XBRL: not just for external reporting; If you think XBRL is just for financial reporting by public companies to the SEC, think again. XBRL promises to be for business reporting what the Universal Product Code (UPC) has become for retailers--a means of standardizing, managing and simplifying processes.

• Author: Willis, Mike
• Position: BUSINESS REPORTING

In February, the U.S. Securities and Exchange Commission's (SEC) Advisory Committee on Improvements to Financial Reporting (CIFiR) recommended that "the SEC should, over the long-term, mandate the filing of XBRL-tagged financial statements, subject to certain preconditions." SEC Chairman Christopher Cox responded by asking the SEC's professional staff to analyze the report and its proposals, and to provide recommendations to the commission for consideration.

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Most financial executives familiar with the term "eXtensible Business Reporting Language, or XBRL," likely associate it with external reporting and regulatory compliance. And, as such, they are waiting to learn more about it when the SEC mandates filing via XBRL. However, the best-kept secret to date is that XBRL is much more than external reporting.

XBRL is a business information format standard that can potentially save companies large sums in processing and reporting information, help reduce headcount and get higher-quality information to management and the market faster and more accurately (see box, "Perceptions vs. Reality" on page 46). And, it makes optimum use of systems already in place by linking them to one another.

Standardizing Processes: UPC, Now XBRL

When the Universal Product Code (UPC) symbol, commonly known as the "bar code," was introduced in 1966, most retailers were concerned that it would increase their costs and make it harder for shoppers to understand and compare individual product prices. Before too long, however, retailers were swiping products as they were sold, recording not only the locations and dates of their sales, but also tracking the inventory unit changes of the items sold.

Retailers then progressed to swiping customer bar-coded credit cards to track individual purchasers. Bar codes now save retailers over $17 billion annually and provide vastly improved product assessment and comparison capabilities for both retailers and shoppers.

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Like UPC, XBRL is a form of standardization that brings significant process efficiencies. Just as the UPC-standardized product descriptions enable greater agility in inventory management, enhanced product throughput and lower overall inventory management costs, XBRL enables greater agility in managing enterprise information, speed of access and analysis and provides an opportunity to lower overall compliance process costs.

Companies have struggled to integrate business information into a single software system because they could not seamlessly connect various applications. XBRL, however, does for business information what UPC does for products--it standardizes descriptions. By providing digitally-executable descriptions for business information, XBRL helps various business software applications to universally recognize, understand and apply the information, rules, relationships and other relevant concepts used by business and compliance processes.

Financial executives do not really need to understand the technology underlying XBRL, but, rather what XBRL means to their processes. XBRL was designed to address highly pervasive business process problems. Understanding how it addresses these common problems will allow financial executives to streamline them.

Four common and...