XBRL: What a Preparer of Financial
a Statements needs to know
Developed by AICPA Assurance Services Executive Committee – December 2007
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.
How is XBRL used today?
Many regulators are well under way in establishing timetables for implementation of interactive data
initiatives for financial reporting throughout the world. Below are examples of how XBRL is currently
utilized within the U.S.
n The SEC believes that XBRL is a technology that can assist them in more efficiently and
comprehensively reviewing filings and will enable a change in the way corporate financial data is
submitted, reviewed and disseminated to the public. On February 3, 2005, the SEC issued a final
rule that allows registrants, on a voluntary basis, to furnish supplemental financial information using
XBRL through the SEC’s Electronic Data Gathering, Analysis and Retrieval system (EDGAR). The
establishment of this Voluntary Filing Program (VFP) allows public companies to voluntarily submit
XBRL documents as exhibits to periodic reports and investment company act filings. Today,
approximately 50 companies participate in this voluntary program that creates an environment for:
- registrants to gain experience in tagging their financial information using XBRL through
a pilot program prior to a mandate
- the entire financial community to test the benefits and costs of using XBRL
More information on the SEC VFP program can be obtained at http://www.sec.gov/spotlight/xbrl.htm.
n The U.S. Federal Deposit Insurance Corporation (FDIC), in coordination with the Federal Reserve
Board and the Office of the Comptroller of the Currency, launched a large and very successful XBRL
project in October 2005 involving the collection of quarterly bank financial statements (Call Reports)
from more than 8,300 U.S. banks. Use of XBRL is mandatory and the data is posted on the Internet
for public use and analysis. This coordinated U.S. project has proven that XBRL can provide real
business value by reducing burden and duplication, improving data transparency and enabling more
timely analysis.
a
When will it become necessary to use XBRL or be left behind?
If you choose to ignore XBRL, chances are you would do so at the risk of losing your competitive edge.
XBRL is a hot topic for the SEC and is on the agenda of the SEC’s Advisory Committee for Improvements
to Financial Reporting. Members of the Committee have met with representatives of various
constituencies of the financial reporting process regarding the use of XBRL and are discussing a possible
mandate of XBRL in SEC reporting some time in the near future. It is anticipated that the SEC will issue a
proposed rule during 2008 that will impact a segment of filers. Your better option is to roll up your sleeves
and stay informed about the emerging information standard that is about to impact your company.
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 allowins 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?
The AICPA hosted an infocast that introduced XBRL concepts and demonstrated how to create XBRL
financials. Visit http://www.aicpa.org/Professional+Resources/Accounting+and+Auditing/BRAA
S/Events.html to download and view this infocast. In addition, information regarding interactive data is
available at the SEC Web site, www.sec.gov/spotlight/xbrl, and the XBRL Web site, www.xbrl.us.
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