XBRL: What a Preparer of Financial
a Statements needs to know
Developed by AICPA Assurance Services Executive Committee – updated July 2008
What is XBRL?
XBRL, eXtensible Business Reporting Language, is a royalty-free, international information format
designed specifically for business information, also referred to as “interactive data” by the U.S. SEC.
The concept of XBRL is that all individual disclosure items within business reports are assigned unique,
electronically readable tags (like a barcode). These tags are mapped to taxonomies that are being
developed by market constituents and are publicly available on the XBRL Web site. Taxonomies are,
in essence, dictionaries of financial concepts in which each concept is defined and assigned a
relationship to other concepts.
What are the benefits of XBRL?
The use of XBRL will provide major benefits in the preparation, analysis and communication of
business information through cost savings, greater efficiency and improved reliability to all those
involved in supplying or using financial data. By using XBRL, companies and other producers of financial
data and business reports can automate the processes of data collection. For example, data from
different company divisions with different accounting systems can be assembled quickly, cheaply and
efficiently if the sources of information have been upgraded to using XBRL. For AICPA members
who serve in financial management and information technology roles, XBRL will streamline the
preparation of business and financial reports for internal and external decision-making. It also will
improve the ability of companies to more precisely direct and publish financial information to investors,
regulators, analysts, lenders and other key stakeholders.
When will it become necessary to use XBRL?
On May 30, 2008, the SEC issued a proposal that would require companies to provide XBRL financial
statements, as well as posting such statements to company Web sites. The proposed rules would
initially apply to domestic and foreign companies using U.S. GAAP and, eventually, to foreign private
issuers using International Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB). The XBRL financial statements would be required, as an
exhibit, with a company’s traditionally filed (ACSCII- or HTML-formatted) annual and quarterly reports,
transition reports and Securities Act registration statements. The information produced in an XBRL
format would include companies’ primary financial statements, footnote disclosures and financial
statement schedules.
The proposal set forth a three-year phase-in schedule for all domestic and foreign filers beginning with
fiscal periods ending on or after December 15, 2008, as follows:
n Year 1 – large accelerated filers that use U.S. GAAP and have a worldwide public float above $5
billion (determined as of end of most recent 2nd fiscal quarter), estimated to cover approximately
500 companies
n Year 2 – all other large accelerated filers (public float above $700 million) using U.S. GAAP
n Year 3 – all remaining filers using U.S. GAAP, including smaller reporting companies, and all
foreign private issuers that prepare their financial statements in accordance with IFRS as issued
by the IASB
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What is your forecast for the use of XBRL in business?
XBRL is not just for reporting to the SEC; it can be applied to a variety of business and financial data. The
utilization of XBRL could range from external reporting to different regulators (including tax, central banks
and governments) to the internal exchange of information within corporations and government bodies.
Additionally, XBRL can support the filing of loan reports and applications that could increase the timeliness
and accuracy of the assignment process of credit ratings. The market adoption of XBRL is part of a larger
migration to the Internet by capital market participants. XBRL is not an alternative technology product; it is
a language for the communication and processing of business information.
How does XBRL work?
XBRL enables preparers to utilize software to tag all financial items in their business reports to the
elements within taxonomies (standardized dictionaries of financial concepts). This is accomplished
with what is known as an Instance Document: the XML file in which companies transmit their data in a
structured manner that can be electronically exchanged and validated between computers or viewed in
a human-readable format. It is expected that instance documents will be created for individual financial
reports (e.g., annual reports, earnings releases, submissions to creditors, etc.). Once the
data is created in XBRL, different types of reports using various subsets of the information can be
automatically produced with minimal effort and reduced errors because reports are generated by
working off the original data, not a retyped version.
How does XBRL impact a company with multiple systems?
By using XBRL, data (in different languages and currencies) can be retrieved and automatically
transferred through different applications thereby reducing or eliminating many of the current manual
processes associated with accessing, consolidating and reporting business information. Internal
management reports, financial statements for publication, tax and other regulatory filings, as well as
credit reports for lenders, can be quickly and reliably generated. Improved reporting and review
processes result in time and cost savings, which allows for resources to be re-deployed enabling
further analysis, forecasting and improved decision-making.
Who is in charge of selecting and applying the tags?
In an XBRL-enabled environment, companies tag their own reports, rather than rely upon third-party
intermediaries to do so, for more direct — and thereby effective — communication with the investor
community. Companies express their information in a more articulate manner, which allows them to
more accurately communicate their message and improve investor relations through distribution of
more user-friendly information.
Where can I learn more about XBRL?
Visit http://www.aicpa.org/Professional+Resources/Accounting+and+Auditing/BRAAS/XBRL.html
to obtain more information, including background material, articles, links to Webcasts and other Q&A
documents. In addition, information regarding interactive data is available at the SEC Web site, http://
www.sec.gov/xbrl, and the XBRL Web site, www.xbrl.us.
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