eXtensible Business Reporting Language
Moving to a global standard for electronic business reporting
The movement toward eXtensible Business Reporting Language,
or XBRL, as a standard global framework to support the more
effective production, consumption, and exchange of financial and
business information is rapidly gaining acceptance throughout the
world. Standard setters, regulators, governments, and lenders in many
of the largest economies around the world are embracing XBRL. In
2009, many companies across the United States, Europe, Asia, and
elsewhere will be using XBRL, and those numbers will likely increase
dramatically by 2011 as additional mandates go into effect and
convergence of global reporting standards continues. However, the
XBRL story will not end with regulatory financial reporting. As the
trend toward common information standards continues to take hold,
adoption of XBRL by companies will be driven by growing demand
in the capital markets for data, and by companies discovering XBRL’s
utility and value in more efficient and effective management of their
businesses.
The worldwide stage is being set for the broad adoption of XBRL as
the accepted information standard for financial and business data.
Among the recent developments that are driving the acceleration of
XBRL adoption are the following:
• The United States Securities and Exchange Commission (SEC)
adopted a final rule, “Interactive Data to Improve Financial
Reporting”, to mandate the use of XBRL by U.S. registrants.
Application of the rules will be phased in beginning June 2009 and
will require that companies submit financial statements and financial
statement schedules in an XBRL format. The SEC also adopted a
final rule that requires mutual funds to provide risk/return summary
information in XBRL format beginning in January 2011. In addition,
the SEC has drawn links between its XBRL and IFRS initiatives,
noting XBRL as an enabler on the path toward convergence of
global reporting standards.
• The International Accounting Standards Board (IASB) released an
expanded IFRS XBRL Taxonomy in June 2008 to support the broad
adoption of XBRL for IFRS-based reporting. This taxonomy has been
leveraged as the basis for other XBRL reporting taxonomies. The
IFRS Taxonomy has been updated in 2009 to reflect recent changes
and developments in IFRS standards.
• The Japanese Financial Service Agency (JFSA) has mandated the use
of XBRL for electronic filing of financial statements. The mandate
affected all listed domestic companies and investment funds in
Japan beginning with reports for the first fiscal quarter ended June
2008.
• The SEC, IASB, and JFSA have established a program to align their
XBRL initiatives and taxonomy development efforts going forward.
• Momentum is building around large scale “national” XBRL
projects. These multiagency projects aim to streamline corporate
to government and interagency reporting. High profile projects
such as Australia’s Standard Business Reporting (SBR) project and
the Netherlands National Taxonomy Project (NTP) are being viewed
by other countries as a template for the use of XBRL for improving
efficiency and reducing costs borne by companies and governments
associated with financial reporting.
• Exchanges, regulators, and government agencies in other countries
have pilots or mandates in place for the use of XBRL in public
company filings. These include, among others, Canada, Korea, the
United Kingdom, and China.
The bottom line:
XBRL adoption will continue to accelerate. As adoption increases,
data that is more easily consumable becomes more widely available.
As a result, greater transparency will likely be required in order for
companies to stay competitive in the global marketplace as well as to
manage their businesses effectively.
What is XBRL?
eXtensible Business Reporting Language (XBRL) is a language
for the electronic communication of business and financial data
which is revolutionizing business reporting around the world.
XBRL’s impact on financial reporting and data exchange has been
compared to the impact of barcodes on merchandising. Like the
barcode, XBRL is a system for coding and decoding information.
Instead of treating financial information as a block of text – as in a
standard Internet page or a printed document – XBRL provides an
identifying tag for each individual item of data. The introduction of
XBRL tags enable automated processing of business information by
computer software, allowing the data to be treated “intelligently”.
This greatly increases the speed of handling financial data, reduces
the chance of error and permits automatic checking of information.
Some of the benefits of XBRL are:
• It creates a standards-based method with which users can
prepare, publish in a variety of formats, exchange and analyze
financial statements, and business information.
• It offers cost savings, greater efficiency, and improved accuracy,
and reliability, to all those involved in supplying or using
financial data.
2
Why are regulators, standard setters, and
companies considering XBRL?
Why XBRL now?
