XBRL: Make Its Power Your Own.

XBRL. It's more than just another professional acronym. XBRL (extensible business reporting language) represents new specifications for electronic business reporting that will revolutionize the way financial information is reported. XBRL will enhance financial statement accessibility and usability while offering substantial practice opportunities to CPAs.

XBRL BENEFITS

When users (management, stockholders, creditors, financial analysts, taxing authorities and others) want to analyze financial reports they have three primary tasks to perform. First is the mechanical task of loading the report into the users' analytical software such as a spreadsheet. The second task is to use the software to aggregate, disaggregate, clean and re-categorize the original data so it is comparable with other data already in the users' databases. Finally, the users actually analyze the data and make decisions such as to buy or sell stock. Users usually only have a limited amount of time to complete these tasks and if the report source is a printed document, most of the users' time will be spent on mechanical tasks.

XBRL enables users to access financial reports in a matter of seconds and move the data to the users' analytical software with literally "a click of a mouse." This gives the users more time to focus on making decisions, which could decrease credit costs and increase analysts' coverage of smaller public companies because of the lower costs of analysis.

BACKGROUND

On any Web page, you can view the source code by selecting "source" (Internet Explorer) or "page source" (Netscape) from the "view" menu in your browser. The information you see between the brackets ([less than] [greater than]) is HTML (hypertext markup language), a standardized language that allows all browsers to view content in essentially the same way. Each tag tells the browser how to format the content of the page. HTML doesn't identify or describe the content between the tags. As such, HTML does nothing to help automated searches for specific items from Web-based documents, including financial statements, press releases and other forms of business reports.

XML (extensible markup language) on the other hand, allows developers to create new tags that can be "read" by XML-aware browsers and search engines. XML is used to identify or describe content. For example, the source code of a Web page using XML, might include a sentence that looks like this:

Our income for 1999 was [less than]netIncome multiplier = 1,000,000,000 year=1999[greater than] $2.2 [less than]/netIncome[greater than] billion.

Here, "netIncome" is a label and "multiplier" and "year" are attributes. Like HTML, XML tags are not visible in browsers.

With XML, financial statement preparers can tag anything, from complete financial statements, individual financial line items, footnotes and items inside footnotes, to nonfinancial information contained within business reports. However it's actually a drawback that XML tags aren't standardized since if one company uses [less than]netIncome[greater than], another uses [less than]Net.Income[greater than], and yet another uses [less than]Net_Income[greater than], a search engine would have to know every net income XML label to do a complete comparative analysis.

The power of XBRL is that it will provide the exact XML tags and attributes for financial reporting information--and eventually, general business information. XBRL is not a new accounting standard and it is not going to require organizations to disclose more information. Whatever an organization discloses in today's financial reports, XBRL will provide specific terms to tag those disclosures.

XBRL.ORG

The XBRL Steering Committee, co-chaired by Louis Matherne, AICPA director of information technology, and Mike Willis, a partner with PricewaterhouseCoopers, was formed in late 1999. It has grown to more than 80 organizations--a who's who of national and international accounting standards setters, large and small CPA firms, general and accounting software companies, and financial analysts. These individuals and organizations are divided into separate working groups, which are currently focused on developing XBRL taxonomies (collections of labels, attributes and structures). A taxonomy for commercial and industrial enterprises for U.S. GAAP has been completed, and several more taxonomies are in development worldwide. Eventually, xbrl.org will become a collection of organizations representing the independent reporting of different jurisdictions such as the United States, Canada, Japan and the International Accounting Standards Committee.

OPPORTUNITIES FOR CPAs

As XBRL-enabled software becomes available and third parties start requesting XBRL documents, businesses will be clamoring for help, and as a CPA, you want to be able to take off running. Following are some of the opportunities that XBRL offers:

* Web-based Financial Reporting: Public companies, small businesses, not-for-profit organizations and government agencies all will need help properly tagging their Web-site financial statements. They'll look to their CPAs to help select the proper tags and map (or translate) between their chart of accounts and those tags.

* Financial Analysis: Banks (and other creditors) are interested in XBRL since it will significantly reduce the mechanical aspects of financial analysis--hereby providing more time for analysis and review. Banks may start requesting that borrowers submit periodic XBRL financial and business reports--and offer discounts for businesses that provide these reports.

* Tar and Regulatory Filing: Many government agencies such as tax and regulatory filing agencies are closely following XBRL activities and eventually may request XBRL documents. Early this year, the California Board of Equalization announced it was going to allow XML for tax filings, but it is not known yet whether it will require XBRL.

* Internal Reports: The power of XBRL applies to internal reports, which are often more detailed, frequent and variable than outside reports. As such, the efficiencies of XBRL are significant inside the organization as well as outside the organization.

* Middleware: Middleware is software that helps two dissimilar systems to share or transfer data. Many businesses will use XBRL to consolidate accounting information from several dissimilar accounting systems used by the subsidiaries. If each system outputs financial information using XBRL, after a one-time mapping process, consolidating could be much more automated. In fact, XBRL's role as middleware is unlimited. Wherever there is a problem sharing or transferring accounting information between dissimilar systems, XBRL is a potential solution.

WHERE TO GO FROM HERE?

First, go to http://www.xbrl.org and review the information and sample financial statements. Add your name to the e-mail list. Download the demo that shows you how to publish your trial balance in XBRL. (You will need Access 2000 to run this demo.) For instructions on how to use the demo, read the article, "Finally, Business Talks the Same Language," in the August 2000 issue of the Journal of Accountancy. The article offers an overview of XBRL and its history, and can be accessed online at http://www.aicpa.org/pubs/jofa/aug2000/zarowin.htm.

Glen L. Gray, PhD, CPA, is a professor in the accounting and MIS department in the College of Business Administration & Economics at California State University, Northridge. Gray is also a member of the XBRL Steering Committee.

XML & XBRL REFERENCES

XML References

"XML for Dummies" (IDG Books)

"XML Step-by-Step" (Microsoft Press)

XBRL References

http://www.xbrl.org

http://www.aicpa.org (Search the site for XBRL)