X marks the spot
If the term ‘XBRL’ means nothing to you, read on, because the eXtensible Business Reporting Language looks set to loom large on the financial reporting landscape. It can potentially make it easier to analyse, publish, use, re-use, and exchange finance-related information – providing accountants, analysts, competitors, investors, regulators, and other stakeholders with access to more transparent and usable information.
However, XBRL can be confusing. Even the name is misleading, because XBRL is not a language. It is a standard that describes financial information using tags (or labels) that work in a similar way to bar codes. It is based on the ‘lingua franca’ of the Internet, XML, a system that uses data tags to make it easier for computer applications to talk to each other. These tags also work like barcodes, but instead of making it easier to handle asset management or manage retail sales, XBRL makes it easier to identify different items of financial information.
XML has already established itself as the key to distributing information in the Internet age, and XBRL could be the future of financial reporting. Once an XBRL tag has been used to describe an individual item, such as inventory or ‘elements de stock’, it becomes easier to identify – regardless of national and international differences in reporting standards, languages, and terminology. So it could unlock the information that is currently trapped by disparate and incompatible databases and computer systems.
While HTML describes just the appearance of digital information (such as Arial, italics, or 10 point), XML tags are descriptive labels that can be attached to the information, along with instructions for its use. This is done through a series of taxonomies or dictionaries. These are standard sets of tags, agreed by an industry or group of interested parties, for a product or set of products; hence XBRL for financial reporting.
Specialist accounting taxonomies now include IFRS-GP, which was the world’s first full financial statement taxonomy, developed by the International Accounting Standards Committee Foundation; and the XBRL International developments XBRL FR and XBRL GL – the former is a definition for a financial reporting language, the latter for direct data mapping. But they have been a long time coming.
It is almost 10 years since the American CPA came up with the idea that led to XBRL, and the technology has been slow to catch on. For the technology to reach the critical mass required to bring big benefits to business, commercially available applications are a must. But for software companies to use XBRL as the basis of product development or enhancement, they need guidance from the accountancy profession – and this has taken some time. Software companies that have built XBRL capabilities into existing applications, or used XBRL to create new products, now include Cartesis, CaseWare, DecisionSoft, Edgar Online, Fujitsu, and Microsoft.