Reporting language XBRL looks as though it is in the right place at the right time

Citation

Mayne, P. (2002), "Reporting language XBRL looks as though it is in the right place at the right time", Balance Sheet, Vol. 10 No. 3. https://doi.org/10.1108/bs.2002.26510cab.002

Reporting language XBRL looks as though it is in the right place at the right time

Peter Mayne

Peter Mayne of KPMG has been involved in the development of XBRL as part of a pan-professional initiative.

Just over a year ago, London hosted the first international conference of a new language for business reporting on the Web, Extensible Business Reporting Language, XBRL for short. XBRL was hailed as a bold response by the accountancy profession to the developing digitisation of the Web. No more .pdf files: paper-based financial statements would dissolve into a dust of electronic data and allow quick and easy communication within capital markets and directly to private investors. In the time since that landmark London conference, XBRL has survived, prospered and, well-attuned to the post-Enron mood, is deservedly high on the agendas of many governments, regulators and stock exchanges as well as the larger software companies and banks.

"A world of complex argument"

The first thing to note is that XBRL has emerged intact from the Byzantine, acronym-infested world of IT standard setting. This is a world not unlike that in which accountants hammer out new FRSs: a world of complex argument and twists of political fate as different, competing groups seek position and influence. It is perhaps a tribute to the diversity of the profession and the Big 5 in particular that it has been able to draw on programming and IT-consulting skills to establish a credible and, it seems, successful position. XBRL is now recognised as probably the only contender language to communicate information between business, regulators and governments about a broad range of reporting: financial, non-financial, regulatory, fiscal and so on. Key landmarks here include recommendation within US government interoperability standards, adoption by two large regulators in Australia and the USA, as well as its selection by the Inland Revenue for corporation tax returns. The UK government is supportive and, through the efforts of the ICAEW, is considering recommending XBRL for on-line reporting.

Taking XBRL across industries

Equally interesting, however, is that XBRL is starting to look like more than just another recognised but essentially niche application of the language for the digital Internet. In the same way the ebXML is emerging as a standard for interoperability within and across industries for the routing and packing of transactions, XBRL may become the equivalent cross-industry standard for reporting. There are many who believe that XBRL is actually the foundation of the new industry built around a now, information-based commodity. Reporting has, up until now, been clumsy, bogged down in either paper or proprietary IT systems. Business analysts – rather under the spotlight at present – hold their position in part because of the high level of resource that needs to be deployed to unlock information about businesses and the economy from these disparate systems. Regulators collect information to protect the public interest and be an efficient arm of government, yet current technology inevitably introduces months of delay both in responding to changes in the market and collecting and consolidating vital information.

Factors such as these suggest that the activity of business reporting is acquiring new importance and significance. XBRL has the scope to lower the costs of implementing business reporting and analysis applications and dramatically increase their value. One of the significant, early achievements of the XBRL community was to broaden out from a base in the US and arouse interest across the globe. In part this was due to the energy and charisma of the liaison chair, Zachary Coffin. His message combined with clear national interest on the part, for example, Far Eastern economics to increase the transparency of their capital markets and be competitive and attractive for foreign capital. Europe also had the example of coming International Accounting Standards as a visible spur. In these examples, therefore, the value of this kind of business reporting was near at hand.

Enron focuses the mind

The failure of Enron has brought revitalised interest in XBRL to its original home in the apparently transparent US capital markets. Even here, XBRL has a strong value proposition. The urgent message on the street is that it is not just a matter of what you disclose about business operations, but how you disclose it and the ease with which others can access and interpret it. Many companies rushed to provide additional information in the aftermath of Enron. But how does one deal with an extra two inches of paper about a complex global concern? XBRL offers a way to achieve depth of disclosure without losing quality under an avalanche of paper. How you publish information also has a dramatic impact upon how quickly that information can be understood and returned to the market. Because of its potential to increase transparency for investors, XBRL surfaced in US Senate Banking Committee hearings with a recommendation by the Brookings Institute that XBRL should be mandated in SEC filings.

"Many companies rushed to provide additional information"

XBRL has therefore perhaps been lucky in being in the right place at the right time, but it has caught the current mood. It looks like becoming the teeth of transparency. Publish, and publish in a way that is easily accessible. This is now seen to be essential for the market economy. And any government which seeks to devolve its powers and set targets to guide and define achievements in line with public interest will soon reach out for the opportunity to bridge some of the gap between words and deeds.

The US Federal bank regulator, the FDIC, sees its XRBL pilot as part of a strategic initiative to redress some of the longstanding problems which have beset efforts to serve the market well and act as a responsive regulator.