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Financial reporting on auto pilot

After months of steering meetings, taxonomies and testing, ExtensibleBusiness Reporting Language finally moved from concept to reality inOctober, when Reuters published its Q3 2001 results.

Mark Hunt, Reuters’ director of XML strategy is pleased with thebreakthrough. “The XBRL debate has progressed from talking about thestandard to applying it. We have put out our third quarter figures in XBRLto stir up some real interest and achieve thought leadership in theissue,” he says.

The theory behind XBRL is that each piece of a company’s financial datacan be ‘tagged’ with a unique code identifier. Tagged data can then beheld in databases and called up in seconds to produce internal andexternal financial reports without the need to relocate and re-keydata.

The beauty of this process is that it separates raw data content from themedium of presentation. This enables the same core data set to be flowedinto any application or medium, for viewing on any device. “Apart from theraw XBRL, we also produce HTML and Word versions of the results, but allfrom the same electronic data set. We even produce a version in Quark thatis used for print,” says Hunt.

Most visitors to Reuters’ results website aren’t interested in XBRLdownloads. But from Reuters’ finance team’s point of view the technologyis invaluable because it simplifies the investor relations function,automating the publication and dissemination of reports.

“We know what our reports will look like, so we used dummy numbers andcreated a template in advance,” says Hunt. “When the real results come inat the last minute, the tags are selected and the right numbersautomatically flow into the template. We basically press a button andeverything goes live. The complete process takes about half-an-hour fromthe results arriving from finance.”

XBRL gets really interesting if a company amasses large amounts ofhistorical financial data. Strategy-minded finance guys can then runbusiness analytics, and, once the standard is widely adopted,like-for-like financial comparisons with other companies. In the widerfinancial community, XBRL databases can be used by auditors, analysts andjournalists for data aggregation and research.

Transparency of information is key to XBRL, but the accessibility andflexibility of financials may create security issues. When you get areport through the post it is branded and signed in a way that makes itofficial.

An electronic version has less integrity. Moreover, if a company’s datacan be downloaded and manipulated by a third party there is a risk ofmisrepresentation – malicious or not.

Reuters and the XBRL steering committee,, are currently debatingsecurity issues. But, at the investor relations level there may be asimple solution. “One of the formats we present XBRL tagged data in is thePDF (portable data format). People still want to read this stuff and itprovides a secure medium,” says Hunt.

According to Adobe, the US company that supplies the PDF reading andcreation software, Acrobat, more than half of all listed companies alreadycarry a PDF version of their annual report online. Mark Floisland, Adobe’sUK marketing director thinks PDF take-up will extend to all financialreporting, especially as XBRL rolls out.

“If a company is externally communicating sets of financial data, one ofthe key benefits of XBRL is where it can easily re-purpose information forshareholders,” says Floisland. “This is usually distributed in paperformat, but there is absolutely no reason why paper should beinvolved.

We are seeing a marked increase in NASDAQ-listed companies that offertheir financial statements as PDF first, and in paper format only ifdirectly requested by the shareholder.”

This, adds Floisland, points the way to automated investor relations.

XBRL tagged data can be set into a PDF template and emailed toshareholders in minutes, without compromising security or integrity.

Understanding the software is no longer a barrier either. Microsoftestimates there are 500m PC users worldwide – and Adobe has seen 320mdownloads of its free Acrobat Reader software from its website.

“From a legislative angle, I think we will see a mandate issued by the LSEin the not too distant future saying there is no longer a requirement forpaper-based financial statements,” says Floisland. “And, as people stopconsuming paper reports in favour of electronic media, then XBRL and PDFswill create a platform that will make automatic electronic communicationsthe norm.”

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