Let’s talk about XBRL

18th June 2012

Is the eXtensible Business Reporting Language a pig in lipstick or a pig with wings? It’s time for finance professionals to decide, suggests FSN writer Lesley Meall. 

Join Financial Systems News (FSN’s) Linkedin Group for up to the minute discussion about XBRL and iXBRL

 

 

 

‘The time has come,’ the Walrus said, ‘to talk of many things: of shoes – and ships – and sealing-wax – of cabbages – and kings – and why the sea is boiling hot – and whether pigs have wings.’ And if Lewis Carroll were writing Alice in Wonderland today, he could well have added XBRL to the list. Because after a decade during which it was talked about only by its most ardent advocates, XBRL has finally entered the vocabulary of CFOs and FDs and financial controllers across the world, even if they are struggling to exploit it now it’s arrived. 

At the moment, most corporate adoption of XBRL is being driven by various mandates that require its use for statutory reporting. This has potentially big benefits for governments, tax authorities and stock exchanges. Hence the use of XBRL to  collect and analyse company and finance-related information in around 26 jurisdictions including Australia, the Netherlands, Japan, Spain, the US and the UK (with its HM Revenue & Customs variant Inline XBRL aka iXBRL) – and you can learn more about such initiatives here. The benefits for business are harder to find. 

Many finance professionals see XBRL as an investment without a return, but the recent winner of a $20,000 prize for the ‘most inventive and useful application’ of the XBRL data in the EDGAR database of the Securities and Exchange Commission, provides a glimpse of the possibilities. Calcbench is a free, browser-based tool that enables users to click on any number in an XBRL-tagged SEC filing, automatically calculate changes in categories such as accounts payable, debt to equity ratio, and inventory, over quarters or years, and compare the results between companies. 

Users can also add their own notes and formulas, export to Excel and share their work with others. Although the brief for the competition means that the winner and the finalists are all tools aimed at investors, these also have possibilities for benchmarking and analysing competitors, partners and suppliers, and can help CFOs get a clearer view of how their filings could appear to others. But XBRL also has the potential improve internal reporting processes, if it can be integrated into earlier stages in the reporting supply chain. 

Before it is tagged for compliance purposes, data is collected and processed for the preparation and generation of internal and external financial reports, and goes through the financial close process, and there are software tools that can be used to do this. But there are also barriers, such as the use of third party services to apply XBRL tags for compliance purposes – and even when tagging is done in-house, in most cases the software being used cannot also be used to exploit XBRL internally, and there is a disconnect between these and the other systems in the reporting supply chain. 

This is something the FSN LinkedIn Group has recently been discussing, here, along with the need for less complex software tools (than most of those currently available)  with which to explore and exploit XBRL. (It’s along thread, so persevere.) Currently, adding XBRL functionality to new or existing software is a complex and costly job for developers. Steps are being taken to address this by XBRL International Inc (XII) the not for profit consortium of agencies and companies that develops and promotes XBRL standards and adoption (and you can read about them here). 

So you can look forward to more – and more user-friendly – software to exploit XBRL inside the enterprise in the future. You could eventually benefit from easy-to-use software that streamlines and simplifies your management reporting and automates that pesky last mile, so that finance can produce XBRL-tagged data for statutory filings without spending time on transactional work. But you’ll either have to be patient, or be proactive and make demands. Only the finance profession can decide if XBRL stays a pig in lipstick or turns into a pig with wings. 

Follow Lesley Meall @FSN_writer

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