XBRL: Are You Ready?

By Cathy Poyner, CPA

Imagine a business world where everyone speaks the same financial language.

This is the promise of XBRL (eXtensible Business Reporting Language) to the financial reporting world. XBRL is based on XML (eXtensible Markup Language). XML is tagging software that promises to reduce problems HTML (HyperText Markup Language) has with identifying different types of data.

When using HTML, identifying and analyzing data is difficult because of the inconsistency between data reporting among organizations. The tags used in HTML only tell how to format the page, not what relationships exist between data.

XBRL is a type of XML that specifies business and financial data and is being standardized to allow for the easier reporting and retrieval of financial information. The tags used in XBRL allow data relationships to be established in reporting data.

Current Status Of XBRL In Business
 Financial Executives International (FEI) recently issued their top 10 challenges for 2007. XBRL was listed as the third challenge, behind more internal controls and uncertain tax positions. XBRL moved up to third after being the ninth last year. (For more information on this topic, see http://www.xbrl.org/Announcements/FEI-Top10-2007.pdf.)

SEC reporting is now voluntary for XBRL use, but may soon be mandatory. On Sept. 25, 2006, the AICPA announced a non-profit organization that will support the implementation of XBRL in the United States and promote the adoption of XBRL. (For more information on this project, go to www.xbrl.org/us.)

There are required reports in XBRL for banks. The site http://www.ffiec.gov/find gives more information on the format that is required by the FDIC.

Benefits of XBRL
 There are several benefits to XBRL:

Typically XBRL is not seen by the user, but is in a form that is understood by the application or machine.

Process of creating XBRL documents
 The process for creating documents in XBRL is as follows:

  1. Taxonomy selection — An XBRL taxonomy describes financial facts and their relationships. The current taxonomy created by xbrl.org is version 2.1;
  2. Create instance documents — Instance documents use the taxonomy to represent your company data. This may be from your accounting/financial system with a “Save as XBRL” option;
  3. Validate the instance document — Audit of the instance document is important. Paper documents should match electronic documents;
  4. Use the instance document — This allows the document to be available to those who need access to the financial information;
  5. A style sheet can be used to express XBRL instance document in another form such as HTML, another XML, word processing or text files; and
  6. Use applications which can be used for analysis. These applications can be used to compare data with other companies.

XBRL cannot be ignored. Companies will need to prepare their financial reports using XBRL, and accountants can no longer ignore this technology. There is a wealth of information available related to XBRL, including moving to, reporting and using XBRL. A few resources are listed below.

For more information about XBRL, visit http://infotech.aicpa.org/Resources/XBRL/Resources_Home.htm

CFO.com has a series of articles that demonstrate the necessity of moving financial data reporting to XBRL. These articles are available online at http://www.cfo.com/article.cfm/8372678/c_8310234.

XBRL has much potential. This language can change the way people use business reports. It can speed up the collection and analysis of data and should be understood by business professionals.

Cathy Poyner, CPA is an instructor of business administration at Truman State University where she teaches courses in information technology and systems. She is also a member of MSCPA’s Information Technology Committee. She can be reached at: cpoyner@truman.edu. 

Reprinted with permission from the Missouri Society of CPAs.

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