Finance directors across the globe would be well advised to keep an eye on
the progress the international accounting standards setters are making on
eXtensible Business Reporting Language (XBRL). XBRL is the business reporting
version of Extensible Markup Language (XML), which codes individual items within
documents so that they can be immediately accessed.
XBRL International a not-for-profit consortium of companies and agencies
worldwide working to build XBRL and promote and support its adoption has been
saying for some years that XBRL will revolutionise financial reporting. Those
who support XBRL say it provides major benefits in the preparation, analysis and
communication of business information offering cost savings, greater efficiency
and improved accuracy and reliability to all those involved in supplying or
using financial data.
But until recently, they have been voices in the technology wilderness. Now,
maybe, their time is coming. Both the US Securities and Exchange Commission and
the International Accounting Standards Committee Foundation (IASCF) the body
that oversees the board of the International Accounting Standards Board (IASB)
have recently started to promote XBRL.
In January 2006, the SEC proposed a deal with companies. They will receive
“expedited reviews” of registration statements and annual reports in exchange
for taking part in the SEC’s interactive data initiative. SEC chairman
Christopher Cox says: “Interactive data holds the promise of transforming the
static, text-only documents companies file with the SEC into dynamic financial
reports that can be quickly and easily accessed and analysed.”
The SEC has been experimenting through a voluntary programme of receiving
financial information in XBRL format since April 2005, but now it wants to do
“The best way for filers to understand how interactive data works is to
participate in the voluntary program. The filers will have an opportunity to
share with the SEC their individual experiences with preparing, making and
analysing their interactive filings. They will also better understand how
interactive data can help streamline their financial reporting process,” says
The SEC plan is for companies to provide financial data contained in their
periodic and investment company reports in XBRL and tell the SEC how it worked,
including a view of costs and benefits. If XBRL works it could become the US
required reporting format, helping the regulator analyse the thousands of
reports it receives.
While the SEC is working with XBRL, the IASCF is perhaps more at the
preliminary stage, but it has committed substantial resources to the project. It
recently launched a new website in a bid to publicise its work in this area.
Commenting on the launch of the new website, Kur Ramin, chairman of XBRL
International, says: “It is important we keep the XBRL and wider community aware
of all current and impending developments.”
The development so far is that IASCF is building an IFRS XBRL taxonomy. This
is an electronic description and classification system for the contents of
financial statements and other business reporting documents. The IASCF points to
its constitution in particular, the objective “to develop… high quality,
transparent and comparable information in financial markets and other financial
reporting to help participants in the world’s capital markets and other users
make economic decisions” as a reason for wanting XBRL to work.
The International Financial Reporting Standard taxonomies, or XBRL tags,
assist the transfer of financial information reporting prepared using
international accounting standards via the internet according to a single common
electronic protocol. This creates comparable financial information in an
efficient and timely manner. The IASCF XBRL team is working on a convergence
project aimed at demonstrating how XBRL helps to make cross-border financial
reporting information more comparable.
Whether finance directors and their teams embrace XBRL, or whether they are
eventually forced to come on board, remains to be seen. Technology specialists
and regulators are claiming that XBRL can help regulatory agencies and FDs in
the search for a unified solution for compliance, reporting and financial
disclosure activities. Perhaps years of dealing with in-house accounting and
reporting systems have left FDs thinking that they have heard it all before.
In the pipeline
XBRL is not the only acronym in the finance XML language. A host of other
financial XML is under construction including:
• Financial Information eXchange (FIX) Protocol: For real-time electronic
exchange of securities transactions.
• Financial products Markup Language (FpML): For swaps, derivatives and
structured financial products.
• Interactive Financial Exchange (IFX): For electronic bill presentment and
payment, business-to-business payments and banking, automated teller machine
communications, consumer-to-business payments and banking.
• Open Financial Exchange (OFX): For electronic exchange of data between
financial institutions, businesses and consumers designed to support financial
activities, including investment transactions download.