For a number of years momentum has been building toward a
fundamental shift in business reporting. Regulators, investors, capital
markets and companies have all been part of the movement. Enabling
technologies, including information standards and the Internet, have
already had a dramatic impact on business.
Today, consumers and businesses have an unprecedented ability
to customize the products and services they purchase. Rather than
in-stock goods and off-the-shelf products, these technologies have
allowed for the “mass customization” of goods and services. It is not
difficult to envision how digitization, along with information standards
and the Internet, can allow users to customize the information they
want and how they want to see it presented, in much the same way as
they now customize the products and services that they purchase.
Key to bringing this vision to life is the adoption of information
standards such as XBRL, which provides a framework to support
the effective exchange of documents and data across applications,
platforms, and the Internet.
Today’s challenges
Today, companies face unprecedented challenges. Increasing global
competition, heightened regulatory oversight, rising risk awareness,
and other factors have altered the playing field. For companies to
succeed, the ability to quickly adapt to a fluid environment is more
critical than ever.
XBRL was designed to meet these challenges and provide a reporting
framework that can help improve efficiency, control risks, and
introduce enhanced flexibility in the way companies manage their
business and respond to the constant change and fluid environment in
which they operate.
How XBRL can provide solutions
The business value possible from XBRL can be realized by regulators
and standard setters, as well as by investors and other external users
of business reporting information. XBRL standards allow for the
development of interoperable, reusable, and scalable applications,
software tools and processes resulting in more efficient production,
consumption, and exchange of data. XBRL is already being leveraged
in the public and private sector to achieve real benefits, including
improved efficiency, and enhanced quality and comparability of data.
Standard setters, preparers, and consumers of financial and business
information all recognize the need for accurate, consistent, and
reliable information at a granular level and on a timely basis. XBRL
enables consumers of financial data to reduce the time spent on
inefficient and costly manual processes, including locating, assembling,
and reentering data, and concentrate their efforts on analysis, aided
by software that can validate and manipulate XBRL-formatted data.
In an XBRL-enabled environment, searches for particular information,
which might in the past have taken hours, can be completed within a
fraction of a second.
Acceleration of XBRL adoption, including the issuance of the SEC’s
rules have served as a wake-up call for many U.S. executives —
especially in larger companies with multi-GAAP reporting needs. In
time, as the global trend toward convergence of reporting standards,
enhanced comparability and transparency of information continues,
companies are expected to benefit from developing a rational response
to the inevitable movement toward XBRL.
For many companies, XBRL may represent an opportunity for
enhanced business reporting, providing management with better
internal information, improving how the company communicates with
investors and the capital markets, and even reducing reporting costs.
In assessing the impact of adopting XBRL, companies should consider
potential benefits and advantages including:
• Standardized and improved accounting and financial
reporting – XBRL streamlines the creation and validation of
financial and other business reports by attaching standardized
“tags” to data within documents and other data sources allowing
automated analysis and reporting of the data. This reduces today’s
typical laborious and error-prone manual reporting and analysis
processes.
• Data consumption and analysis – Consumers of XBRL-formatted
data can automate its handling, validation, and analysis, reducing
time-consuming and costly collation and reentry of information.
The human effort normally spent on manual compilation of data
can switch to higher, more value-added analysis, review, and
decision-making.
• XBRL is extensible – XBRL is extensible and flexible; therefore, it
can be adapted to a wide variety of applications and requirements.
Companies using XBRL can extend current taxonomies by defining
new tags, or by creating their own taxonomies for their specific
purposes.
• Transparency – XBRL allows for increased transparency of financial
information to stakeholders, at a granular level. For example,
companies reporting under a common taxonomy provide specific
details that are immediately comparable by investors and analysts
in investment decision-making. This can benefit the organization
in various ways, such as improved investor relations, investor
coverage, and access to capital markets.
Global standards for business reporting
The momentum around XBRL is part of a broader trend toward
convergence and the adoption of universal standards, such as IFRS,
to improve the effectiveness of global business reporting.
As part of this trend, XBRL will contribute to reduced complexity,
greater transparency, increased comparability, improved efficiency
and other potential benefits of a move to global standardization of
business reporting:
Investors – The investment community is increasingly looking for
high-quality financial information. Investors, in increasing numbers,
perceive XBRL as an opportunity to analyze companies across the
globe. Companies that do not provide this information may soon
need to, as shareholders and analysts may expect (or demand) it.
