'All aboard' the XBRL train.

The eXtensible Business Reporting Language (XBRL) train is boarding for financial reporting and, in some cases, it's beginning to leave the station. This powerful new tool promises to aid the usefulness and transparency of financial statements for users and preparers.

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"XBRL benefits the whole financial information supply chain: companies, institutional and individual investors, accountants, capital markets and lenders, regulators and analysts, as well as key third parties such as software developers and data aggregators," says Michelle Horowitz, vice president of content development at PR Newswire and chairperson of the XBRL-US Adoption Committee, writing in IR magazine last November.

Indeed, since its inception in 1999, great strides have been made in adoption and implementation. In its current form, XBRL "will allow companies to gain greater market recognition and media coverage through access to more transparent information, which will enable all stakeholders to make better business decisions," Horowitz says.

As companies re-assess their reporting processes, it's key to deliver better and faster reporting, and XBRL seems to fit the bill. Horowitz explains, "It's an eXtensible Markup Language (XML)-based standard that permits the automatic exchange and reliable extraction of financial information across all software formats and technologies. It reduces the need to enter financial information more than once, and minimizes the risk of data-entry error."

XBRL is gaining momentum internationally. Kurt Ramin, who serves as volunteer Global Chair for XBRL International, spoke recently with Managing Editor Ellen M. Heffes about XBRL in the international arena. Ramin is commercial director for the International Accounting Standards Committee Foundation (IASCF).

Members of XBRL International, based in New York--an outgrowth of the American Institute of Certified Public Accountants (AICPA)--are all interested in the improvement of the business reporting supply chain. Its 250 worldwide members consist of software companies, regulators, the big accounting firms and others. It has a full-time president and several paid staff people. It aims to gain global recognition and visibility of the group and the process (XBRL).

Would you say XBRL is revolutionizing financial reporting?

RAMIN: What it does, for the first time, is integrate the business supply chain of information. It bar-codes financial and business information. Companies create internal, information and most use an integrated software package. They can probably integrate the information into external audit reports. But, then it doesn't get much further because it doesn't get to the analyst and the data integrators, or the Internal Revenue Service (IRS) or all the other people/places in the supply chain. With XBRL, it becomes one flow--it's a code that reaches the different participants in the supply chain.

It drives quality and consistency in financial reporting. While based on XML, XBRL uses business information--to transport it into financial information.

So CFOs, or other senior finance executives who use the system, will have to learn something new?

RAMIN: To a certain degree. Ideally, it's a shared effort between the systems people and the whole community working in financial information. As an end user, you really don't have to learn that much more, but if you put in information, you have to be familiar with the technologies. Obviously, there are tools developed that make the effort much easier. You don't have to be a programmer if you wanted to rearrange information and change it. If people are familiar with Excel spreadsheets and know how to drag and drop information, that is all that they really need to know.

Would you say the development phase is a kind of teamwork between the senior finance and IT people?

RAMIN: Yes, that's why in our circle we have all the large software companies, the large accounting firms and the standard-setters. We all have to work together so we can create the right tools--with the technology, hopefully based on International Financial Reporting Standards (IFRS), and extend to other information to make it easier for the user.

What are you doing at XBRL International to communicate this information out to those who need to know about it?

RAMIN: First, we created a stable platform and specification. We used XML and created specifications on how to create technologies in XBRL. There are certain rules on what you can do and how you can link information--in a calculation or presentation.

We are at the stage now where XBRL language and specifications are becoming implanted. For example, the Federal Deposit Insurance Corp. (FDIC)'s call reports are now based on XBRL; they code the call reports, and the banks have to report this in XBRL.

Is there a timetable to adopt XBRL?

RAMIN: We are not setting the timetable, the individual participants are setting the timetable. For example, several stock exchanges and regulators are now requiring that information be provided in XBRL. The difference [is] if you use a standardized format, the data is much more transportable and comparable.

What is IASB's position on using XBRL for the new IFRS; do you expect reporting in 2005 to begin using XBRL?

RAMIN: The objective of the IASB is to create global financial reporting standards. XBRL taxonomies provide order and format to put the information in. So, if we would integrate or converge global financial reporting standards and use thousands of taxonomies, not based on the IFRS taxonomies, we would have to start all over again. That's why we were in there from the beginning. And, the Financial Accounting Standards Board (FASB) has joined the effort and has been doing the same thing.

We don't set requirements. The governments, the European Union (EU), made a decision that companies have to report using IFRS. It's the stock exchange, or some other regulator, that can require that information be in XBRL format. For IFRS, they have made the decision to conceptually use the standards in 2005.

Last month, we [at XBRL International] received one million euros, which is a $1.2-million grant, from the EU to help to market XBRL to make sure that all the different jurisdictions (countries) in Europe understand, prepare and drive this effort.

What about opposition, or any groups saying, "No, we don't want this?"

RAMIN: [There is] not really anybody against it. There is competition, to a certain degree, and not much opposition. I would rather say that they are "lagging and leading."

We now have worldwide, organized efforts in different countries to drive this forward. These include: the U.S., Germany, The Netherlands, Japan (they are far-developed) and Australia. There are many countries worldwide already doing this. The jurisdictions are listed on the Web site at www.xbrl.org.

What do you see as XBRL's real benefits, and when do you foresee its adoption?

RAMIN: It is going to happen in stages, and, obviously, the more implementation we see--which is starting now--the more excitement comes along with it. People see how easily you can compare company by company, basically over the Internet [with] all kinds of data, format and charts, which you really can't do presently. If you do it now, you have to get information line by line, and input it separately; it is very cumbersome.

Think of an automobile right now that is bar-coded with 30,000-40,000 parts. You can take it apart in half a day and put it together again. [With] the financial information, we can't really do that at this time, because it's not portable--we need intelligent financial tags.

It's a work in progress. But, do you see a light at the end of the tunnel?

RAMIN: We have a stable specification now, which took two years to build. We have developed a U.S.-GAAP taxonomy, (an orderly ranking of information, like a balance sheet), an IFRS taxonomy for general industry, and we are working on one for the financial services industry. So, all these technologies are being developed, and local extensions are being built in different countries, because we need to take care of the additional requirements of the local countries. With the building nearly finished, we are now starting the implementation phase. So, yes, it's a work in progress, but [as for] the output, I've seen it already now.

What about familiarity with XBRL and its new terms?

RAMIN: Like any thing new, it needs more knowledge of people, and they need to see the effects of it. Like any new computer tool, it'll take time to get into the market. It took years, even for Microsoft. The benefits of XML are in many places--there is legal XML [and] human resource XML. This one (XBRL) is for the business-reporting supply chain.

Again, what we wanted to do is make sure that once IFRS is implemented, we don't have to start over again--to make sure that most countries in the world base their taxonomies on the IFRS taxonomy. That is the key message here: convergence, conceptually, with technology.

But convergence may be years down the road--would you say 2010?

RAMIN: I wouldn't venture to guess; but, if I were optimistic, perhaps much earlier. It is like any thing else: once you see the flow, [and] you identify the bottlenecks, [you'll] hopefully be able to clean up these differences much faster.