Friday, March 05, 2010

Red Tape Reduction Commission
by Gerald Trites

The Federal Budget tabled yesterday contained an interesting announcement that is very pertinent to what the XBRL community is trying to accomplish. The announcement was as follows:

"Red Tape Reduction Commission: A commission, involving both parliamentarians and private sector representatives, will be established to review federal regulations in areas where reform is most needed to reduce the compliance burden and provide specific recommendations for improvement."

The Budget report tabled yesterday goes on to say:

"Reducing red tape for businesses is an ongoing challenge that requires continued attention. The Canadian Federation of Independent Business (CFIB) estimates that businesses in Canada currently spend over $30 billion each year complying with regulations."

At present companies who file with the federal departments and agencies must file a diverse number of different reports, usually in different formats. The inefficiency of this approach costs the filers millions of dollars, perhaps billions, in unnecessary expense for systems maintenance, data input and form completion. If they were able to use a standard system - XBRL - they could save considerably in these areas.

Over twenty countries around the world have implemented programs to reduce the compliance burden and red tape for companies dealing with the governments. In several of these countries, XBRL has been considered and/or recognized as a way to assist with achieving the goals of these programs.

The Netherlands, for example, recognized this several years ago and has been implementing XBRL across the board for government filings.  "It was in response to concern for the enormous incidence of duplication in reporting that the Netherlands Government in 2004 launched a major initiative known as the Dutch Taxonomy Project."

"In their progress report to the Dutch Government in April 2006 officials indicated that from January 2007 the majority of small and medium sized businesses would be required only to provide annual accounts data to the Chamber of Commerce (thus replacing traditional multiple reporting arrangements). The XBRL taxonomy will make it possible to supply the data to other institutions with 'just one push of the button'. The estimated value of burden reduction from this measure is put at approximately €400 million per annum. In addition, full implementation of the Dutch XBRL taxonomy in 2007, with its wide incorporation across relevant financial accounting software packages will result in substantial time savings to business- up to 33% compared to the time required for traditional annual accounts." (emphasis added). A similar program is underway in Australia and under consideration in other countries.

The adoption of XBRL for rationalizing the reporting of data to governments is a feasible and cost-effective way to achieve the laudable objective of substantial reduction in the cost of compliance by Canadian companies. The new Red Tape Reduction Commission should give top priority to its consideration.


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