, John. But thank you for all those wonderful insights and for appearing on the With Interest Podcast.

John Turner:
It's been a great pleasure. Anytime. Nice to speak Ram.

Ram Subramanian:
For our listeners eager to learn more, please check out the show notes for links to more information and additional resources from XBRL International and CPA Australia. Don't forget to subscribe to With Interest and share this episode with your colleagues and friends in the business community. Until next time, thanks for listening.

Garreth Hanley:
You’ve been listening to With Interest, A CPA Australia podcast. To find out more about our other podcasts and CPA Australia, check the show notes for this episode. And we hope you can join us again for another episode of With Interest.