CHAPTER ONE

XBRL

XBRL IS A SIGNIFICANT INITIATIVE in the finance and accounting community as it has the capacity to partner productively with IFRS in the reliable and rapid development, and delivery of business reports. It is an influential agent of change and one that cannot be overlooked in terms of its implications and impact, whether within any reporting entity or when considered more broadly, such as in any inter-organisational or international capacity.

XBRL enables the control of information flows through open-source technology by binding business (financial and non-financial) data requirements and technical functions, including systems and platforms. XBRL provides a means of describing and defining business and financial information, enabling its transfer and enhanced analysis. This may also affect existing auditing and assurance processes intended to increase users' trust in reported data.

XBRL can handle data in different accounting standards and present it in various languages. It is flexible and can be adapted to meet different requirements and uses. Data can be transformed into XBRL by suitable mapping tools or it can be generated in XBRL by appropriate software. It acts as an intelligent chart of accounts. In fact, by using numbers, just similar to a global chart of accounts, a reader is able to consume data in any language.

For information related to XBRL, in addition to what is presented in this section, see www.xbrl.org (Figure 1.1).

Note that screenshots and text related to XBRL in this book are reproduced by permission of XBRL International.

It must be emphasised that XBRL is not software. It is a standard, much like others discussed in previous sections, although in this instance it is a standard related entirely to the exchange of business information. In much the same way as electronic text is sent and received, with ease, between differing computer systems, XBRL achieves this for financial data. More specifically, XBRL defines the various numeric and non-numeric elements of financial information that constitute the following business reports:

• Statement of Financial Position, also known as a balance sheet;
• Statement of Comprehensive Income, also known as a profit and loss statement;
• Statement of Cash Flows, also known as a funds flow statement;
• Statement of Changes in Equity.

Certainly, one use of XBRL is to define and exchange financial information, such as a financial statement. In so doing, computerised systems that follow the same definitions can, very easily, receive and analyse such data. From a technical perspective, XBRL is based on XML (Extensible Mark-up Language), the standard that establishes the rules for encoding documents so that they are machine readable, which helps to make Internet traffic possible. (See more about XML in the next section.)

The fact that XBRL is extensible (meaning that it is extendible) relates to its flexibility in handling extensions to the core specifications in order to suit the particular needs of users in different countries, industries or companies. In other words, the use of XBRL does not imply an enforced standardisation of financial reporting; on the contrary, its flexibility supports all current aspects of reporting in different countries and industries. Its extensible nature means that it can be adjusted to meet particular business requirements, even at the individual organisation level. For more details, see www.xbrl.org/benefits-and-uses.

Regardless of extensions to XBRL, as already suggested, any subsequent exchange of data would also necessitate the usage of mutually agreed rules and definitions. This is referred to as XBRL taxonomies, a term that has origins in biology, and refers to the identification, naming and classifying of organisms. In relation to business reporting, therefore, XBRL classifies, categorises and thus organises financial data (whether numeric or non-numeric) by giving unique identities to each group, subgroup or line item.

This process is referred to as tagging in that each piece of data has a tag attached that is recognised by computer systems. XBRL, therefore, is very much about the tagging to ensure that data is sent and received in a reliable way. This manner of tagging also defines reporting concepts and relationships between concepts so that, say, tagged line items in a particular report will always be associated with that report.

In addition, company-related information is embedded in the data, as is a time code so that data for the same line item, but for different reporting periods, are not confused in any way. The same can be said for same data that has different corporate origins, whether operating units in the one company or where various corporations are concerned.

Essentially, XBRL is similar to Legal XML standards, and e-COURT projects, that enable the justice and public safety community to effectively share information at all levels, thereby laying the foundation for local, state and national justice interoperability. However, as suggested earlier, XBRL is the language for business.

Concepts and definitions (very similar to object identification) are pieced into structured data in the form of taxonomy. The taxonomy is a list of computer-readable tags in XBRL that allows companies to label precisely the thousands of pieces of financial data that are included in typical long-form financial statements and related footnote disclosures. The tags allow computers to automatically search for, and assemble, data so it can be readily accessed and analysed by investors, analysts, journalists and regulators.

