The House Bills encourage XBRL use

The House passed two bills in early December 2009 with provisions related to the use of XBRL (eXtensible Business Reporting Language). The SEC currently requires the largest accelerated filers to file an XBRL exhibit with their annual 10-K and quarterly 10-Q’s. Remaining SEC filers will be required to file the XBRL exhibits beginning in 2010 and 2011.

The Government Information Transparency Act (H.R. 2392) will require federal agencies to collect their data in a uniform, searchable format using XBRL thereby simplifying mandatory financial reporting for companies that receive federal funds. The bill calls on the White House to issue rules within 18 months that direct every agency to use XBRL. It would also require companies to file activity reports to agencies in XBRL and require agencies to make the reported financial information viewable by the public.

H.R. 4173, the Wall Street Reform and Consumer Protection Act, also encourages the use of XBRL. The bill makes it easier to scrutinize complex financial results filed by public companies with government regulators such as the SEC and banking regulators. According to the legislation, financial market regulators must report to Congress for each of the next five years on how they are “encouraging the use and acceptance of interactive data” to increase transparency in financial reporting.

XBRL linking with codification

The FASB Codification and XBRL have recently conjoined within the Codification website. The FASB says that some XBRL elements are now electronically linked into the Codification. The Codification now provides a list of the XBRL links to the paragraphs in the Codification. For an example see ASC 840-10-75. The FASB’s Notice to Constituents provides further details about the references to XBRL imbedded within the Codification.

“The new XBRL functionality provided by the Codification website will help entities as they prepare or plan to prepare XBRL financial statements using the U.S. Financial Reporting Taxonomy,” states FASB Chairman Robert Herz. “Users will be able to very easily identify the XBRL elements associated with specific Codification paragraphs.”

XBRL US announced previously that it had released two XBRL taxonomies that link to the Codification to assist users as they verify that they have reported their transactions according to current US GAAP pursuant to the FASB Codification.

XBRL 2.1 version is out with corrections and new features

The XBRL International Domain Working Group developed a detailed set of requirements which were then implemented by the XBRL International Specification Working Group. The conformance suite consists of over 250 example taxonomy fragments (XML Schema and XLink files) and instance documents, containing both valid and invalid usage.  It will help application developers ensure their software processes XBRL correctly.

 It is expected from taxonomy authors gradually to upgrade their taxonomies to 2.1.  This is a prerequisite for conformance with the Financial Reporting Taxonomies Architecture (FRTA) 1.0.  However, 2.0 versions of these taxonomies may also be made available at the discretion of the taxonomy authors.

Domain experts and application developers can now encode more precise information about financial reporting concepts in XBRL taxonomies.  They can also define the handling of new relationships not defined by XBRL itself.  New relationships allow taxonomy authors to connect taxonomy definitions to authoritative definitions and other supporting documentation.

There have always been restrictions on what are a meaningful taxonomy schema, meaningful linkbase, and meaningful instances.  In the past many of these criteria were implicit. These criteria are now part of the specification.  In some cases, they may be enforced using XML Schema, requiring no new code to be written, and in other cases the specification enables vendors to write correct validation code.  Examples of these technical enhancements include:  A detailed exposition of handling variable precision numbers, prohibitions on certain kinds of loops in relationships, and prohibition of duplicated data in instances.  The meaning of calculation links and their ability to express relationships between items in different tuples has been specified precisely.

How can companies benefit from adopting XBRL

XBRL increases the usability of financial statement information.  The need to re-key financial data for analytical and other purposes can be eliminated.  By presenting its statements in XBRL, a company can benefit investors and raise its profile.  It will also meet the requirements of regulators, lenders and others consumers of financial information, who are increasingly demanding reporting in XBRL.  This will improve business relations and lead to a range of benefits.


With full adoption of XBRL, companies can automate data collection. For example, data from different company divisions with different accounting systems can be assembled quickly, cheaply and efficiently.  Once data is gathered in XBRL, different types of reports using varying subsets of the data can be produced with minimum effort.  A company finance division, for example, could quickly and reliably generate internal management reports, financial statements for publication, tax and other regulatory filings, as well as credit reports for lenders.  Not only can data handling be automated, removing time-consuming, error-prone processes, but the data can be checked by software for accuracy.

