XBRL

Extensible Business Reporting Language

XBRL: Not just a requirement

XBRL is the future for all financial reporting and it is important to know how to use and format XBRL.

XBRL: Present and Future

XBRL: making information easier

Extensible Business Reporting Language (XBRL)

• An XML based markup language used to communicate financial and business data electronically. – You can use it to code information such as financial

statements, earnings released, stock performance, etc. and submit that information so that it can be easily displayed and sorted through.

– It is already being used by many companies listed on the stock exchange and is growing in popularity and usage.

– It uses tags to identify each piece of financial data in a very exact manner.

• A prototype version of XBRL was first developed in 1998.

• XBRL International is comprised of approximately 170 international organizations, including accounting firms, technology providers, government agencies and financial services groups.

• Securities and Exchange Commission (SEC) has mandated that the 500 largest publically trading companies in the US begin submitting tagged financial statements by June 2010, with rest of publically traded companies required to submit by 2011.– Required to tag the main part of the financial statements, footnotes,

and tables within footnotes using XBRL. – Some companies are already voluntarily tagging prior to the actual

requirement going into effect.

The Business Reporting Supply Chain

Processes

Participants

Companies

Financial Publishers &

Data aggregatorsInvestors

CentralBanks

TradingPartners

Managementaccountants Auditors Regulators

Software Vendors

Source:Mike Willis, PWC & XBRL

XBRL GL XBRL External ReportingXML Specs

BusinessOperations

InternalBusiness

Reporting

ExternalBusiness

Reporting

InvestmentLending

Regulation

EconomicPolicymaking

Manual Interfaces

• The current situation:– Too many proprietary software packages and manual

interfaces • Create friction points!

– Validation is a persistent problem• What can you trust?• Manual controls

– Data is not reusable – Data is not comparable (not standardized)– Processed without “context”

• Documents are not “intelligent”

XML/XBRL Interfaces• Processing with XML/XBRL

• The next “killer app” in the business reporting supply chain– Frictionless processing

• Software apps that “understand” XML– Validation is automated

• Data & documents can be trusted– Many controls are automated– Data is processed with “context”

• Data & documents are “intelligent”– Data is reusable– Data is analyzable & comparable

Communication on Networks

• Communication on computing networks requires 2 standards:– Standardized metadata – data about data• Agreement on what pieces of data mean

– Standardized structure – shared context• Agreement on the structure of the metadata

XML

• The XML “family” of technology– The XML foundation• The rules for the creation of documents containing

data marked-up with metadata • The rules for defining the structure of the

documents

– The XML software paradigm• Languages for adding new features to and

processing XML documents• Domain-specific vocabularies (XBRL)

XML/XBRL

• XML– The foundation for a new computing paradigm• Automated, intelligent, frictionless processing

• XBRL– The foundation XML vocabulary for a new

business reporting paradigm• Standardized, intelligent documents for business

operations & financial reporting

Advantages Comparison and Searchable Statements

Once data is correctly tagged, it is easier to transmit, interpret and search. Errors associated with data transfer are reduced.

No external auditing of Statements Software is being developed to make the tagging process easier.

Disadvantages Cost to make sure that data is tagged Added cost of Internal Auditing of Tags There is a cost of figuring out “how to do all of this XBRL.”

Who Benefits? SEC - easier regulation Companies - easy statement review Individual Investors - easy comparison It is becoming, and will become, a reporting requirement in both the

US and around the world. Once a company gets XBRL figured out, it is easy to use and accurate.

However, when starting out, the biggest barrier for a company is cost (time, money and any sort of approaching mandated deadline)

• XBRL tagging makes information easier to find. Investors were more likely to invest in a company when disclosures were made via XRBL rather than embeded somewhere in a pdf file that would have to be carefully read and sifted through. It is now easier to analyze risk. Any flaw that a company might have is now more apparent and harder to find. Investors can now better understand the companies the are investing in.

• The SEC now requires public companies to provide financial statements using XRBL in order to make information easier for investors to understand and analyze and also provide a uniform format for the information reported.

• Over time, the SEC has had to modify the definitions of the various tags that might be used (its schemas).

• In 2011, all publically traded companies must make their required disclosures using XBRL.

• In addition to being required to disclose using XBRL, companies also can realize benefits such as being able to close and post their financials much faster, they can also improve their workflow management and they have improved audit trails.

There are several options for companies that need to change their paperwork to be compliant. The first option is the “Bolt-on” approach. This only modifies the end report after it has been generated and offers no real benefits to the firms other than compliance with this new XBRL mandate. This bolt-on method will only be sufficient for the first year, however. During the second year, the requirement for XBRL-tagged data will increase to include nearly every value found in the filing reports as well as any notes. At this point, the bolt-on approach becomes nothing more than an increased workload for the preparer. This is where the benefits of XBRL come into play if they are built into enterprise software. In this situation, XBRL is not simply piled onto the output documents, but is hardcoded into the data long before it reaches the output stage. Additionally, since all the financial information is XBRL-tagged, this allows third party firms who may need to see or analyze the information to do so in a standardized format. To embed XBRL even further at the GL level allows all of the company’s information to be XBRL-ready, including the ledgers. With this method, even if different departments within the company use different systems or software, as long as the software is XBRL-enabled, it can interpret the data.

There are many benefits to XBRL beyond simply complying with this new SEC mandate for regulatory filings. The simple benefit of making all of the company’s data universally readable should be a compelling argument for deploying XBRL as soon as it is feasible for the company.

• As written in a summary by Ethan Levine

MySportsStore.com, listed on NASDAQ as MYSS, needs to report quarterly their current assets and liabilities to their bank in an XBRL instance document. At the end of the first quarter of 2006, they have the following balance to report for their Cash and cash equivalents account– 5,860

MySportsStore.com reports under U.S. GAAP for Commercial and Industrial companies in U.S. dollars.

• <us-gaap-ci:CashCashEquivalents contextRef=“FirstQ2006” unitRef=“usd” decimals=“0” > 5860</us-gaap-ci:CashCashEquivalents>

• indicates that the value reported, 5860, is accurate to the nearest dollar and there are no decimal places being reported.