Magazine article Online

Implementing XBRL Successfully by Mandate and Voluntarily

Magazine article Online

Implementing XBRL Successfully by Mandate and Voluntarily

Article excerpt

Initial skepticism regarding the utility of XBRL (extensible Business Reporting Language) is over, and the time for implementation is here. As one of a family of XML languages, XBRL is becoming a standard means of electronically communicating information among businesses, banks, and regulators. XBRL is being developed by an international nonprofit consortium (http://xbrl.org) of approximately 450 major companies, organizations, and government agencies.

Supporting business data by means of this free markup language is now perceived as a good idea by global regulators. And the implementation experiences are being reported as easy, quick, and low-cost. Dozens of XBRL taxonomies are now available at the XBRL organization's website for external reporting all over the world - financial statements, audit reports, solvency forms, tax filing, and other important fields of business intelligence. The list of taxonomies includes those that are approved (they comply with the official XBRL guidelines and the XBRL specification) and those that are acknowledged (they merely comply with the XBRL specification).

On Feb. 28, 2008, the European Parliament's Committee on Economic and Monetary Affairs adopted an opinion that "strongly promotes the use of new technology such as XBRL; emphasizes that such information should be easily accessible for investors, creditors, employees and public authorities throughout the EU."

In May 2008, the U.S. Securities and Exchange Commission (SEC) signaled its intent to require XBRL reports for compulsory financial reporting of the major 500 companies this year, and for all listed enterprises in 3 years. This extends its original plan, announced in October 2006, to modernize its EDGAR (Electronic Data Gathering Analysis and Retrieval) system and its more recent announcement, in August 2008, to replace EDGAR with IDEA (Interactive Data Electronic Application), which has XBRL at its heart. However, this still has not been mandated, only proposed. At the moment, financial reporting using XBRL is voluntary.

Many other XBRL adoptions, all over the planet, have been initiated by mandate, mainly using blind converters. (For one overview of XBRL projects worldwide, see "XBRL Around the World: A Look Beyond U.S. Shores to Put the SEC's Interactive Data Initiative in a Global Context," by Karen Kernan, Journal of Accountancy, October 2008; www.journalofaccountancy.com/Issues/2008/oct/XBRLAr oundTheWorld.htm.)

From the academic perspective, Joanne Locke and Alan Lowe, writing in the European Accounting Review ("XBRL: An (Open) Source of Enlightenment or Disillusion?" Vol. 16, No. 3, September 2007, pp. 585-623), detect some deficiencies in XBRL. For example, the barrier to participation in the consortium, created by requiring paid membership and a focus on transacting business at physical conferences and meetings is identified as antithetical to the open source philosophy. Additionally, some professional comments arise is it worthwhile to implement XBRL just for external reporting? Sometimes, when XBRL is adopted by mandate and on a blind basis - using blind mapping processes from existing technology and using XBRL only to support the transmission of data via the internet - the full functionality of XBRL is ignored.

We now question how to best promote XBRL adoption, considering the newest academic research and the breaMng experiences we are living through in the financial and regulatory spheres. Is it really a good idea to launch XBRL by mandate?

THE SUCCESS OF XBRL

As stated in the XBRL 2.1 specification (2006), in force from 2003, "XBRL allows software vendors, programmers, intermediaries in the preparation and distribution process, and end users who adopt it as a specification, to enhance the creation, exchange, and comparison of business reporting information. Business reporting includes, but is not limited to, financial statements, financial information, non-financial information, general ledger transactions and regulatory filings. …

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