F.A.F. maintains XBRL taxonomy for GAAP

The Financial Accounting Foundation (FAF) recently announced its new responsibility for the ongoing maintenance of the U.S. GAAP Financial Reporting Taxonomy applicable to public issuers registered with the U.S. Securities and Exchange Commission (SEC). The FAF and Financial Accounting Standards Board (FASB) will assemble a small team of technical staff dedicated to maintaining the taxonomy and will work towards the release of the next taxonomy update in early 2011. Today’s announcement is the culmination of several months of discussions between the FAF and the staff of the SEC. 

The U.S. GAAP Financial Reporting Taxonomy is a list of computer-readable tags in extensible Business Reporting Language (XBRL) that allows companies to label 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 and assemble data so it can be readily accessed and analyzed by investors, analysts, journalists, and the SEC staff. 

FAF Chairman Jack Brennan stated, “The FASB team assigned to taxonomy maintenance will work closely with the SEC, investors, issuers, accounting firms, and other stakeholders to develop updates that are of the highest quality.” 

The FAF’s maintenance activities will be focused on updating the taxonomy for changes in U.S. GAAP, best practices in taxonomy extensions, and technical enhancements.

Taxonomies

Taxonomies are the reporting-area specific hierarchical dictionaries used by the XBRL community. They define the specific tags that are used for individual items of data (such as "net profit"), their attributes and their interrelationships. Different taxonomies will be required for different business reporting purposes. Some national jurisdictions may need their own reporting taxonomies to reflect local accounting and other reporting regulations. Many different organizations, including regulators, specific industries or even companies, may require taxonomies or taxonomy extensions to cover their own specific business reporting needs. Taxonomies which have been officially recognized by XBRL International are listed under the "XII Recognized Taxonomies" tab. Details on how the taxonomy recognition process operates along with instructions on submitting taxonomies can be found under the "Taxonomies Recognition Process" tab. A special taxonomy developed and recommended by XII itself has also been designed to support collation of detailed, drill-down data focusing on internal reporting within organizations. This is the Global Ledger taxonomy.

Elements included in the XBRL

One of the best ways to get to know a new metadata scheme is to dive in and look at the specific elements. XBRL is simply not that simple. XBRL is more than just a metadata scheme. It is a framework for developing standardized taxonomies that can be used to create metadata for specific business reporting needs. So before we look at elements, we have to understand the basic structure of XBRL.

XBRL consists of the following:
-Instance document. This is the actual XBRL marked-up document.
-Taxonomies. Basically a document of concept definitions, or a dictionary. In terms of metadata terminology we used in class, the taxonomy document provides the semantics for a particular XBRL instance document. The taxonomies also define hierarchies of concepts. If necessary, taxonomy could describe one item in more than one language. The taxonomy itself is extensible, that is, a user can split one item into two different items (i.e., instead of just "sales," “equipment sales” and “consumables sales” could be used).
-Linkbases. Unlike the taxonomies which define the elements (called "items" in XBRL), linkbases are documents that define various relationships between items. The five types of linkbases are reference, label, definition, calculation, and presentation.
The instant document, taxonomies and linkbases are all connected using an XML linking standard called xlink

XBRL22 will be held on May 17-19, 2011 in Belgium

XBRL22, the next global gathering of tax authorities, securities commissioners, banking supervisors, corporate executives, accountants and technology vendors, will take place in Brussels, Belgium, May 17- 19, 2011.

With a theme of “Sharing Economic Information in a Global World,” XBRL22 will focus on the use of XBRL tagged data for performance measurement, business intelligence, management reporting, investment management, and regulatory oversight. “With XBRL International’s recent launch of an abstract model working group, we ultimately hope to catalyze greater development of software tools that can gather and analyze XBRL formatted information,” added Mr. Fragnito.

“The abstract model lays a solid foundation for software architects, engineers and developers to expand XBRL tools by creating a common specification blueprint, ultimately lowering development costs for solutions, project implementation, users and reporting entities.”

