5th February 2007
Although eXtensible Business Reporting Language XBRL has had a chequered history since its genesis in 1998 there are now signs of ‘green shoots' as the SEC adds its weight to digital reporting and a new report suggests that business organisations as well as regulators stand to benefit. With sufficient momentum gathering behind it, XBRL could form the basis of more extensive benchmarking against competitors and support the growing clamour for more non-financial information as well.

In broad terms, XBRL is a ‘mark up' language that allows electronic tagging of financial data so that a third party user of the data, knows how it has been prepared and what it is supposed to mean. For example, “Revenue” defined according to IFRS, for a particular company, period and currency. Once individual elements of the data are tagged in this way they become amenable to data query, analysis and reporting so that external readers of financial statements, such as fund managers and individual investors can use query tools to select and analyse comparative data from different companies.

Regulators around the world have seized upon XBRL as a way of reducing their administrative burden. By getting companies to codify their statutory filings the regulators can streamline their data entry and reduce their processing costs. Whilst regulators are set to benefit, the advantages that accrue to the businesses supplying the data are less obvious.

In the US , for example, The Securities and Exchange Commission has introduced a voluntary scheme for the submission of quarterly filings which some commentators believe may be made compulsory in the not too distant future.

Crispin Read, global head of marketing at Cartesis told FSN, “XBRL is sometimes portrayed as a technology being imposed by regulators such as the SEC who have a backlog in processing data. If they can get other people to do the work then it is a lot cheaper.”

“I think XBRL should really be viewed as a technology opportunity. The value to a company is not in publishing data since this is clearly a cost. The real value in XBRL comes by using other peoples' XBRL for comparison and benchmarking performance,” he added. Cartesis is one of the very few business performance management vendors that has taken an interest in XBRL and regularly demonstrates pulling XBRL data into its performance dashboards for competitor benchmarking.

But this leaves the thorny question of who is going to supply XBRL data for companies to use if other companies are reluctant to supply it? However, recent evidence seems to suggest that the problem is slowly evaporating as different legislatures around the world compel companies to produce their results in XBRL format and third party providers of data such as EDGAR Online enter the fray. T he company, which is licenced to use the EDGAR brand and data has built a significant store of XBRL tagged financial data which is available for annual returns 10-K, quarterly 10-Qs and many other standard returns for approximately 8,500 companies. This is irrespective of whether the companies concerned filed XBRL data under the SEC voluntary scheme.

James Fisher, another Cartesis director points to the growing pool of XBRL data from Chinese companies and sources of data from other providers such as Reuters and Yahoo! Finance.

It is this richly growing availability of tagged data that is Cartesis believes may help to drive the accelerated use of XBRL for performance management. Read says, “If XBRL data is brought into a single data model then the same tools that are used for reporting internally can be used for external reporting as well.”

Read believes that it is this external perspective that is difficult to achieve using conventional manual processes and methods. He told FSN, “Benchmarking performance against close competitors is really important and insightful. For example, rather than saying I want to increase sales revenue by three percent it is much more challenging to say I want revenue to be three percent more than my closest competitor.”

In the past, competitor data has not been abundantly available and nor has it been present to the required level of granularity, but with XBRL apparently catching on quickly the situation looks set to change.

The findings of a new report prepared by Cartesis in conjunction with Perception Partners, entitled, “New Format and Technology Drives Enhanced Business Reporting suggest that this heightened interest in XBRL could also be the springboard for more extensive use of XBRL for non-financial reporting in support of growing narrative reporting requirements around the world. Read adds, ““The real question is: Can businesses afford to be behind the curve? Companies that don't embrace XBRL will sacrifice the ability to leverage external data and easily calculate growth trends, drivers and metrics. They will also miss out on the opportunity to run a wide range of simulations, including M&A scenario analysis, to help their organisations improve business performance and optimise the financial forecast process.”