Tuesday, September 28, 2010

2011 U.S. GAAP Financial Reporting Taxonomy Now Available for Public Review and Comment

The Financial Accounting Foundation (FAF) announced on august 31, 2010 the availability of the proposed 2011 U.S. GAAP Financial Reporting Taxonomy for public review and comment. The FAF is responsible for the ongoing maintenance of the taxonomy applicable to public issuers registered with the U.S. Securities and Exchange Commission (SEC). The deadline to submit written comments is October 30, 2010.
The proposed 2011 U.S. GAAP Financial Reporting Taxonomy contains updates for accounting
Standards and other recommended improvements to the official taxonomy currently in use by SEC issuers. The 60-day comment period is intended to solicit feedback on these updates from users of the taxonomy and to provide SEC filers, service providers, software vendors, and other interested parties the opportunity to become familiar with and incorporate new element names for current filings. The final version of the 2011 U.S. GAAP Financial Reporting Taxonomy is expected to be finalized and published in early 2011.

The U.S. GAAP Financial Reporting Taxonomy is a list of computer-readable tags in XBRL that allows companies to tag precisely the thousands of pieces of financial data that are included in typical long-form financial statements and related footnote disclosures. The tags allow computers to automatically search for, assemble, and process data so it can be readily accessed and analyzed by investors, analysts, journalists, and regulators.

The 2009 taxonomy currently in use by SEC issuers was developed by XBRL US, Inc., an independent non-profit organization with research, development, and education programs facilitating the widespread adoption of XBRL in the United States for tagging business reports across all business domains to aid investors and other users. The Financial Accounting Standards Board (FASB) provided technical accounting standards support to XBRL US, Inc. during the development of the 2009 taxonomy. In early 2010, the FAF assumed maintenance responsibilities for the taxonomy, and, along with the FASB, assembled a team of technical staff dedicated to updating the taxonomy for changes in U.S. GAAP, identifying best practices in taxonomy extensions, and technical enhancements.

Monday, September 27, 2010

Citi announced collaboration with XBRL US Labs


On Monday, September 16, XBRL US announced that Citibank is working with XBRL US Labs, the research and development arm of XBRL US, to research the costs and benefits of transforming corporate actions processing in a pilot program that will involve dividend payment announcements.  An impact analysis will be conducted on the issuance of XBRL-tagged announcements, processing by banks, depositaries, and stock exchanges, and on the ultimate usability of corporate event data by information consumers, particularly shareholders.

“Citi is pleased to participate in this XBRL corporate actions pilot,” said Alan Smith, Chief Operating Officer, Citi Securities and Fund Services.  “As a market leader and early adopter, we will look forward to welcoming other institutions to help standardize financial information and achieve true straight-through-processing and benefit our customers, the recipients of these event announcements.”

Experts in corporate actions services at Citi will work with XBRL US Labs and other pilot participants as part of an initiative launched in 2009 by XBRL US, the Depository Trust and Clearing Corporation (DTCC) and SWIFT to use XBRL to reduce corporate actions' cost and time, and to improve data quality.  The initiative published a business case in May of this year, (http://xbrl.us/i2i/pages/businesscase.aspx) and has developed an XBRL taxonomy based on the ISO 20022 standard, which is scheduled for an early October release on the XBRL US website for public review, testing, and comment, (www.xbrl.us).The pilot is designed to test the premise that the use of structured, computer-readable data can streamline the process and introduce straight-through-processing (STP). 

"Citi's collaboration in this pilot will help to demonstrate how a large amount of information can be more easily, accurately and efficiently consumed, saving money and time and ultimately getting critical information to investors", said David Hands, Director, Product Development, DTCC. "We look forward to following this ADR-based pilot with another program focusing on US-based issuers early in 2011."

Initial efforts will focus on tests on dividend announcements issued by American Depositary Receipts (ADRs).  ADRs are US securities based on foreign shares that are received and processed by depositary banks such as Citi.  Announcements about ADRs are transmitted from Citi to stock exchanges, investors, depositories such as the DTCC, and other intermediaries.  The ADR dividend announcement process was selected by Citi and XBRL US Labs as a good test for XBRL because corporate actions announcements from ADRs are concentrated among a relatively small number of depositary banks, and rely on significant hard copy transmittals and re-keying. The pilot will use the XBRL ISO 20022 taxonomy, or dictionary, to create XBRL-formatted documents that will be used directly by downstream users. 