XBRL is expanding globally

NEW YORK, NY, NOVEMBER 9, 2010 – The release of a national General Purpose XBRL Taxonomy by the China Ministry of Finance last month during XBRL21 mandates XBRL across banking, insurance, capital markets, taxation and audit in China. This represents the largest scale integration of the standard to date in the world, building upon a steadily increasing series of regulatory requirements to use XBRL in Japan, U.S., Australia, U.K., many EU member states and others for tax, annual accounts, corporate financials, mutual funds and standard business reporting.

“Governments and tax authorities are increasingly recognizing the power and value of XBRL in

Streamlining the gathering of information from the public and businesses and sharing that information across agencies efficiently and cost-effectively,” said Anthony Fragnito, CPA, CEO of XBRL International, Inc. “The reduced burden on governments using XBRL is substantial, as we have seen with the SBR programs in Australia and the Netherlands. Ireland’s Revenue Commission recently announced that it is planning to use XBRL for tax reporting; The U.K. HMRC requirement for tax reporting using the inline XBRL standard goes into effect next April; Germany, Denmark and other countries are also using XBRL for tax reporting. In total, millions of listed and privately held companies are using XBRL today for tax reporting. Look beyond that to XBRL requirements for listed companies, and the market is now seeing financial information in XBRL format from companies representing more than 75% of the world’s total market capitalization.”

An XBRL taxonomy developed by SWIFT, DTCC and XBRL U.S. for corporate actions was also presented during XBRL21 and is projected to save more than $900 million for organizations reporting and receiving billions of corporate actions transactions annually in the U.S. alone. “I expect to see increasing interest from other countries in the use of XBRL for corporate actions given the projected cost-savings, the improvement in accuracy, and the efficiency in analyzing important corporate communications to investors,” added Mr. Fragnito.

XBRL and internal auditors (part 2)

There are also many opportunities for internal auditors when an organization tags the US GAAP Taxonomy deeply into its business and financial systems. Imaging that an organization tags XBRL into its ERP at the general ledger account and cost center level. Those XBRL tags could be utilized to feed financial data to a variety of systems such as consolidation and financial reporting software, tax software and regulatory reporting software. In addition, internal auditors could utilize the XBRL data tags to:

·         Move from statistical sampling of financial information to performing 100% testing by utilizing Excel, Access or similar desktop software.

·         Eliminate or reduce manual intervention and provide strengthened ability to centralize controls, processes and performance standards thereby reducing risk

·         Providing reliable, consistent and electronically available information that allows internal audit to develop standardized, shareable and electronically executable internal audit programs.

·         Increase the ability to enforce controls and provide analytics that can be persistently shared for communication and collaboration with internal and external stakeholders, including external auditors

Have you limited the potential of XBRL in your organization? Is accounting and finance the only function involved in your XBRL process? Consider the longer term impact and benefit of XBRL. Now could be the time for you to involve your internal audit, information technology and tax functions to maximize the benefits of XBRL within your organization.

XBRL and internal auditors (part 1)

XBRL in the United States is currently most visible in regulatory reporting to the SEC. Many organizations have assigned the responsibility for XBRL to the financial reporting department, but is that the only area that should be involved? Is there a role for internal auditors in complying with SEC XBRL requirements and utilizing XBRL to gain internal reporting efficiencies? Let’s explore the internal auditor’s potential role in XBRL.

The management of an organization is responsible for ensuring that accurate and complete financial statements are produced. In this context, management is also responsible for XBRL formatted financial statement accuracy and completeness. The internal auditor can play an important role in providing some oversight to the XBRL financial statement preparation process including:

·         Providing comfort that internal controls over the XBRL process are adequate

·         Validating that business and financial data is tagged to appropriate US GAAP Taxonomy elements

·         Confirming that XBRL rendered financial statements are proper and agree with printed financial statements

·         Verifying that the SEC’s XBRL filing requirements are met

Advantages and Disadvantages of XBRL (continue)

The Disadvantages of XBRL

XBRL facilitates near real-time disclosure. The potential to quickly report information in automated ways is a double edged sword. On the one hand, near real-time disclosure improves transparency and sharing of information for a variety of beneficial purposes. On the other hand, near real-time disclosure may emphasize short-term results at the expense of long-term objectives. Some argue that financial information shared in a real-time way may cause undue volatility in stock prices and impulsive decisions by investors, suppliers, customers and business managers.

