Academic journal article The Journal of Government Financial Management

XBRL & Public Sector Financial Reporting

Academic journal article The Journal of Government Financial Management

XBRL & Public Sector Financial Reporting

Article excerpt

"Companies that do not arm themselves with XBRL, and rely instead on the increasingly outmoded arsenal of corporate reporting media and practices will compare to those who eschewed the telephone in favor of carrier pigeons. Providers of capital want to align with companies that look to the future, not those that cling to the past."

-Bob Herz, Chairman, Financial Accounting Standards Board (FASB)1


Well for one thing, telephones are cleaner than carrier pigeons. And interactive data (that is, intelligent data that contains its own meaning, instructions for use and supplemental reference information) using XBRL makes for cleaner, faster data exchange-faster than any carrier pigeon can fly.

XBRL, short for extensible Business Reporting Language, is already being used in a number of private sector industries, including the Security and Exchange Commission's (SEC) Voluntary Filing Program. XBRL is under consideration in public sector circles as well. The potential for XBRL to promote a more efficient exchange of public sector data-federal, state and local-across the business reporting supply chain would be a step toward improved accountability and transparency.

Generally, the U.S. public sector has been reluctant to apply XBRL to financial reporting, and instead continues to rely on time-consuming manual processes for report generation resulting in data available in PDF-like formats, visible but unusable for analysis. The private sector had the same early reluctance, and understandably so, as most of us are risk-averse and don't need to fix something that works, or at least gets the job done. But the world is changing-fast and still accelerating-so it is not surprising that driving forces, such as the growing adoption of XBRL in the international financial arena and SEC Chairman Cox's vision for interactive data, have moved U.S. companies closer and closer to the XBRL way.

The Research Opportunity

The U.S. public sector also needs to look at the potential solutions that could be enabled with interactive data. With that thought in mind, AGA has sponsored research that begins to answer questions such as:

* How does XBRL actually work?

* What does an implementation actually entail?

* What are the true costs and benefits?

* Where along the business reporting supply chain should it most effectively be used?

Specifically, this research is an opportunity to answer some of these questions and understand what efforts are needed to create a taxonomy for external reports used at the state level.

The specific project was to explore what it would take to tag the data in two financial statements (Statement of Net Assets and Statement of Activities) for Fiscal Year 2006 contained in the Oregon Comprehensive Annual Financial Report (CAFR). The project was sponsored by AGA and supported by AGA Corporate Partner PricewaterhouseCoopers (PWC) and Allocation Solutions. Oregon State Controller John Radford, CGFM, CIA, CFE, volunteered his office to champion the project and allowed AGA to use its CAFR for the demonstration. The advisory group for this project consisted of representatives of the Governmental Accounting Standards Board (GASB), the Financial Accounting Foundation (FAF) and the National Association of State Auditors, Comptrollers and Treasurers (NASACT).

Since XBRL has not been applied in any form in the U.S. public sector and the project duration was only 90 days, it was important to manage expectations. The premise was to contribute to a knowledge base that can be used as a platform for future public sector XBRL pilots. The main questions at the outset were:

* What would it take to develop a taxonomy?

* How in-depth could the taxonomy, including its metadata, be built in the allotted time?

* What would it take to make the taxonomy, as an open standard, replicable and expandable?

The rationale for choosing the two CAFR statements was twofold: first, the need to start small given the lack of knowledge about the technical components of XBRL and the costs associated with development; and second, and perhaps most important, the strong leadership from Oregon's state controller to "test the waters" with XBRL. …

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