Double Click
The Language of XBRL
XBRL developments are rapidly changing the language of finance.
FROM:
SEP-OCT 2005 ISSUE | BY
DIANE CUSHING
In the pressure-cooker that is year-end, with looming deadlines and long hours, the production of clear, accurate financial statements for owners and shareholders is the number one goal. But do you ever stop to ask yourself how readily consumers can make use of your statements?
Most accountants use a combination of accounting software, spreadsheets, pdf files and HTML documents to prepare and publish financial information. But XBRL, short for Extensible Business Reporting Language, is quickly becoming the new global standard, enabling faster, less costly reporting. It provides a single method for publishing statements and transmitting them to external parties. XBRL opens the door not only to efficient processing of financial data, but also to comparative analysis of information originating from different sources — without the need to
re-enter or
re-format data.
What is XBRL?
XBRL is based on Extensible Markup Language (XML) — a worldwide standard for describing data and transmitting it over the Internet. It uses tags to "mark up" or describe data so the document can be easily processed by computer software, but also read by humans.
XML has spawned over 200 specialized languages and XBRL is just one of them. XBRL uses taxonomies to define the items involved in different types of business reporting, and the relationships among these items. The "extensible" part of XBRL allows companies to extend an existing taxonomy to present items unique to their situation.
A similar concept is NETFILE, technology that has helped the Canada Revenue Agency dramatically reduce both turnaround time and transcription errors in processing tax returns. Canadian taxpayers are delighted to receive their tax refunds promptly when they use this Web-based application. However, unlike NETFILE, which is proprietary and single purpose software, XBRL is an open standard, free to use, and can be employed for multiple purposes.
A Brief History of XBRL
Charles Hoffman, a CPA in Washington state, brought his concept of using XML for financial data to the American Institute of Certified Public Accountants (AICPA) in 1998. The AICPA provided support and funding to pursue a prototype. In 2000 the first taxonomy, covering commercial and industrial companies in the United States, was released. In the same year, XBRL International was formed. There are now 11 formally recognized jurisdictions and five provisional ones. The 11
thInternational Conference held in Boston in
April 2005 attracted over 380 delegates from around the world.
XBRL in Canada
Canada was an early participant in the XBRL Consortium, forming a jurisdiction in 2001. CGA-Canada has been a member since the beginning. In
November 2004, XBRL Canada released a bilingual taxonomy that embodies Canadian GAAP for Primary Financial Statements. Work is underway to include Notes to the Financial Statements and Management's Discussion and Analysis.
CGA-Canada is taking a leading role in promoting this technology by committing to publish the Association's financial statements in XBRL beginning with the
2004-05 fiscal year.
Membership in the Canadian group continues to grow as more organizations recognize the opportunities XBRL offers, not only for ease of preparing and distributing financial data but also for greater transparency in reporting. The Ontario Securities Commission is now an official observer of XBRL Canada, and Statistics Canada is actively exploring the use of XBRL for its surveys of corporate financial performance.
XBRL Around the World
Our neighbours to the south have been instrumental in the development and promotion of XBRL. In February 2005, the U.S. Securities and Exchange Commission initiated a voluntary program encouraging companies to supply their financial information in XBRL format.
Another major effort is the U.S. Call Report Modernization Project by federal bank regulators, among them the Federal Deposit Insurance Corporation. Slated to go live this fall, the program will use XBRL-tagged data for the quarterly reports from 8,300 financial institutions. Estimated savings of
$26 million and a reduction in processing time from
75 days to two days are anticipated.
Other parts of the world are even further ahead in XBRL implementation. To raise awareness of XBRL, the European Commission has allocated one million euros, and there are currently over 30 projects in progress in Europe. The Netherlands has undertaken an ambitious government-wide initiative to reduce the administrative burden on both companies and regulators. Municipalities already use XBRL to report to Statistics Netherlands. Cost savings of
350 million euros annually are anticipated when all government reporting is in XBRL.
But XBRL is more than just financial statements. In the UK, the Inland Revenue is accepting XBRL filings for corporate tax returns on a trial basis. The Bank of Spain is identifying suspicious transactions in an
anti-money laundering bid, and Australia is collecting lending information from banks. The Tokyo Stock Exchange has been taking XBRL submissions since 2003 and many other stock exchanges are piloting its use.
XBRL and the Capital Markets
When statements are published in pdf format, the audience can read the information, but to analyze data or evaluate results beside those of other companies, they are obliged to
re-key the data into another format, and perhaps reclassify items for comparability. Imagine having access to financial data from similar companies in a format that allows you to analyze results without these extra steps. EDGAR Online, a U.S. company that supplies financial information to subscribers, already provides statements from over 12,000 U.S. public companies in XBRL format and has created software to perform ratio analysis and comparisons.
Due to the time and costs involved in obtaining financial data, small or privately owned businesses often have difficulty attracting the attention of market analysts. But, just as the Internet has allowed small enterprises to look large with well-designed Web sites, XBRL can help many companies become more visible in the capital markets.
The Role of Accountants
How will this new tool affect CGAs? Normally, accountants will not have to know all the technical details of XBRL because most accounting software will be able to produce XBRL documents. However, one of the most important tasks for accountants will be to map financial data to XBRL tags, so familiarity with taxonomy will be essential.
CGAs may also be involved in verifying XBRL documents, specifying internal controls, and security around the production and transmission of tagged data, choosing third-party tools, and designing presentation formats.
XBRL resides at the very intersection of accounting and technology, so finance and IT staff will have to cooperate closely on any XBRL projects. The key to achieving potential benefits is careful and thorough planning. Now is the ideal time to begin preparing for a future with XBRL.
To be a part of the development and adoption of XBRL in Canada, join XBRL Canada at
www.xbrl.ca and keep abreast of activities, workshops, and current projects. You can also download the current taxonomy for Canadian GAAP, and sample XBRL documents.
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Diane Cushing, B.Sc., CGA, assists clients with implementation and customization of large-scale accounting systems. She has worked as a software developer, database administrator and trainer, and is a member of XBRL Canada. E-mail
diane@heronwood.ca.
"Double Click" is co-ordinated by
John Yu, M.Sc., CDP, FCGA. Yu has been in the IT industry since 1970 in a broad range of roles in technology and in management. He is vice-president, Information Technology, at CGA-Canada.