Extensible business reporting language (XBRL) is helping to revolutionise the way business results are communicated and boost the drive to transparency.
Extensible business reporting language (XBRL) has recently enjoyed a huge amount of support and international participation. The list of companies involved in its development is impressive.
In March 2002, Microsoft started reporting in XBRL, claiming that it expected to see a quick return on its investment. Reuters and Morgan Stanley Dean Witter quickly followed suit.
The language is also now used by the Securities and Exchange Commission and the Tokyo Stock Exchange. Even the UK Inland Revenue is investigating the possibility of using XBRL in its electronic services programme for corporation tax.
What is it and how does it work?
Many companies use the internet to communicate their business results. PDF files of annual reports, webcasts of meetings with analysts, or PowerPoint presentations can be found on many corporate websites.
Most of the financial information on these sites is simply an electronic representation of what exists on paper, encoded in HTML (hypertext mark-up language). HTML is used to display pages on the internet by providing code and “tags” which dictate how information is displayed. The tags serve to present the information in a certain way – for example, italicised or aligned in tables. HTML cannot “read” or make sense of what's on the page, which means the information cannot be analysed or compared across sites.
XBRL is changing all this. It is an open specification for the reporting of business information in XML (extensible mark up language). XML is an electronic language that functions across all software and technologies, including the internet.
It differs from HTML in that it tags information in a way comparable to a bar code, so that each individual piece of data is described in a comprehensive way, regardless of the format. This allows for comparability and a broader scope for the analysis of information presented.
Its potential is based on taxonomies – XML-based data tags that describe financial statements. They are available for universal use by all members of the financial information supply chain. Because of this, XBRL enhances the transparency and usability of published financial information. In future, the aim is to develop taxonomies that carry non-financial data as well.
XBRL therefore provides the financial community with a defined framework to prepare, publish, extract and automatically exchange financial statements. It is not about creating new standards but about changing the form and process of disclosure.
The envisaged benefits to users include: