|Section Five: Why will Financial Professionals Use XBRL?
Why would an Accounting or Financial professional use XBRL? Some of the benefits of using XBRL include:
Data manipulation happens when companies need to re-position the output from their financial systems to meet the needs of diverse users. A quarterly IRS tax form is very different in format and content from a quarterly SEC filing, although the information needed to file both documents comes typically from the same financial database. With XBRL, information will be entered once and the same information can be "rendered" as a printed financial statement, an HTML document for a Web site, an EDGAR filing file, a raw XML file, or a specialized reporting format such as periodic banking and other regulatory reports. The financial information chain(1) is enhanced with accelerated delivery of relevant data, and lower preparation costs.
Paper-less reporting is facilitated by employing XBRL. Prior to XBRL, financial information for reports was extracted from databases such as a general ledger. The extracted information would then need to be processed several times depending upon the needs of the user. For example, a typical balance sheet would need to be individually processed for SEC filings, for placement in the annual report, for examination by external auditors and for analysis by management. Each process could require an extra handling of the information to create the desired report. With XBRL, the information is coded once and ready for extraction electronically into reports for all information users. With the proper tools in place, the desired output for all uses of the balance sheet information can be transmitted electronically, without the need for a paper-based report.
XBRL conforms to industry-accepted methods. First, XBRL is a language based on a W3C recommendation, XML. The W3C, or World Wide Web Consortium, is the worlds most authoritative body for establishing Internet protocols. XMLs growing acceptance for use as a vehicle for data exchange is well documented.(2) Second, the XBRL development team created a specification that conforms to US generally accepted accounting principles (US GAAP) when developing XBRL for Financial Statements. The design is a GAAP/industry sector tagging scheme that allows room for additional XBRL taxonomies to be created.
Time savings from XBRL will come from several areas. First, multiple report preparations will take less time. XBRL-coded information can easily be fed into various instance documents to create customized output. Second, internal analysis of financial data will be quicker. This is because the data will already be in a format ready for analysis and will not have to be re-keyed. Third, financial analysts will able to extract, analyze and process this information with software tools designed specifically for this purpose.
Major software vendors are committed to developing software that will incorporate XBRL into their financial packages. Over 25 software vendors were members of the XBRL steering committee as of July, 2000.
Interchangeability of data is facilitated by the use of XML-compatible coding. XBRL is fully-compliant with the W3Cs XML 1.0 recommendation. When an XBRL-coded file is created, the document does not make any assumptions about how the data will be used by the requestor (or client). In other words, the XBRL-coded information could be displayed in a Web browser, sent to a database, sent to a printer, used to create another XML document or even listened to as a sound document. The same document can be used by many different applications using the intelligence of the data to build powerful applications.
Greg Adams, CFO of Edgar Online, a company focused on retrieving and organizing financial data filed with the Security and Exchange Commission's EDGAR system, predicts that XBRL will "revolutionize financial reporting." Speaking in the July 1, 2000 Wall Street Journal, Adams said that "because each line of the financial statements is tagged, the information will only need to be entered one time into the EDGAR systems. This eliminates the manual keying of information and it lowers a company's cost to prepare financial statements." XBRL will help to create a uniform way companies approach the information accumulated to accounts such as "trade receivables". According to Adams, establishing "uniform categories of data enhance a comparison of reports in industries and sectors." Tagged data can be sent directly to programming tools such as Microsoft Access 2000 or Excel 2000 for analysis.
Articles for further Study:
GLOBAL XBRL INITIATIVE TO FACILITATE EXCHANGE OF FINANCIAL STATEMENTS, CPA Journal, June 2000.
Copyright © 2008 Saeed Roohani, XBRL Education