New Developments for XBRL: What Do They Mean for Large Firms?

With the release of the XBRL Steering Committee's first specification for U.S. companies, XBRL for Financial Statements, it is now possible for public and private companies to create XML-based financial statements using XBRL. That means businesses can now incorporate XBRL into their financial reporting processes and digitally publish their financial statements.

Among the major benefits of this technology are:

• A streamlined financial reporting process.

• Technology (platform and application) independence.

• Full interoperability.

• Reliable extraction of financial information.

XBRL has something to offer across the business spectrum. "Just as e-business affects companies of all sizes, XBRL technology is important to firms and clients of all sizes," said Mike Willis, a partner of PricewaterhouseCoopers and chair of the XBRL Steering Committee. "It is meaningful to everybody."

What Is It?

eXtensible Business Reporting Language can provide an XML-based framework that businesses will use to create, exchange and analyze financial reporting information, including regulatory filings, such as annual and quarterly financial statements; general ledger information; and audit schedules.

"XBRL helps companies, analysts, investors and other audiences to make better informed financial and management decisions and to leverage the power of the Internet to exchange financial information," said Tom Vos, President of Edgar Online, Inc. "XBRL provides an efficient and reliable means of communicating financial information without changing existing accounting standards or requiring a company to disclose any additional information beyond that in its current financial statements."

Wide Application

A total of 66% of public companies surveyed by AIMR have a Web site—and 76% of those companies provide financial information on their Web site. The study also found that analysts preferred using Web sites to obtain information, even when other sources exist, because it is easier. Another study indicated approximately 80% of major U.S. companies are making some type of financial disclosure online.

Not only will companies soon be making their financial information available online, they can take advantage of options such as disclosing their financial information to the bank in XBRL. The information will be e-mailed to the bank and automatically imported into the bank's loan analysis software.

According to Willis, XBRL's long list of advantages includes:

• Moving the reporting supply chain onto an e-business platform.

• Simplifying the software development cycle for working with business reporting data from creation through analysis and reporting.

• Expanding software options for preparation and analysis of information.

• Increasing speed and decreasing costs and errors.

• Allowing more time for analysis of information and less time for the mechanics of preparation.

• Better positioning the profession for the role of "knowledge worker."

• Preventing the profession and related reports from losing their relevance.

• Offering all of the integrity of existing reporting models—and more—in a fraction of the time.

• Reducing time spent on repetitive tasks or spent filling out forms and applications in a specific format.

• Offering a better climate for sharing data within trade organizations because members can receive aggregate data in return.

"XBRL addresses the entire framework," Willis notes, not simply U.S. GAAP financial reporting.

How Do Large Firms Benefit?

Willis cites these benefits for large firms and their clients:

• Empowers internal audit with new tool sets.

• Enhances the capabilities for analytical review and related risk management considerations.

• Creates smooth information flow.

• Can be applied to current and yet-to-be-developed reporting philosophies, including ABC, Value Reporting and Balanced Scorecard.

An Impressive Pedigree

XBRL is a business reporting supply chain consortium made up of over 65 global enterprises. Among the most recent additions to the XBRL initiative are ACCPAC International, Inc.; ACL Services Ltd; Bridge Information Systems; Dow Jones & Company, Inc.; e-Numerate Solutions Incorporated; eLedger.com, Inc.; Fidelity Investments; Financial Software Group; First Light Communications, Inc.; MIP, Inc.: Multex.com, Inc.; Oinke, Inc.; PeopleSoft, Inc.; U.S. Advisor, Inc.; Virtual Growth, Inc.; and XBRL Solutions, Inc. Participants from various components of the supply chain (preparers, users, analysts, distributors, aggregators, auditors, enabling technology vendors) have all come together to create this XML-based technology platform and related language. These direct competitors are working collaboratively for a common purpose: creation of XBRL to achieve the benefits outlined above.

Getting Up to Speed

How can practitioners become involved? Willis offers some suggestions:

1. Educate yourself. Raise your level of awareness about XML in general and XBRL in particular. A good start is the committee's Web site, which features FAQs, a new member section and demonstrations, among other valuable features.

www.xbrl.org

2. Review the released XBRL taxonomy. It is also possible to participate in development of the new taxonomies through a "review for comment" section that will be available soon on the Web site.
3. Get software information. Practitioners should contact the vendors of their accounting software packages to learn if the software is XML-enabled and will be XBRL-enabled. Ask the vendors if they can offer tools to help facilitate implementation of XML and XBRL.
4. Begin to raise awareness of this technology among members of client audit committees. CPAs have been at the forefront in developing and implementing XBRL. "The role of the CPA will be to help clients take advantage of this new technology," Willis says.

If your organization is interested in becoming a member of XBRL, contact Karyn Waller at the AICPA:

kwaller@aicpa.org