As the workloads of finance departments mount, a new programming language has emerged that could provide a helping hand. EXtensible Business Reporting Language, or XBRL, will simplify the work involved in presenting corporate financial data and filing reports on that data with regulators.
XBRL, which is based on another programming language, XML, allows companies to use the same financial data in different formats and software platforms. Once a company determines the appropriate XBRL tag for each line in its financial statements, the data can flow electronically, without rekeying, into different types of presentations, including regulatory filings and tax forms. "The whole goal of XBRL is to put financial information in a format one time and then use it many times," says Rob Blake, a group program manager at Microsoft Corp., which has been reporting its financials using XBRL since March 2002 and now posts the XBRL version of its financials on its Web site.
Blake says it takes him about an hour to map Microsoft's four core financial statements: its balance sheet, income and cash flow statements and statement of shareholders' equity. He describes the process as "pretty easy" and says that accounting staff members can do it without any help from IT. XBRL "speaks accounting and finance, so the accounting and finance people get it," Blake says.
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XBRL sounds like a useful tool for companies trying to meet the Securities and Exchange Commission's tighter filing deadlines for some of its forms. But the SEC's Edgar filing system doesn't accept XBRL data at this point. In a recent comment letter to the SEC, the XBRL-U.S. Steering Committee asked the SEC to add XBRL to its list of acceptable formats. Paul Penler, a principal with Ernst & Young LLP and co-chair of XBRL-U.S., a consortium of financial services and accounting firms and technology companies working to implement the new standard, says the SEC wants to be sure that companies will accept the standard before it adopts it. Corporate adoption of XBRL is expected to pick up this year as more software companies issue XBRL-compliant versions of their products.
Zach Coffin of Coffin Capital, a start-up venture capital fund investing in financial technology, and a member of XBRL-U.S.'s Steering Committee, says XBRL is also a plus for companies with subsidiaries or acquisitions that use different financial software than the parent company.
While companies in that situation often spend a lot of time and money building bridges between different reporting systems, the data they produce "can all flow together" if all of a company's divisions have software that is XBRL-enabled, Coffin says.
The new mark-up language should benefit investors and analysts as well by making it easier for them to search through financial filings. XBRL now covers U.S. Generally Accepted Accounting Principles (GAAP) and International Accounting Standards as well as other countries' GAAP, and the consortium is working on taxonomies for specialized industries like banking, insurance and broker-dealers.
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