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XBRL Overview
Imagine you're in an small shop in France where a beautiful antique desk captures your eye. The tag that dangles from it simply reads 1500.
You would properly assume that the price meant 1500 Euros. However, suppose the same tag told you that the price actually meant French francs...and that the price only applied for the June to August tourist season?
You've just had a glimpse into the world of interactive data, where identifying tags lend very specific meaning to numbers. In XBRL, each data item - like the number 1500 - has its own identifying tag that is often compared to the bar code now seen on all products. The tag can contain the currency unit, time period, reporting unit, and other important information that give the item context and meaning. Moreover, XBRL tags can perform calculations on the data and validate it.
What Does XBRL Do?
The tagging of data offers an entirely new approach to entering, processing, and labeling information in computer systems. Indeed, we sometimes think XBRL stands for eXtremely BRilLiant language because of its many and remarkable advantages, including:
- Dramatic reductions in data re-entry - a time-consuming, costly process prone to human error
- More efficient and accurate information search
- Automated real-time creation of financial reports, greatly reducing the time gap between period-end and release dates
- Easier and faster exchange of information both within the organization and with external parties, like banks, auditors, business partners and suppliers
- Reduction in time needed for data manipulation, allowing data analysis to happen more quickly
- "Enter once, format many" means you type in your data once and it's available to others as printed reports, EDGAR filings, PDF files, and other formats.
Who Wins?
The list of those who have and will benefit from XBRL is long and broad:
- Government agencies, both in the US and overseas, including securities commissions like the SEC, tax departments, and statistical agencies. Example: The Federal Deposit Insurance Corporation now requires that banks submit its call reports (quarterly financial statements) in XBRL.
- Financial professionals, including securities analysts, credit analysts, controllers, M&A specialists, and researchers. Example: Auditing firms have been champions of XBRL, in part because the increased regulatory burden stemming from Sarbanes-Oxley (SOX) and other legislation is compelling them to make audits more efficient.
- Anyone involved in the financial reporting chain inside both small and large companies. Example: Working with Wacoal, a large Japanese clothing manufacturer, Hitachi integrated their numerous legacy accounting systems running on multiple platforms through a comprehensive XBRL solution.
- The general public, including small investors and credit applicants. Example Governments worldwide are moving toward providing XBRL-enabled company financial statements online so small investors can perform their own analysis.
The XBRL-Enabled Company
XBRL is now being adopted primarily for financial reporting. However, Hitachi believes that its enormous advantages will spur its implementation for everyday use in overall company activities, such as manufacturing, procurement, sales, and human resources. Powerful forces such as globalization, transparency, and competition are accelerating this trend. The movement toward companywide adoption is reinforced by the increased importance of internal control and the expansion of worldwide M&A. Our position paper The XBRL-Enabled Company Emerges discusses these themes and outlines our vision for the use of XBRL as a worldwide business reporting standard.
How To Learn More About XBRL Technology
TV viewers can happily watch Bugs Bunny without knowing anything about CRTs and steering coils. Similarly, many users will view and analyze XBRL-based financial statements and business reports without ever peeking at its technical underbelly. But others, like software developers and some accounting professionals, may be interested in learning more about how XBRL actually works.
Under the hood, XBRL is complex, and comprehending it can be difficult. A good place to start is the How XBRL Works page of XBRL International, the nonprofit consortium of companies and agencies that set the specifications for the XBRL language. Among the sources it lists is the International Accounting Standards Committee Foundation (IASCF) website, which describes XBRL fundamentals, including such key terms as taxonomy, linkbase, and schema. Also helpful is this white paper by the Technology Working Group of XBRL Spain.