XBRL is a freely available, market-driven, open, global standard for exchanging business information. It allows information modelling and the expression of semantic meaning commonly required in business reporting. XBRL is XML-based. It uses the XML syntax and related XML technologies such as XML Schema, XLink, XPath and Namespaces to articulate this semantic meaning.

It also needs to be reiterated that, as with other international standards, XBRL is freely available and market driven, in as much as it is supported by many entities and individuals worldwide. The overarching entity responsible for coordinating the diverse support base, as well as for developing, publishing and distributing XBRL specifications, is XBRL International Inc. (XII). See www.xbrl.org/AboutXBRL.

As an interesting aside, the roots of XML (and, therefore, of XBRL) can be traced to Charles P. Goldfarb, a lawyer working for IBM, who created SGML (Standard Generalized Mark-up Language). The World Wide Web Consortium (W3C) developed these concepts further. XML is self-descriptive, thanks to DTD (Document Type Definition) or XML schemas that define the data about the data (metadata) in form of tags. Given the importance of understanding XBRL, the following section provides an introductory guide to XML.

1.1 XML – THE TECHNICAL BASIS OF XBRL

For the purposes of understanding XBRL, it is worthwhile for interested readers to gain some fundamental knowledge of XML (Extensible Markup Language). After all, electronic business is the future of all business, and XML is the key ingredient. The benefits of XML can be summed up in one statement: Speed – Storing, Publishing and Exchanging Electronic Documents.

Basically, XML, as the full name suggests, is am language understood by computers, as is used to transmit data. This can occur even if the computers (such as the hardware thereof, as well as operating systems, are not at all compatible. The same can be said for transmitting data across boundaries, and between people of different language backgrounds. In addition, the way that XML is displayed makes it easy for people to understand XML, too.

For instance, XML uses tags. These are user-generated and can be common words that are familiar to us in our daily lives, and appear in XML as follows:

<Name>

<Address>

<Telephone number>

Each of these tags, then, becomes the means by which data is captured, collected and manipulated. A simple example of how XML tags appear in computing is presented below.

<Address>

<Name>

<FirstName> Charles </FirstName>

<LastName> Stevens </LastName>

</Name>

<Phone>

<business> 555-373282 </business>

<home> 555-569233 </home>

<mobile> 555-745673 </mobile>

</Phone>

</Address>

In addition, and beyond what we need to know here, is the ability for XML to join tags so that names and contact details, for example, can be combined. We can add assorted other pieces of information, too. In financial terms, we can see how we would be able to add invoice amounts and terms of payment.

For additional information about XML, see The XML Shockwave – What every CEO needs to know about the key technology for the new economy was written by Berthold Daum and Chris Horak and published in 2000 by Software AG, a world leader in enterprise management software (see www.softwareag.com). This 88-page publication still offers a remarkably clear summary of XML. It includes so-called buzzwords related to XML, as well as XML-based Web applications, such as electronic data interchange, plus information about XML technology, including databases, application engineering and integration.

The XML Shockwave provides a guided tour and comprises a compact executive summary containing information about XML from a business perspective, including companies leveraging the power of XML. The following is a brief summary:

• Electronic business is the future of any business and XML is the key ingredient to it;
• The power of XML is that it facilitates the definition of common industry-specific standards for information exchange;
• XML continues to develop;
• If you don't know enough about XML, your business might be outpaced by the major revolution XML will introduce to business practices;
• XML enables the storage, publishing and exchange of electronic documents, which is the foundation for any kind of electronic business;
• XML is becoming the major enabling technology for supply chains, sales channels and electronic markets;
• Like a chameleon, an XML document can adopt many different presentation styles;
• XML will become the base technology for mobile connectivity;
• XML is breeding a completely new generation of tools, middleware and DBMSs that will co-exist with today's transaction- and SQL-based systems.

In the context of this introduction to XML, especially as examples related to formatting of commonly seen details, Figure 1.2 shows the reverse of a business card used by one of the authors of this book when he was chairman of XBRL International.

