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.
Consumers can get information much more quickly with XBRL than from But Adoption Lags Carrying The Torch
For most techies, the beauty of XBRL is that it is based on XML
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.
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.
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.”
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.
