The Time Is Right for Standard Business Reporting
January 28, 2010
How many times have you heard this statement: “A key frustration of business is wasting time sending the same or similar information in different formats to each government agency.”
This quote is from Lindsay Tanner, Australia’s minister for Finance and Deregulation (yes, deregulation). Describing that country’s Standard Business Reporting (SBR) program, Tanner said that the SBR program “has identified the potential to reduce the number of individual pieces of data businesses have to track, analyze and report by 71 percent.”
The primary objective for SBR is to lessen the compliance-reporting burden. To realize this objective, the Australian SBR program has developed an eXtensible Business Reporting Language (XBRL) Taxonomy to harmonize information and compliance reporting requirements across a wide range of federal and state agencies. Using a common set of reporting definitions and a single language to communicate electronically, software developers and intermediaries are working to further reduce redundant business requirements.
Paul Madden, director of Australia’s Treasury SBR Program, said “There are significant benefits in the use of XBRL as the single language in this field of reporting, but the true benefits start to accrue when the reporting requirements of many (such as government regulators) are defined in a single set of definitions, such that once mapped, the information might serve multiple reporting purposes.” This, he added, is what SBR sets out to do.”
Chris Bowen, minister for Financial Services, Superannuation and Corporate Law, explained why Australia is implementing SBR. “Existing reporting requirements impose a significant burden on Australian businesses, with many often having to report the same or similar information to 12 states and territory government agencies. Australian businesses will save close to AU$800 million (about US$735 million) annually when SBR is fully operational.” Implementation is set to begin in July 2010, he added.
This estimate of business cost savings is not unreasonable. In a report issued in July 2009, the Organization for Economic Co-Operation and Development (OECD) estimated that the government-imposed administrative burden on businesses amounted to roughly 2.5 percent of gross domestic product (GDP), and that SBR could reduce these costs by at least eight percent, cutting the burden by .2 percent to 2.3 percent.
In both Australia and the Netherlands ” where SBR is also in place ” this would represent annual savings well into the hundreds of millions in either currency.
Madden noted that the benefits of streamlined reporting aren’t limited to government requirements, as SBR can also be used for business-to-business reporting. “Part of the elegance of the SBR design is the way its open standards facilitate scalability. This gives SBR the potential for achieving even greater benefits for the future,” Madden said.
What Is SBR?
SBR is not universally understood. According to the OECD report, SBR is based on four fundamental concepts:
A taxonomy is essentially a data dictionary and manual taxonomies have been used by governments for years. Unfortunately, different agencies within a given jurisdiction often use different taxonomies, meaning there could be different definitions for the same data item within different agencies. This hinders electronic filing, because businesses must map data elements from their accounting systems to different data definitions and formats.
SBR encourages the creation of national financial and business-reporting taxonomies that both government and businesses could use to describe not only company disclosures, but also the reporting information required for tax, statistical and payroll purposes. All of this information comes from the company’s financial system at some point.
The SBR concept suggests mapping or attaching the XBRL tags to the core financial information within a company’s accounting/financial system. The information needed for government reports can then be read or aggregated providing a “pre-fill” of the required data. This means a company can map it once and use it many times.
While the real outcome of SBR is to ease the burden on business to government reporting, the value of the real-time intelligence of the mapped data will quickly provide companies with a new level of financial reporting to satisfy their chief financial officer, tax manager and investment risk manager.
The SBR projects use XBRL to create the relevant taxonomies. The XBRL concept is simple. Instead of treating financial information as a block of text, it provides an indentifying tag for each individual reportable element, which is computer readable. SBR is not a technology initiative, but a policy initiative that harnesses relevant Internet standards.
To read more about SBR and gain perspective on U.S. readiness for SBR adoption, review the full article ” The Time Is Right for Standard Business Reporting (PDF).
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Reprinted with permission from Financial Executive, (November 2009).
© by Financial Executives International; 973-765-1000; www.financialexecutives.org.