As an interesting aside, in addition to the XML tags for name, title and email address, note the concluding line. This business card, although years old now, shows the location of Kurt Ramin's XBRL office in terms of longitude and latitude. That tag provides details of a specific, and unique, geographical address. Certainly, for any readers who have wrestled with businesses and websites that lack international sensitivity, a unique location identifier like this has the potential to do away with confusion and cost associated with poorly addressed correspondence or deliveries.

1.2 BENEFITS OF XBRL

Evidence from XBRL projects demonstrates a positive impact in a number of areas for businesses and other entities that implemented the standard, due, primarily, to a significant reduction in the reporting burden. Overall, XBRL provides many benefits, such as:

• Increased data quality;
• Elimination of duplicated data;
• Minimised, if not entirely removed, re-keying of data;
• Increased speed of processing;
• Streamlined reporting processes;
• Automated data handling;
• Reduced compliance costs;
• Reduced regulatory burden;
• One-time filing;
• Binding of disparate information systems;
• Reduced operating cost;
• Reduced cost of reporting;
• Faster data collection, analysis and reporting;
• Enhanced competitive advantage;
• Reduced audit costs;
• Reduced risks due to increased data integrity.

This list is not by any means all-encompassing. Even so, it must be noted that this does not overstate the potential benefits of any entity that implements XBRL. Essentially, the greater the extent to which any organisation integrates XBRL, the greater the benefits are likely to be. This significant advantage is considered in more detail next.

Most certainly, XBRL offers major benefits at all stages of business reporting and analysis. The benefits are seen in automation, cost saving, faster, more reliable and more accurate handling of data, improved analysis, and better quality of information and decision making. 

XBRL enables producers and consumers of financial data to switch resources away from costly manual processes, typically involving time-consuming comparison, assembly and re-entry of data. They are able to concentrate effort on analysis, aided by software which can validate and manipulate XBRL information. As just one example, searches for particular information which might in the past have taken hours can be completed with XBRL in a fraction of a second.

Those who stand to benefit include anyone who collects business data, including governments, regulators, economic agencies, stock exchanges, financial information companies, and so on, and those who produce or use it, including accountants, auditors, company managers, financial analysts, investors and creditors. Among those who can take advantage of XBRL are accountancy software vendors, the financial services industry, investor relations companies and the information technology industry. The positive effect of XBRL upon these types of organisations is considered further next.

Corporate reporting

Companies of all sizes can gain benefits from XBRL. By using XBRL, companies will be able to:

• save costs by preparing data in one form and automatically generating many outputs;
• avoid re-keying of data and other manual tasks;
• consolidate results across divisions and subsidiaries with much greater speed and reliability;
• improve accuracy and reliability of financial data;
• focus effort on analysis, forecasting and decision making, rather than on laborious tasks in gathering, compiling and preparing data;
• achieve quicker and more efficient decisions;
• make more effective use of the Internet in communicating with investors. Companies will benefit from the growing importance of websites as a means of communication;
• improve investor relations through provision of more transparent and user-friendly information;
• simplify the process and reduce the costs involved in regulatory reporting to tax and other authorities;
• obtain quicker responses from counterparties, including banks and regulators;
• free themselves from proprietary systems and software which are difficult and costly to replace.

For more information, see www.xbrl.org/corporate-reporting.

Regulators and governments

By introducing XBRL for reporting, regulators and other government authorities can:

• obtain data which can be entered automatically into systems without re-keying, reformatting or other ‘translation' effort;
• dramatically reduce costs by automating routine tasks;
• quickly and automatically identify problems with filings;
• analyse and compare data much more quickly, efficiently and reliably;
• benefit from the use of software in validation and analysis;
• monitor data and activities and reach judgements with far greater speed and confidence;
• focus effort on analysis, decision making and dealing with counterparties rather than on data manipulation;
• provide a much faster and more focused response to counterparties;
• promote efficiencies and cost savings throughout the regulatory filing process.

