New language: XBRL allows one reporting tongue. (Financial Reporting).

An identical chart of accounts is the dream of anyone who tries to audit - or even understand - the finances of a nonprofit. Imagine the benefits: the ability to compare financial statements easily even across disparate organizations; ability to combine financial statements; and more.

Of course, there is the reality that all nonprofit organizations are not the same and a standardized chart of account may be impractical for many reasons. But, potential benefits don't have to be abandoned.

There is a solution that's attracted the attention of all the accounting heavyweights. It has accounting institutes, associations and registries from all over the world among its membership, including the American Institute of Certified Public Accountants (AICPA).

More than 90 members comprise this formidable assembly known as the XBRL Steering Committee: from Microsoft to Dow Jones and Company, Inc. to the U.S. Census Bureau to fund accounting software vendors such as Micro Information Products (MIP). The group is drafting something called eXtensible Business Reporting Language or XBRL.

What has high tech movers and shakers, international governments and some of the largest and most powerful entities in the federal government so interested is the fast and accurate formatting, distribution and "re-purposing" of financial information - all done through an open, browser-based standard.

And, all this is free.

The XBRL standard is a specialized subset of extensible markup language (XML). Resident in the application software, XBRL "tags" the individual data comprising your financial reports.

The official Web site, www.xbrl.org, describes it this way, "An XBRL-based financial statement is a digitally enhanced version of paper-based financial statements ... XBRL documents can be prepared efficiently, exchanged reliably, published more easily, [and] analyzed quickly ..."

It should be noted that XBRL is not establishing new accounting standards, but rather creating a set of tools that enhances the usability of the data necessary for distribution and compliance with existing standards.

There are some differences between every webmaster's favorite programming language Hypertext Markup Language (HTML) and proposed standard. Like XBRL, HTML also uses XML-based tags, but HTML's primary focus is on tags that address formatting of information. HTML takes a document, for example your balance sheet, and displays it.

But, HTML does not inherently describe the contents of the balance sheet. It is merely used as a formatting language describing fonts, sizes, colors and other attributes to enhance the visual presentation.

XBRL, on the other hand, contains information that describes the content of the information being presented.

HTML distinguishes what should be bolded, underlined, and so on, but does not distinguish between assets and liabilities. XBRL does not specify font characteristics, but it does describe assets, liabilities, and other detailed contents of a financial report.

Using XBRL to display or transport key information, you can focus on particular details of the balance sheet while excluding others. In fact, XBRL is so flexible you could extract data from several different reports, possibly from several different applications, and create an ad hoc document.

Who is behind all this?

Charles Hoffman, a CPA in Tacoma, Wash., was among the first to see the potential of XBRL. Then Hoffman, along with Wayne Harding, chairman of the AICPA High Tech Task Force, briefed the task force on the scope and opportunity of XBRL.

At the request of the AICPA, Hoffman, Harding, Eric Cohen, CPA, and Louis Matherne, CPA, AICPA's director of information technology, completed a business plan that identified the business case for an XML-based financial mark up language.

The AICPA Board of Directors promptly agreed to fund the project, and within 30 days, 12 companies including Microsoft Corporation, the largest accounting firms, and others, joined the AICPA's effort as members of the initial steering committee. Today, that number has swelled to close to 100 organizations.

This past June, at the second International XBRL meeting held in New Orleans, several commercial accounting software vendors provided demonstrations of how they have incorporated XBRL into their software. What the 90 or so members of XBRL.org are speculating is that XBRL will be embraced by large regulatory entities such as the Securities and Exchange Commission (SEC) and the Internal Revenue Service (IRS).

And beyond the border of the United States, XBRL.org is energetically globetrotting to demonstrate the advantages of how its standard could revolutionize large multi-nationals to: analyze and publish the financial statements of numerous subsidiaries in different countries; use different languages; each comply to their own nation's accounting standards and requirements on a variety of computer systems.

It is not hyperbole to say the promise of XBRL is taking the world by storm but what does it mean for the typical nonprofit organization? There are short-term and long-term answers to this question.

In the short term, nonprofits that routinely publish financial data to their boards, constituents, donors, and other funding sources will benefit from the ease of publishing Web-ready financial reports made possible by XBRL. In fact, XBRL instance documents (that is the fancy name given to the data file containing the XBRL tags and related data for a financial report) can easily be opened. It can be done in any number of office productivity software capable of working with XML documents, such as Microsoft Excel XP.

Organizations that compete for grants and other funding sources may benefit from being able to provide financial data in a manner that makes it easier for funding sources to analyze and reach decisions in a rapid manner.

Another short-term benefit extends to non-profits that need to combine financial data from multiple subsidiary organizations, such as United Ways, that have a national component as well as hundreds of local, independent chapters. Each of these entities operate as independent legal entities and may in fact have very different accounting systems, as well as a completely different chart of accounts.

This diversity makes it quite time consuming and difficult to compare the financials of one chapter to another, or to combine the financial results of several chapters, or to identify chapters who meet a certain financial criteria. Doing any of these tasks without XBRL requires review of printed financial reports, reclassification of transactions, and to re-entering the adjusted data in a financial reporting system. XBRL, however, provides the potential for streamlining these processes and making them as easy as opening an excel spreadsheet.

In the longer term, there are cost savings and other simplifications to be derived. Today, the National Center for Charitable Statistics and GuideStar.org spend approximately $5 million per year capturing images of Form 990s information and summarizing the data for use by nonprofits and those interested in nonprofit financial information.

XBRL could very significantly reduce those costs while improving the accuracy and timeliness of the data. Now, nonprofits submit financial reports in a variety of formats to several different government and regulatory agencies. XBRL. provides the opportunity to standardize these many formats.

The opportunities are boundless. For instance, nonprofits operating in multiple currencies could use off the shelf software such as Microsoft Excel XP to read one XBRL instance document in Yen from its Japanese office, another in Euros from the U.K. office, another in Pesos from the Mexican office, and apply a currency conversion factor to convert it all to U.S. dollars without having to retype any of the data.

There are a number of common misconceptions about XBRL. One of those is that XBRL is a whole new series of financial reports. Another misconception is that XBRL somehow imposes new financial reporting requirements. In fact, all that XBRL does is create a set of tags (think of these as labels) that define the typical financial statements everyone is used to creating and reading.

An XBRL balance sheet instance document is merely an electronic representation of the paper version of the balance sheet.

The initial XBRL taxonomy (think of this as a grammar), published by XBRL.org partners focused specifically on the commercial and industrial sectors. As we all know, nonprofit financial statements are slightly different than commercial financial statements and therefore the original Commercial and Industrial (CI) taxonomy had to be adapted accordingly.

MIP, working in collaboration with the National Center for Charitable Statistic (NCCS) and other XBRL.org members developed the first nonprofit NP taxonomy. While MIP was focused on developing the (NP) taxonomy, the NCCS was developing the Form 990 taxonomy.

Coordination during the development of these two taxonomies was critical because there are significant sections where they overlap. This close cooperation by MIP and NCCS insured that the two taxonomies would be compatible.

Now, granted, the XBRL instance document is more complicated for us humans to read and interpret, but it contains exactly the same information as the printed version, no more, no less. It is, however, structured in a standardized format that can be read by software much more easily.

Kent Hollrab is president of MIP, Inc., a nonprofit and government applications software provider based in Austin, Texas.