Kristine Brands, Assistant Professor of Accounting in the College for Professional Studies at Regis University, contributes to Strategic Finance. This is an excerpt of her post, by permission of Strategic Finance.
Every year, U.S. publicly listed companies make hundreds of thousands of corporate action announcements to disclose decisions, events, and activities announced by their boards of directors that affect a company’s shareholders.
The actions are classified into three categories: mandatory actions affecting all shareholders, such as a merger or acquisition; voluntary actions, such as a tender offer for a merger; and mandatory actions with choices, such as choosing between a cash or stock option with one choice designated as a default. The breaking news nature of corporate action announcements may have an immediate and material effect on a company’s stock price and have the greatest value to investors when disseminated quickly and accurately.
This column examines the challenges of the current corporate action reporting process and the initiatives under way to use eXtensible Business Reporting Language (XBRL) for corporate action disclosure to streamline the process to improve the quality and timeliness of the announcements.
Issues and Challenges
Paper-based systems drive the current corporate action reporting process. After an announcement is released, it may pass through data providers, investments analysts, custodians, and subcustodians (foreign and domestic) before reaching investors. The meaning of the information is at risk because corporate action users need to interpret the action message from form-based notifications such as press releases or PDF files that communicate the information.
There is no standard format for the action notifications, leaving interpretation up to the users. The longer it takes to interpret an announcement’s message, the faster its value drops.
Read the rest of Kristine Brands’ article in Strategic Finance, “XBRL and Corporate Actions Reporting.” (PDF file)
Kristine Brands has extensive work experience in finance, accounting, controllership, auditing, software engineering, and financial systems design and implementation. Holding both CPA and CMA certificates, Kristine is heavily involved in the research and policy areas of performance measurement, International Financial Reporting Standards, and XBRL and interactive data. Speaks at national accounting conferences on accounting issues and serves on the Institute of Management Accountant’s XBRL Standing Committee. She also heads up Regis University’s introductory XBRL course and advanced XBRL course, “Financial Applications for XBRL and Interactive Data.”