Information Technology
The X Factor
When it comes to the future of Internet-based financial information, XML and XBRL mark the spot.
FROM: SEP-OCT 2001 ISSUE | BY JOHN W. YU
It is increasingly evident that the Internet is the new medium for everything financial. A recent survey of chief financial officers (CFOs) by consulting firm RHI Management Resources found that financial executives have an integral role in the development of Internet-based financial applications.
And that's why it's so important for CGAs to know that all information published on the Web is being revolutionized with the creation of a new online publication language, XML (Extensible Markup Language). And a new financial reporting language called Extensible Business Reporting Language (XBRL), which is based on XML, is changing the nature of online financial information.
While most CGAs would likely not do any of the coding themselves, understanding the impact of XML and XBRL will help them in their roles as CFOs, controllers or chief accountants. In particular, CGAs need to understand how to use XML and XBRL to publish financial information online for their employer or clients or to analyse financial information published on the Internet.
From HTML to XML
To date, most Web site content, including a lot of financial information, is stored and displayed in HTML format (or sometimes PDF). Increasingly, however, HTML is too limiting. One of HTML's major weaknesses is that it deals only with the display of information, it does not describe the content.
Information provided on HTML pages cannot be easily analysed because the pages are static in nature (just words and numbers formatted on a page). Like HTML, content stored in PDF format is similarly limiting. For example, financial reports published on the Web in HTML or PDF limit the user's ability to analyse the financial information provided. To perform any analysis of the information, users would have to re-enter it on a spreadsheet program or financial analysis program first.
So a quiet revolution has been under way for several years under the auspices of the World Wide Web Consortium (W3C), which is designing and defining XML as the language of choice for storing online content (for more information on W3C, see www.w3c.org). All major players in the Internet world, such as Microsoft, Oracle and IBM, to name a few, have now endorsed XML. And, all major Internet browsers, from Microsoft Internet Explorer to Netscape Navigator, are XML-ready.
Unlike HTML, XML is an online content description language. The best way to illustrate the difference between HTML and XML is by a simple example.
An online listing of a CGA course description may look something like the following:
FA1
Financial Accounting 1
Fall session
#205
$550/$350
In HTML, the code to store and display the above information would look like:
<p><b>FA1</b>
<br><i>Financial Accounting 1</i>
<br>Fall session
<br>#205
<br><b><i>$550/$350</i></b></p>
The codes enclosed in brackets are standardized HTML tags that specify how each piece of information will look. For example, <b> is the tag to turn on boldface and </b> to turn off boldface.
In XML, the code to store the same information would look more like:
<course>
<short name>FA1</short name>
<full name>Financial Accounting 1</full name>
<session>Fall session</session>
<section>#205</section>
<course fee>$550</course fee> <re-enrolment fee>$350</re-enrolment fee>
</course>
The codes enclosed in brackets are XML tags that you create yourself to identify the nature of the information. For example, the pair of tags <section> </section> describes the information in between as referring to a section number (in this case, the section number is 205).
Then, to control the display of the information, a separate style sheet, specified in XSL (eXtensible Style Language) is set up and applied to the information. Changing the look is easy to do because all you have to do is change the specifications on the XSL style sheet.
By using different style sheets, XML documents can adapt to different types of computer sizes, unlike HTML Web pages, which are designed to work only with certain browsers and certain screen sizes. This is very important as we move to a more mobile form of Internet that is accessible on desktop computers, notebook computers and handheld devices.
What makes XML shine even more is its applicability beyond the Internet. Organizations, for example, typically publish their financial information on paper as well as on the Internet, and for different purposes. Currently, the same information would have to be reformatted, probably in different software, for each media or purpose. XML codes provide a means of describing documents independent of medium. Using different style sheets, you can render the same XML document in different ways for different uses, e.g., for print publications in addition to Web sites. To render an XML document in print, all that is needed is a style sheet to control the appearance of the printed document.
XML also provides users with the power of analysis. In the previous example about course description, the code <course fee> describes that particular incidence of data ($550) as the course fee for this particular course. So if we need to calculate an average course fee for all courses, this information can be easily extracted and computed. The information in XML codes that describes the data content is what makes analysis possible. Note that this information is missing from the equivalent HTML document.
With its analytical capabilities, XML is the perfect language for online financial reporting. And, if generally agreed to XML tags for financial reporting can be established globally, then financial reporting and analysis would be significantly simplified.
XBRL for Financials
XBRL, formerly code-named XFRML (Extensible Financial Reporting Markup Language), is an open specification that uses XML tags to describe financial statements for both public and private companies. XBRL is basically a set of XML specifications for the financial information industry.
The American Institute of Certified Public Accountants (AICPA) started the XBRL initiative in 1999, which quickly turned international. Currently, a consortium of almost 100 organizations worldwide is actively participating in the development of XBRL specifications. CGA-Canada, for example, joined the XBRL Consortium early this year.
According to the XBRL Consortium (www.xbrl.org), XBRL is a freely licensed "standards-based method with which users can prepare, publish (in a variety of formats), exchange and analyse financial statements and the information they contain." It does so by permitting the automatic exchange and reliable extraction of financial information across any software format and technology worldwide through the use of standardized XML tags.
Making use of the power of the Internet, XBRL improves and accelerates access to financial information, simplifies financial analysis, and reduces the need to prepare financial information more than once to meet the different needs of various users. When fully implemented globally, the work of accountants will be significantly impacted — the publication of financial information will be more streamlined and the analysis of financial information sped up. More importantly, XBRL can lay the foundation for continuous audit, a dream of auditors for many years.
These are the reasons why most of the major accounting and financial software publishers are active in the XBRL Consortium. There's little doubt that producers and users of financial information would stand to benefit from the efficiency XBRL has to offer. Anyone from public and private companies, the accounting profession, regulators, analysts, investors, brokers, capital markets, banks, lenders, and accounting and financial software developers will feel XBRL's impact.
For example, if a corporate accountant has a set of financial reports prepared according to XBRL standards, the same information can be printed on paper, displayed on the Web, sent to the bank as credit reports, or sent to investors and analysts to enable them to make informed financial decisions. The same XBRL document can be rendered for different formats or uses using style sheets.
Do accountants need to know how to code in XBRL? The answer is no. Software publishers such as ACCPAC International and Great Plains Software are actively participating in the XBRL Consortium because they want to extend their software so that financial statements can be published in XBRL formats without accountants having to code the XBRL tags.
XBRL 1.0 was released in 1999. Currently, the XBRL Consortium is working on XBRL 2.0; the date for release is not yet scheduled at the time of writing.
X Marks the Spot
CGAs should keep a watchful eye on the development of XML, especially in relation to XBRL, as its impact on how financial information is encoded, stored and published begins to be felt globally.
[ TOP ]
John W. Yu, MSc, CDP, FCGA, has been in the IT industry since 1970 in a broad range of roles in technology and in management. He is vice-president of IT at CGA-Canada and the co-ordinator of "Double Click."