Volume 1

Issue 3

September 2004

Tools and Technology XBRL (eXtensible Business Reporting Language) Steve Manning Diane Mueller-Klingspor The Rockley Group BusinessObjects manning@rockley.com Diane.Mueller@businessobjects.com It is difficult to explain XML and its value because XML is such an abstract concept and still widely misunderstood. Sometimes it's easiest to describe XML as an enabling technology, and by talking about the ways in which people are using XML successfully. One such success story is XBRL. In this article, we spoke to Diane Mueller-Klingspor, currently heading up the XML and XBRL efforts at BusinessObjects, for her views on XBRL. XBRL (or eXtensible Business Reporting Language) is arguably one of XML's success stories. It uses the best of XML-structural focus, separation of format from content-to provide financial information to a wide audience n a format capable of satisfying many different business needs. XBRL International is leading the effort to develop XBRL and they describe their goal as follows: XBRL is being developed under the umbrella of XBRL International, a not-for-profit consortium of approximately 250 companies and agencies worldwide working together to build the XBRL language and promote and support its adoption. The consortium members meet periodically in international conferences, conduct committee work regularly via conference calls, and communicate in email and phone calls throughout the week. This collaborative effort began in 1998 and has produced a variety of specifications and taxonomies to support the goal of providing a standard, XML-based language for digitizing business reports in accordance with each countries' accounting rules or with other reporting regimes such as banking regulation or performance benchmarking. [1] A major goal of XBRL is to improve the business report product. It facilitates current practice; it does not change or set new accounting or other business standards, that is, XBRL should facilitate changes in reporting over the long term. You can read more about the history of XBRL International, the missions of the working group, and get a better understanding of what XBRL is and how you might employ it in your organization by visiting www.xbrl.org. Q & A with Diane Mueller-Klingspor To get some firsthand feedback on the use and impact of XBRL on the financial industry, we went to Diane Mueller-Klingspor, currently heading up the XML and XBRL efforts at BusinessObjects (www.businessobjects.com). What is XBRL? eXtensible Business Reporting Language is a freely available electronic language for financial reporting. It is based on the industry standard Extensible Markup Language (XML). It is also based on accepted financial reporting standards and practices to transport financial reports across all software, platforms and technologies. XBRL allows software vendors, programmers, and end users who adopt it as a specification to enhance the creation, exchange, and comparison of business reporting information. Business reporting includes, but is not limited to, financial statements, financial information, non-financial information, general ledger transactions, and regulatory filings such as annual and quarterly financial statements. XBRL consists of a core language of XML elements and attributes used in financial reports as well as a language used to define additional elements and taxonomies. XBRL and XML XBRL is built on top of several XML initiatives. It uses several World Wide Web consortium (W3C) recommendations, including XML 1.0 and XML Namespaces, and refers directly to XML Linking. It also relies extensively on the XML Schema recommendation. There are also ongoing discussions between the XBRL consortium and other bodies issuing XML specifications in the financial arena, including OAG (Open Applications Group), OMG (Object Management Group), FpML (Financial Products Markup Language), finXML (Financial XML), OFX/IFX (Open Financial Exchange), Acord Insurance XML) and ebXML (e-Business XML). The scope of XBRL includes financial reporting and provides extensive detail in the representation and use of accounting conventions, which distinguishes it from these other efforts. Note that XBRL does not include transaction protocols. However, it does not specify the mechanisms by which XBRL documents are communicated or transported to other systems. Who uses XBRL? There are four categories of users: business information preparers intermediaries in the preparation and distribution process users of this information and the vendors who supply software and services to one or more of these three types of user What are the benefits of using XBRL? XBRL provides a number of benefits: Provides users with a standard format in which to prepare reports that can subsequently be presented in a variety of ways (e.g., multiple media or multiple organizations of content). Provides users with a standard format in which information can be exchanged between different software applications. Permits the automated, efficient and reliable extraction of information by software applications. Facilitates the automated comparison of financial and other business information, accounting policies, notes to financial statements between companies, and other items about which users may wish to make comparisons that today are performed manually. What does this