XBRL: Bringing Financial Reporting to the 21st Century
Current uses in global markets and the United States explored.
July 21, 2008
by Greg Zegarowski
XBRL, or eXtensible Business Reporting Language, was conceived 10 years ago in the United States and was supported by the AICPA. The technology quickly leapfrogged the oceans and found applications in Europe and Asia. Today, XBRL is truly a global phenomenon and is poised to permeate the financial reporting supply chain in the United States. The Securities and Exchange Commission (SEC) recently proposed the mandated use of XBRL for all public filing companies in a three-year phased-in approach starting with fiscal periods ending on or after December 15, 2008, for companies with worldwide public floats greater than $5 billion.
Uses of XBRL
XBRL provides a way to improve the timeliness, accuracy and accessibility of business information. It is an international Web-friendly standard for the tagging of business information in machine-readable formats. Some have likened tagging to “bar-coding” the information. XBRL is an open standard and is free of license fees. It can facilitate business reporting in multiple languages and under different accounting standards such as US GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards).
Reader Note: Meet the author at the upcoming XBRL Workshop: Concepts & Applications Understanding and Using the New Information Standard, July 22-23, New York, New York
XBRL is already being used by over 8,000 banks in the U.S. that submit quarterly call reports to the FDIC (Federal Deposit Insurance Corporation) through an XBRL-enabled data collection system. Mutual fund companies can now voluntarily submit data in XBRL to the SEC relating to fund cost, risk and past performance thus enabling better financial decisions by individual investors. The main value proposition for companies is that XBRL can streamline internal reporting, assist with migration of data to new systems and integrate data across platforms and spoken languages. There are compelling value propositions for CPAs and auditors who will leverage XBRL for benchmarking corporate performance and enhancing continuous audit environments.
How XBRL Is Going Global
The XBRL International consortium has grown to over 550 companies and organizations around the world. In the spirit of the mantra “think globally, act locally,” XBRL is an international standard that is mainly implemented at local levels through jurisdictional organizations such as XBRL-US. Any summary of how XBRL is currently being implemented around the world is destined to be outdated as soon as the list is published. The following are examples of how XBRL is going global:
The motivation for using XBRL is grounded in the conviction that the time is ripe for major improvements to the way business information is communicated in our interactive age. Speaking to the American Enterprise Institute, SEC Chairman Christopher Cox noted,
“Technology has revolutionized almost every aspect of our lives — the way we communicate with one another, the way we listen to music and even the way we play games. And yet, with one of the most important things we do in life — prepare for the future financially — what do we do? We are still, today, relying on the open-cry pit system of the 1700s and the printed page of the Gutenberg press of the 15th century.”
XBRL brings financial reporting into the 21st century. The SEC has given the financial community a great boost with its investment in XBRL-based interactive technologies. Organizations such as XBRL-US, the AICPA and many others are actively promoting the widespread use of XBRL and encouraging direct participation and input from financial community members.
As companies prepare to launch into their initial XBRL-based communications, getting a sound understanding of this new technology and organizing internal teams will be essential. On July 22 and 23, the AICPA is hosting its first training conference on XBRL in New York. The AICPA XBRL Workshop is designed to help company leaders understand this new communication standard and transition their companies to the new financial reporting mandates. Conferences such as the AICPA XBRL Workshop are a great way to ensure success on that journey.
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Greg Zegarowski is President of Financial Leadership Corporation and a member of the XBRL-United States Communications Steering Committee.