The more that demand for XBRL financial information grows, the
more even the playing field becomes, thus allowing investors to
have an “apples-to-apples” perspective when comparing financial
results.
Capital markets – With XBRL, greater market efficiencies can be
realized. A single, global set of reporting standards can encourage
both companies and investors to more easily access multiple or
foreign markets. In effect, this can help stimulate investment and
enable cross-border capital flows, similar to that of IFRS.
Companies – Streamlining financial reporting processes throughout
a global operation can eliminate divergent accounting systems and
enable greater consistency in reporting, thereby reducing costs,
increasing operational effectiveness, and decreasing the likelihood
of potential errors resulting from the misapplication of standards.
3
Many companies around the world are beginning to incorporate
XBRL into their financial reporting process. It is an important vehicle
as stakeholders in the global economy move toward convergence of
financial reporting standards, with the goal of building efficiencies in
the global capital markets, and moving toward greater corporate and
government transparency. As a result of the increased focus on XBRL
by the SEC and other major regulators and standard setters, many
public filers and other market stakeholders have been evaluating the
potential benefits of XBRL. As more companies become familiar with
XBRL, adoption of XBRL will likely continue to grow.
What should companies do?
Given the heightened interest and activity around XBRL, companies
in the United States would be well served by taking action now to
develop a greater understanding of XBRL. This involves assessing the
implications of the SEC’s rules on their organizations, and determining
an appropriate course of action for responding to increasing adoption
of XBRL as a global business reporting standard.
CFOs, CEOs, Audit Committees, and Boards of Directors should
consider the following in an effort to understand the impact of XBRL
on their company:
1. Assess how the organization is currently exposed to U.S. and global
initiatives to adopt XBRL for regulatory and external reporting
purposes. This would include:
• Becoming educated: Gaining an understanding of the SEC’s
initiatives around XBRL as well as the scope, timeline, and impact
of the SEC’s rules.
• For companies with operations outside of the United States,
identifying, and gaining an understanding of other XBRL
initiatives around the globe that may affect their reporting
requirements.
2. Develop an implementation roadmap to be compliant with U.S.
(SEC) and international XBRL reporting mandates. Companies
should consider options including:
• Technical training for reporting staff: Including training on
XBRL and specific to the requirements of regulatory mandates
affecting the company.
• Assessing implementation options: Including consideration
of internal vs. outsourced deployment support, software and
vendor selections and related cost considerations.
• Defining and implementing additions and changes to reporting
processes: Identify and implement process and internal control
changes needed to accommodate the implementation of XBRLbased
reporting.
3. Evaluate the potential benefit of deploying XBRL beyond the
requirements of regulatory mandates.
The requirements of XBRL regulatory mandates will likely be
limited to external reporting. While limiting implementation only
to external reporting will likely carry the lowest direct cost to the
company, it will limit the benefits of moving to XBRL. Companies
subject to SEC or international XBRL mandates should consider
the cost and benefit of going beyond the minimal requirements of
external reporting and implementing XBRL for reporting within the
organization.
Key questions to consider:
• Does the organization currently have multiple GAAP or statutory
reporting requirements?
• Does the use of disparate accounting systems and reporting
platforms drive challenges in consolidation and other internal
reporting processes?
• How frequently do acquisitions, divestitures, or other business
events drive a need for extensive reporting and systems
integration efforts?
Adopting XBRL is not just about external reporting and complying with
specific regulatory mandates. Introducing XBRL-based processes and
applications can have a critical effect and benefit, directly impacting
the way companies manage their business. Companies should consider
these factors in assessing how they will respond to the XBRL reporting
requirements of U.S. and other regulatory mandates.
Moving Forward
Market forces, regulatory activity, the promise of efficiencies, and
other factors are pushing XBRL into the headlines and to the top of
senior executives’ agendas across corporate America. The movement
toward XBRL is real. Companies must ask themselves: Can we afford
not to investigate the power of XBRL?
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member firms of Deloitte Touche Tohmatsu and their respective affiliates are not, by means of this publication, rendering
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advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making
any decision or taking any action that may affect your business, you should consult a qualified professional advisor.
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