mean for preparers of financial statements? Will they need to learn XBRL? Preparers will not need to `learn' XBRL; the software tools they use to prepare statements must be able to import and publish XBRL-tagged documents much in the same way they currently must push content to the web using HTML. The onus is on the software vendors to provide XBRL-aware tools for the accounting and financial services market. What XBRL does is enable the content consumers (in this case, the Securities and Exchange Commission) to automate the analysis process much more rapidly and accurately, and respond to submissions in a timely fashion. How do companies create statements in XBRL? To date, a number of companies, including Reuters and Microsoft, have posted their 10Q/K results on their websites for interested parties to review. In Japan, Korea, and Australia, stock exchanges and regulators alike are accepting XBRL-tagged financials. The Financial Services Authority (FSA) in the UK and the Federal Deposit Insurance Corporation (FDIC) both have multi-million dollar projects in progress, that will allow these agencies to begin accepting and analyzing XBRL-tagged information. Currently, most of the filings being submitted to regulators today are being authored with tools normally reserved for developers. The process is as follows: Create the company-specific set of XBRL schemas Usually, the schemas (or taxonomy sets) that map to the financial document are edited and extended by the company's resident XML/XBRL guru - generally this task lands on shoulders of a Business Analyst with an IT background in the Finance department of the filing company. This analyst works with the existing XBRL schema sets available today from XBRL.org and extends them to meet the company-specific needs. Author a financial statement using the company's XBRL schema This schema set (or taxonomy as we call them the XBRL world) is then used to create a template instance document for the financial statement (10K/Q) using a product like BlastRadius' XMetal Author. At this stage an accountant from the company will generate the usual financial reports (balance sheet, statement of cash flow, income statement) from the company's financial reporting application. A number of the larger ERP companies, Oracle's e-Business suite for example, have the ability to generate XBRL-tagged versions of these reports which can then be imported into the XMetaL Author template. Otherwise, the reports are generated as Excel files (which mostly consist of tables of numeric information) that can be dragged and dropped into corresponding tables and fields in the template. It should be noted that a typical 10Q/K document consists of much more than numerical content. The prose sections of the financial statement (narrative text), such as the Management's Notes and Discussion, must also be entered into the document. These prose sections can be entered directly into the template using XML authoring tools and distributed for review by all interested and required parties within the organization. The key here to remember is that financial statements are made up of data from numerous sources such as report writers, spreadsheets, word processors. The goal of the author is to create a composite document that mixes prose and numeric data. What is the difference between XBRL and FpML, Fix, FinXML, OFX, XML/EDI? What makes XBRL stand out? XBRL is not a transaction protocol. XBRL includes financial reporting and provides extensive detail in the representation and use of accounting conventions, which distinguishes it from these other Financial XML standards efforts. It's built by accountants for accountants! What is key to a successful XBRL implementation? The key to success is to ensure the infrastructure for success in place. Check with your vendors of accounting applications, report writers, and authoring tools, and make sure that incorporating XBRL is in their product road map. Make sure your auditors, and the accounting firms with which your accounting team works, has XBRL expertise. What is the future of XBRL? The future is now, the SEC recently announced plans to pilot accept XBRL, the FSA in the UK is working diligently on their launch for next year, and stock exchanges and regulatory bodies worldwide are building XBRL into their applications. Summary The development of XBRL highlights the usefulness of XML when applied to content intended for a wide range of audience. It has become a standard (suggesting boundaries and limits) that is none the less providing much needed flexibility in content communication, so that information can be quickly and easily moulded to meet users needs. In a few years' time, consumers of financial information won't even notice that their annual reports, earnings press releases, and market research documents and web portals all have XBRL under the hood, but they will notice that the accuracy and timeliness of their data has greatly improved. And those responsible for content management will be using and reusing XBRL content in multiple information products. References [1] XBRL International, www.xbrl.org/ [2] An Introduction to XBRL, www.xbrl.org/WhatIsXBRL/ [3] XBRL: Leveraging the Internet for Corporate Reporting, Mike Willis, PricewaterhouseCoopers', www.accountingweb.com/cgi-bin/item.cgi?id=15900&d=101&h=0&f=0&dateformat=%%20%B%20%Y