XBRL: The Future of Online Financial Data.Introduction
The "information superhighway" is proving to be a great way to do business. Many companies are now increasing their visibility on the Internet and displaying various information about themselves (including financial information). However, the lack of standard definitions for various types of data on web sites and the use of proprietary formats for presenting financial information create confusion and limit the usefulness and transferability of such reports.
In order to make online financial reporting more usable, XBRL (EXtensible Business Reporting Language) A specification for publishing financial information in the XML format. It is designed to provide a standard set of XML tags for exchanging accounting information and financial statements between companies and analysts. (Extensible Financial Reporting Markup Language markup language
Standard text-encoding system consisting of a set of symbols inserted in a text document to control its structure, formatting, or the relationship among its parts. The most widely used markup languages are SGML, HTML, and XML. ) is being developed by a consortium of companies and organizations as a standards-based program. This language will provide users the ability to prepare, publish, exchange, and analyze information in financial reports in a variety of formats. In addition, it will serve to integrate software applications by enabling the automatic exchange and reliable extraction of financial information among various users.
The Need for XBRL
Despite the excitement over increased use of the Internet for electronic commerce, a major problem inherent in information systems still plagues E-commerce--how to make information that is originally created in one format/platform accessible in another format/platform. The original solution to this problem was HTML HTML
in full HyperText Markup Language
Markup language derived from SGML that is used to prepare hypertext documents. Relatively easy for nonprogrammers to master, HTML is the language used for documents on the World Wide Web. , a programming language used to apply tags to describe content on web pages. These tags provide descriptive elements (such as a header, table, background color, italics, and bold) to the web page content (which make it accessible to Internet browser See Web browser. software).
HTML tags A code used in HTML to define a format change or hypertext link. HTML tags are surrounded by the angle brackets < and >.
tell web browsers The following is a list of web browsers. Historical
Historically important browsers
In order of release:
HTML gives programmers a great deal of room for originality and creativity in formatting web pages. Individual companies developed their own proprietary standards Specifications for hardware and software that are developed and controlled by one company. Proprietary standards are technically de facto standards such as Microsoft's Windows and Intel's x86 chip family. Contrast with open standards. for using HTML, standards which (more often than not) do not conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?"
coordinate - be co-ordinated; "These activities coordinate well" any other company's HTML. As a result, HTML does not easily facilitate the essential requirement for business-to-business transactions--the reliable exchange of data. Today's Internet is a vast, unruly collection of HTML, Java SCRIPT and Java on the client side, and a grab bag grab bag
1. A container filled with articles, such as party gifts, to be drawn unseen.
2. Slang A miscellaneous collection: The meeting evolved into a grab bag of petty complaints. of scripted and compiled languages compiled language
See under programming language. on the server side.
Understanding XML XML
in full Extensible Markup Language.
Markup language developed to be a simplified and more structural version of SGML. It incorporates features of HTML (e.g., hypertext linking), but is designed to overcome some of HTML's limitations.
Since XBRL is based on XML, one must first understand XML. In 1996, a new language (Extensible Markup Language See XML.
(language, text) Extensible Markup Language - (XML) An initiative from the W3C defining an "extremely simple" dialect of SGML suitable for use on the World-Wide Web.
http://w3.org/XML/. , or XML) was introduced for the creation of web pages. It provides structure for the creation of web pages whose content is more accessible, usable and transferable to various applications. XML uses pairs of tags to provide metadata, or information that describes the web page content. XML tags are applied to pieces of text to identify them as being certain types of data elements, similar to those in a database. Each piece of information on a web page is categorized cat·e·go·rize
tr.v. cat·e·go·rized, cat·e·go·riz·ing, cat·e·go·riz·es
To put into a category or categories; classify.
cat with a standardized standardized
pertaining to data that have been submitted to standardization procedures.
standardized morbidity rate
see morbidity rate.
standardized mortality rate
see mortality rate. XML tag. Applications can easily zoom in on XML-created web pages and extract the specific data elements of interest. For example, a computer could easily read and/or extract a patient's name and/or allergy condition from the following XML notation:
[less than]patient[greater than] [less than]name[greater than]John Doe John Doe
formerly, any plaintiff; now just anybody. [Am. Pop. Usage: Brewer Dictionary, 329]
See : Everyman [less than]/name[greater than] [less than]drug-allergy[greater than]penicillin penicillin, any of a group of chemically similar substances obtained from molds of the genus Penicillium that were the first antibiotic agents to be used successfully in the treatment of bacterial infections in humans. [less than]/drug-allergy[greater than] [less than]/patient[greater than].
Accounting is one of the fields that has been creating its own "standards" for the use of XML by creating document-type definitions that dictate the schema or logical structure for standard documents. Examples of this include data element types, naming conventions
The goal of XBRL is to create a standard set of specifications, or terms, which is the same for all companies and consistent from one financial statement to another (creating a platform independent solution enabling ubiquitous reporting formats").
