XBRL streamlining financial reporting.

• Author: Graziano, Cheryl de Mesa
• Position: Reporting Practices

Studies by the FEI research foundation examine how XBRL can help companies around the globe deliver critical financial reporting information--more effectively and efficiently.

Recent corporate governance changes required by the Sar banes-Oxley Act and the Securities and Exchange Commission, as well as proposals from the New York Stock Exchange and Nasdaq, have called on financial executives to deliver critical information more effectively and efficiently. Though Internet usage has certainly resulted in more timely financial information, it has also led to concerns regarding how such advancements can best be used to facilitate the delivery of financial information.

Studies by the FEI Research Foundation examine a solution -- eXtensible Business Reporting Language (XBRL) -- and explain how financial executives can effectively address the need for financial transparency and create a level playing field for anyone to obtain financial information. The studies also note how the technology can enhance communication with internal management and external stakeholders and increase operating efficiencies.

Zachary Coffin, the study's coauthor and author of the forthcoming book, Introducing XBRL: Decision Making in a Digital Economy, calls XBRL "the first attempt ever to translate financial reporting into an Internet language. Unite these two communities [preparers and users of financial information] with XBRL, and you have the most significant development in financial reporting since the birth of the Internet."

How It Works

While XBRL was introduced a couple of years ago, usage is still in its infancy. Essentially, XBRL is a royalty-free, open specification subset of eXtensible Markup Language (XML), the universal language for defining and naming data over the Web. Now broadly incorporated into databases and software products, XML allows data exchange between disparate software applications by providing a framework for defining tags (called taxonomy) and the corresponding relationships (called schema).

XBRL applies the XML metamarkup standard to specifically express financial information. XBRL tags each value of data within a document. For example, on a document, application, industry or global basis, a financial metric, such as gross margin, would be defined as $2,500,000. Though the tagging methodology is relatively straightforward, open standards -- similar to those developed by the World Wide Web consortium for HTML and XML -- should be developed...