XBRL increases the potential for error. Many cite the potential for errors and inconsistencies as a major disadvantage. If companies select the wrong tag from a taxonomy (for example the US GAAP Taxonomy or “UGT”) then users of that information would rely on the incorrect information. This is a concern during implementation as companies begin to select  UGT elements for the first time, but the UGT ”tags” chosen by companies will improve over time as XBRL users learn how to select the best UGT elements to represent their information. In addition, the SEC will review XBRL exhibits and make comments where they believe corrections should be made. Since XBRL persists from period to period, electronic reporting accuracy should improve over time.

XBRL may increase information abuse. In an information age where dishonest people are electronically enabled, abuse is bound to occur. As more information becomes electronically companies will need to implement appropriate safeguards to protect their information, including XBRL tagged information.

XBRL taxonomies are extensible. Taxonomies are extensible. In other words, they can be expanded to meet a variety of purposes. One such reason for extending a taxonomy is to add a new taxonomy element that better describes an amount for which there is not a currently available taxonomy element. Extending a taxonomy is perfectly appropriate in some cases such as tagging disclosures required by  a newly effective accounting standard that has not yet been incorporated into the UGT. However, some argue that companies can over use taxonomy extensions thereby rendering (pardon the pun) the resulting instance document less comparable with companies in the same industry. Overuse of taxonomy extensions can be a problem. There are examples of companies utilizing UGT extensions exclusively in their filings with the SEC. Extensions are a necessary part of XBRL use, but use of extensions should be made only when appropriate taxonomy elements are not available.

Advantages and Disadvantages of XBRL

The Advantages of XBRL

XBRL is a universally accepted information sharing tool. XBRL is available universally in many countries and facilitates sharing business information in many languages, on virtually any computer platform and in multiple accounting standards. Investors can access business information electronically with XBRL thereby enabling almost real-time analysis. Business information tagged with XBRL can be converted into a variety of formats including HTML, spreadsheets and databases. Because XBRL is so widely accepted, companies can increase automated information sharing with minimal implementation costs.

XBRL is beneficial for a variety of stakeholders. XBRL has broad appeal because it can be utilized by investors to facilitate analysis of financial results, by companies to eliminate manual input and review of information passed through the financial reporting process, and by governmental entities to efficiently gather information from business. XBRL can drive business information sharing efficiencies in a variety of situations. Companies should begin to explore using XBRL in other ways once they complete SEC compliance requirements.

XBRL adapts well to a variety of uses. XBRL is not just a financial reporting tool. XBRL can be used in a variety of business information sharing situations. XBRL could streamline tax return preparation and reporting, sharing of non-financial business information, like production volumes, inventory reserves or merchandise shrinkage. XBRL could facilitate internal corporate efficiencies including the automated movement of information from its source to its end use. XBRL can also enable information sharing between companies and their vendors, customers and business partners. Consider for instance that automated matching of purchase orders, receiving documents and invoices could be automated utilizing XBRL technologies. In addition, there is open source taxonomy, Global Ledger, that companies could utilize to jump-start the use of XBRL within their organization

XBRL provides context, validation, persistence and reusability. A company can use XBRL to improve both the speed and accuracy of information moved through its reporting cycle. In addition, XBRL can improve spreadsheet controls by electronically accessing information from source systems thereby significantly mitigating human input errors. In addition, business information tagged with XBRL persists from period to period and is thereby easily reusable.

XBRL is Open Source. Organizations have paid to develop taxonomies that can be used without any cost to those that use them. There are also web-based readers to read the taxonomies and web-based tools for rendering XBRL Instance files. Even Microsoft Office, a tool widely available in almost every company, is XML enabled (XBRL is a special type of XML). By utilizing the freely available XBRL resources, companies can benefit from XBRL while keeping implementation costs to a minimum.