Development of XBRL
In 1998, a task force began to explore the possibility of using XML for the electronic reporting of financial information. By late 1998, the task force agreed to provide funding for a project that would create a prototype set of financial statements in XML. An XBRL Steering Committee steer·ing committee
A committee that sets agendas and schedules of business, as for a legislative body or other assemblage.
Noun was created in 1999 that currently includes more than 30 member companies and organizations.
The XBRL Working Group maintains a web site XBRI.ORG, which publishes up-to-date information pertaining per·tain
intr.v. per·tained, per·tain·ing, per·tains
1. To have reference; relate: evidence that pertains to the accident.
2. to the adoption of XBRL. In October 1999, the XBRL Steering Committee completed an experimental prototype of XBRL (which was used to create financial statements for 10 companies). A Working Group presented the first phase of XBRL standards in March 2000. XBRL is expected to be freely licensed and used extensively by accountants.
Benefits of XBRL for the Field of Accounting
XBRL will offer many benefits to the accounting profession, including:
* Automatic exchange and reliable extraction of financial information among various spreadsheets and software applications that share the XML format. Users will be able to extract various types of information (such as auditors' reports, balance sheets, income statements, cash flow statements, stockholders equity information, and notes/supplemental schedules included with the financial statements)
* Automated and reliable comparisons between business entities (made possible by the use of agreed-upon type tags to organize and tag financial statements)
* One-time creation of financial statement information that can then be rendered many times (i.e., as a printed document, a web page, a bank filing, or an EDGARIZED 10-k form for filing with the Security and Exchange Commission)
* Cross-referencing of financial statements to all major authoritative accounting pronouncements and standards
* Cross-referencing to all other major reporting formats
* Support from all major accounting software developers and providers of audit work papers Noun 1. work papers - a legal document giving information required for employment of certain people in certain countries
work permit, working papers
* Flexibility for users to create additional tags to extend the XBRL language to fit their needs (or create their own style sheets for viewing financial statements)
* Direct extraction and importation of data from financial statements into financial statement analysis
* Sharing of data from financial statements between any database and application that supports the XML format
* Security feature that indicates if an XBRL file has been modified
* Readiness for international use (XML uses Unicode, a character-encoding system that enables the exchange of information in all major world languages).
Prospects for the Future of XBRL
XBRL will have a major impact on all participants in the financial reporting supply chain. Companies will be able to prepare financial statements more efficiently (i.e., creating them once and then being able to render them as printed reports, on web sites, or as Edgar or other regulatory filings). Analysts, investors and regulators will benefit from automated analysis, less re-keying of information from one form into another, and ability to receive information in the preferred format for specific types of analysis.
XBRL is expected to have other impacts as well on the financial world. XBRL will eventually be used to represent all authoritative accounting literature, reporting precedent, and accounting research materials. The Securities and Exchange Commission will soon use XML as a filing format. Every public company will be able to make its financial information available on its web site. Companies applying for loans will be able to E-mail to the bank their XBRL-formatted financial information, which will then be automatically imported into the bank's loan analysis software.
Financial auditing can be a continuous process performed on a daily basis instead of once a year. XBRL will make possible an auditing by exception process that will improve security and help eliminate fraud within the company. In addition, the auditing process will use intelligence agents to notify the auditor of discrepancies in "near real-time." A bank in Italy has already begun offering loans at lower rates to companies that use XBRL standards, since they can audit themselves more consistently and are, therefore, lower loan risks for the bank.
As electronic commerce on the Internet grows, businesses are revealing more and more about themselves on their web sites, including financial information. Confusion and errors have resulted from the lack of standardized definitions and formats for financial statements. The intelligent tags and structure, which XBRL provides for creating documents containing financial statements, will identify and show relationships between individual pieces of data. By using XBRL, documents are easily accessible and more understandable for all types of web browsers and easily transferable to other formats and applications.
Expectations are high for the XBRL Work Group's release of the newest accounting-specialized Internet programming language. If XBRL fulfills its objectives, it will result in enhanced communication of financial information, reduced costs of doing business, and increased efficiency of business decision-making. Only time will reveal the real impact of XBRL on the financial world and on financial transactions conducted by businesses on the Internet.
Abbas Foroughi, Ph.D., is a Professor of Computer Information Systems in the School of Business at the University of Southern Indiana The University of Southern Indiana (USI) is a public university in Evansville, Indiana. This publicly-funded institution is rapidly growing and is the fastest growing comprehensive state university in Indiana. .
Brian L. McGuire, Ph.D., CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. , CMA CMA - Concert Multithread Architecture from DEC. , is an Assistant Professor of Accounting in the School of Business at the University of Southern Indiana.
Mehmet C. Kocakulah, Ph.D. is a Professor of Accounting in the School of Business at the University of Southern Indiana.
Jeanette Maier-Lytle, MBA MBA
Master of Business Administration
Noun 1. MBA - a master's degree in business
Master in Business, Master in Business Administration , CPA, is an Instructor of Accounting in the School of Business at the University of Southern Indiana.