XBRL to save the U.S. financial system

The recent financial crisis exposed the information asymmetry between regulators and financial institutions, and revealed the dangers of a systemic risk. (systemic risk is the possibility of collapse to the entire financial system and not just the failure of an individual entity). While everybody agrees that a reform is needed, there is much to discuss over how to implement a stronger regulatory framework that will underpin the financial economic system.

XBRL is maybe an important part of this solution. By defining a systemic risk taxonomy and giving regulators the ability to extend their analysis of a financial institution’s balance sheet, will provide a window for identifying large exposures across firms and markets, leverage and counterparty risks (counterparty risk takes place when a financial institution has a contract with a trading partner, such as a loan, through collateral or unrealized gains).

It is true that in the past financial institutions undertook excessive risks and leverage and regulators could not react because they could not follow and understand the complexity of the financial systems. So this information gap between regulators and financial institutions paralyzed the fed’s reaction during the financial crisis and they were not able to protect investors efficiently and effectively.

Financial institutions need more standardized reporting of corporate risk. Regulators also need a more holistic view of the financial system, which requires more data and the capability to aggregate and assess linkages of risk. Regulators still have very limited visibility of counterparty risk with the existing data reporting requirements. So additional information is needed to improve their visibility and eliminate the risk of a future financial crisis. More specifically, they need further information on derivative positions such as swaps, options and forward contracts. Once regulators collect data using XBRL, they will have the capability to map the risks associated with a financial institution and make a better decision making in the future.   

Saturday, September 25, 2010

SEC required XBRL since 2008 for financial reporting

The adoption of eXtensible Business Reporting Language (XBRL) by the U.S. Securities and Exchange Commission (SEC) has marked the largest and most complex implementation of XBRL around the globe to date. Millions of dollars are being invested in software, tools and in the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) database to support the thousands of companies that will submit financial information in XBRL format and to enable consumers to more easily access this information for analysis. 
Continual updates to the U.S. Generally Accepted Accounting Principles (GAAP) taxonomies to incorporate new accounting concepts and standards will help to improve the use of XBRL-formatted data that investors will come to rely upon. Capable tools will facilitate analysis of the abundance of data that will become available in the market as a result of more public companies submitting their tagged financial statements under the SEC’s phased-in mandate. 
Expect to see improvements in the efficiency of the entire market as preparers and consumers benefit from streamlined processes and more accurate and transparent data when XBRL is implemented by all public companies.
The SEC mandate of XBRL-tagged financial information marks an enormous milestone in the widespread adoption of XBRL. However, the potential for process improvements that XBRL can provide is much broader than just external reporting and investments that are already made and can be leveraged for a “broader footprint” for many types of business reporting.

Monday, September 20, 2010

XBRL in simple words

The idea behind XBRL, eXtensible Business Reporting Language, is simple.  Instead of treating financial information as a block of text - as in a standard internet page or a printed document - it provides an identifying tag for each individual item of data.  This is computer readable. For example, company net profit has its own unique tag. 

The introduction of XBRL tags enables automated processing of business information by computer software, cutting out laborious and costly processes of manual re-entry and comparison.  Computers can treat XBRL data "intelligently": they can recognise the information in a XBRL document, select it, analyse it, store it, exchange it with other computers and present it automatically in a variety of ways for users.  XBRL greatly increases the speed of handling of financial data, reduces the chance of error and permits automatic checking of information. 

Companies can use XBRL to save costs and streamline their processes for collecting and reporting financial information.  Consumers of financial data, including investors, analysts, financial institutions and regulators, can receive, find, compare and analyse data much more rapidly and efficiently if it is in XBRL format. 

XBRL can handle data in different languages and accounting standards.  It can flexibly be adapted to meet different requirements and uses.  Data can be transformed into XBRL by suitable mapping tools or it can be generated in XBRL by appropriate software. 

My first post! Introduction to XBRL

XBRL is a language for the electronic communication of business and financial data which is revolutionising business reporting around the world.  It provides major benefits in the preparation, analysis and communication of business information.  It offers cost savings, greater efficiency and improved accuracy and reliability to all those involved in supplying or using financial data.

XBRL stands for eXtensible Business Reporting Language.  It is one of a family of "XML" languages which is becoming a standard means of communicating information between businesses and on the internet. 

XBRL is being developed by an international non-profit consortium of approximately 450 major companies, organisations and government agencies.  It is an open standard, free of licence fees.  It is already being put to practical use in a number of countries and implementations of XBRL are growing rapidly around the world.

This site provides information about the nature, uses and benefits of XBRL.  It explains how individuals and companies can join the effort to move forward and make use of the language.