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XBRL Chugs Along Despite Scant Users

Companies feeling the burden of Sarbanes-Oxley accounting regulations can take comfort.

There's a maturing specification that helps businesses cut costs and time in reporting financial information, and it is gaining steam from high-tech companies out to improve the exchange of information gaining steam.

The eXtensible Business Reporting Language (XBRL) was created to promote the automated processing of business information by software on a computer, saving the time and manpower it takes workers to enter data by hand.

For most techies, the beauty of XBRL is that it is based on XML , a fluid Web language. Instead of treating financial information as a standard Web page or printed document, it provides an identification tag for each individual item of data. The computer will read the bit of data with its own tag and process a request for information.

Computers can read the information in an XBRL document, store it, exchange it with other computers and present it on the fly according to the format users desire. This includes spreadsheet or word-processing documents.

Consumers can get information much more quickly with XBRL than from traditional methods of procuring financial info from Reuters, Standard & Poor, or another provider that renders 125 to 150 data items in one snapshot. With those traditional methods, an analyst would have to spend a third of his or her time cutting and pasting to gather the information.

Not so with XBRL filing.

This speed and agility of information is a great asset at a time when compliance commands like Sarbox dictate that corporations cough up financial data in an instant. It also cuts down on the paper trail historically associated with general accounting principles.

But Adoption Lags

Some say the standard isn't producing quite what it should, considering the spec's steward has been working with it for the better part of four years. Some industry watchers claim the work is taking too long to do any good for investors, analysts, financial institutions and regulators.

Tell that to the backing group XBRL International whose 12 "jurisdictions," or countries around the world, create their own taxonomies for XBRL based on their country's accounting rules.

Karl Best, executive director of XBRL International, has heard some rumblings that XBRL is lacking. He said he believes detractors don't fully understand how to use XBRL.

"There are a few individuals and organizations that don't yet understand the benefit and potential of XBRL, or that think it should be done in some other manner," Best said. "We're working on them. I would class XBRL as mature enough to do useful things, but certainly there is more work to be done. But the core spec is there."

The government is doing its part to help promote XBRL, too. Earlier this year, the U.S. Securities & Exchange Commission (SEC) announced a voluntary program for registrants to furnish filings in XBRL.

It's endorsements like that that can pull the spec up by its bootstraps and speed it toward adoption, said ZapThink analyst Ronald Schmelzer, whose firm covers XML-related technologies.

"XBRL is one of those long-in-the-coming specs that has taken its sweet time to develop," Schmelzer said. "But it recently has gotten quite a bit of support and even some help from governments in making it a regulatory requirement for financial reporting."

Schmelzer said it's precisely because the various countries endorsing XBRL have different accounting principles that XBRL has taken so long to mature.

"The challenge is that different countries and jurisdictions each have their own way of specifying financial data, and, as such, coming up with one spec that covered all the various different needs was a significant challenge," the analyst said.

Rob Krugman, vice president of analytic solutions for financial information provider Edgar Online, has heard the nay saying, too.

"When financial services firms talk about disappointment of XBRL, it's usually about the adoption rate," Krugman said. "Adoption has taken awhile because there is complexity involved in the processes. Everyone has to get it right in their workflows."

Carrying The Torch

Krugman thinks his company is blazing a path with tools, such as I-Metrix, which provide a simple way for users to use Microsoft Office Excel to analyze U.S. public company financial information using data tagged by XBRL.

Within the Excel application, users can download data and verify its accuracy by viewing line items in the source document and converting Edgar documents into XBRL files.

I-Metrix is grabbing the attention of other vendors. Just yesterday Edgar Online and business intelligence software giant Business Objects inked a deal to let their customers access XBRL data via I-Metrix through BusinessObjects XI platform.

Krugman agrees the SEC's voluntary program should do well to spread more enthusiasm and support for XBRL. He said the spec can match the "depth of detail" Sarbox requires with regard to financial reporting demands.

"People are starting to implement solutions," Krugman said. The SEC may take a little while, but it's very positive that they've started this voluntary program. To this point, there's been a lack of products out there. A lot of focus has been on the creation of content, and we need more tools that focus on managing internal workflow."

ZapThink's Schmelzer agreed.

"What remains is really good tooling for the development of XBRL documents and their consumption," Schmelzer said. "We should hopefully see more on this front soon."

Microsoft became the first tech company to report its financial results in XBRL in 2002, and other vendors are taking up the XBRL torch.

Earlier this year, top China financial services company Xinhua Finance began offering XBRL in China through its U.S. subsidiary Mergent Inc. Hitachi America Ltd. introduced a tool that lets users port XBRL financial information directly into Microsoft Excel.

Best said XBRL International is working to help more companies drive internal use of XBRL as a replacement from their home-cooked proprietary software.

"By using XBRL internally, rather than just for external reporting as is usually the first implementation, you can XBRL-ize the entire financial reporting supply chain, automate the creation of those base reports, and therefore reduce error," Best said.

The group's 300 members are also trying to find a way to establish one universally accepted GAAP (Generally Accepted Accounting Principles) that can be accessed by all companies looking to leverage the efficiencies of XBRL.

With a little more maturity, XBRL may very well eradicate concerns about accurate and timely reporting to help companies meet federal guidelines.