For more information, see www.xbrl.org/regulators-and-government. For an indication of which governments are implementing XBRL-based service strategies, see the subsequent and self-explanatory section ‘Users of XBRL – worldwide'.

Stock exchanges

Stock exchanges can use XBRL to:

• make their process of company data collection more efficient, comprehensive and reliable;
• increase the value and competitiveness of the data products which they offer to institutions and private investors;
• strengthen the transparency and robustness of information on their markets.

Depending on the circumstances in which they are operating, Exchanges may be able to encourage, or mandate, the filing of information by companies in XBRL or convert company data into XBRL. They can then offer data in XBRL form, benefiting all consumers of investment information. The result is a set of more competitive and valuable exchange data products as well as improved exposure for the exchange. For more information, see www.xbrl.org/stock-exchanges.

For an indication of which stock exchanges are implementing XBRL-based service strategies, see ‘Users of XBRL – worldwide'.

Investment analysts

By using XBRL, investment analysts and advisers can benefit from:

• much greater transparency, clarity and consistency in company financial data;
• the ability to handle and compare a broader range of companies and deeper set of information;
• more powerful software tools for analysis, comparison and benchmarking;
• far more efficient means of finding specific company data;
• the ability to select data from a variety of companies within seconds for comparison and analysis.

In summary, XBRL can help the analyst community provide quicker and better quality investment advice and decisions. For more information, see www.xbrl.org/investment-analysts.

Financial data providers

Through the adoption of XBRL, companies in the financial information industry will be able to:

• obtain company financial data in a standardised and predictable form;
• significantly reduce costs by automating many aspects of the gathering and storage of financial data;
• switch efforts from routine data gathering to analysis;
• provide a faster, clearer, deeper and more accurate view of company financial performance;
• produce richer and more usable products containing XBRL data.

For more information, see www.xbrl.org/financial-data-providers.

Banks

Through XBRL, loan and credit management departments can:

• obtain data quickly and reliably via automated reporting;
• reduce costs in processing data;
• compare and analyse financial information much more reliably, fully and effectively using automated processes;
• track financial performance more quickly and efficiently;
• reach decisions more confidently and provide a quicker response to clients.

In particular, credit risk assessment companies are already working within XBRL International on the introduction of XBRL in this area. Credit insurance underwriting decisions depend on high-quality assessment of large quantities of up-to-date information. XBRL enables automated, robust assessment of such data. For more information, see www.xbrl.org/banks.

For an indication of which banks are implementing XBRL-based service strategies, see the ‘Users of XBRL – worldwide'.

Accountants

Through the use of XBRL in companies, accountants will be able to:

• obtain more rapid and reliable data on company financial performance;
• greatly reduce effort and costs in gathering and analysing data;
• simplify and automate tasks;
• focus effort on analysis and value-added work;
• make better use of software to improve efficiency and speed.

In summary, XBRL can speed up, reduce effort and increase reliability in accounting and auditing tasks. For more information, see www.xbrl.org/accountants.

Software and IT systems providers

XBRL offers software, systems and IT companies a range of opportunities to enhance existing products, develop new ones and expand their business. It enables these companies to:

• adopt a data standard for transferring business and financial information, avoiding the commercial conflicts and client aggravation caused by competing proprietary standards;
• create software to support the preparation, publication and collection of data in XBRL;
• create software to select, compare and analyse financial data in XBRL.

For more information, see www.xbrl.org/software-and-systems-providers.

1.3 USERS OF XBRL – WORLDWIDE

Numerous and significant organisations have implemented XBRL. These include:

• National banks;
• Regulatory authorities, such as national taxation departments and treasuries;
• Stock exchanges;
• Financial institutions;
• Accounting service providers;
• Industrial entities.

For an indicative list of entities that have implemented XBRL fully, or those that are in the process of completing related projects, see Worldwide XBRL Projects Listing, as per the XBRL projects around the world link at xbrlblog.com/world-wide-xbrl-projects-listing.html. Note that this information is maintained by the large and growing, XBRL community of users of associated stakeholders.