by John Covaleski
Seattle -- The developers of XBRL, the Internet-based software language for business reports, are hopeful that their upcoming international conference will be a break-out for the technology that holds the promise of revolutionizing how business reporting is performed.
The XBRL International conference, to be held here Nov. 3-7, is scheduled to feature the most prominent display of XBRL’s capabilities since that technology was put into development in 1998 by a consortium of businesses led by the American Institute of CPAs.
Meeting sessions include a “software shoot-out” by software developers with XBRL-enabled applications; training on how the language can be used to improve financial reporting-related work within organizations; and demonstrations of XBRL pilot programs and implementations already underway in some organizations.
The scheduled events should provide a greater glimpse of XBRL’s capabilities than was provided in its only other prominent capability demonstration — a 2002 pilot program in which the Nasdaq stock market enabled investors to access data from Nasdaq-listed companies that had their financial reports formatted in XBRL.
XBRL is the business report derivation of Extensible Markup Language, or XML, a framework that establishes individual “tags” for elements in structured documents, allowing specific elements to be immediately accessed and grouped to meet the needs of users.
By contrast, the Internet’s still-dominant Hyper Text Markup Language merely provides pictures of structured documents, and requires users to sort out individual elements and copy and paste to use them in other applications.
The original U.S.-based consortium spawned XBRL development efforts in several other countries in Europe and the Far East. XBRL International became a consortium of the more than 200 companies, associations and government agencies leading XBRL development efforts worldwide
“We are now making XBRL real,” said XBRL International chairman Mike Willis, also a partner with PricewaterhouseCoopers. “To most of the public, this had only been a conceptual thing before the Nasdaq demo. Now we’re at the point where people can see it and say, ‘Yes, I get what it’s all about.’”
The conference will try to make the case that helping companies comply with the stricter financial regulations established by the Sarbanes-Oxley law can be a big part of what XBRL is all about.
Advance conference material says that specialized training sessions at the event will be dedicated to audiences that include compliance officers “looking for information on how you can make your regulatory reporting process more efficient,” as well as senior executives or directors “looking for tools that will help with corporate governance.”
The XBRL International group is hopeful that the meeting will intensify the public’s growing recognition of XBRL as a useful tool in helping companies comply with tougher regulations.
“To those who understand that the base of compliance is access to data, this is a big conference,” Willis said.
Earlier this year, Nasdaq vice chair Alfred R. Berkeley said that XBRL’s potential to help investors more easily gather and disseminate financial reports could open the door to reviewing companies now overlooked because there’s no analysis of their financial conditions. It will provide for “the democratization of data,” he said.
More recently, Rep. Richard H. Baker, R-La., chairman of the House of Representatives’ capital markets subcommittee, also praised XBRL’s potential.
“Too much damage has occurred because of the lack of timely and transparent financial information,” he said in a paper published by the Cato Institute think tank. “I have confidence XBRL will eliminate those deficiencies.”
The Seattle meeting will also include sessions targeted specifically at technologists, including news regarding the pending release of a new version of XBRL.
Changes in that 2.1 version will, among other things, enhance the ability of software developers to build packages that export XBRL-tagged data and, more significantly, import and understand XBRL data.
“The vendors moving to XBRL are doing it in bits and pieces, and developing XBRL export capability is the natural first step,” Willis said. But, he noted, “Adding the import capability is a much tougher step.”
Thus far, approximately 20 software vendors have released products with XBRL capabilities, but most of those applications export XBRL-tagged data, and very few commercial market products can read and work with tagged data.
However, an executive with a developer of accounting practice software, who asked to remain anonymous, said that his company is monitoring the possibility of adding XBRL import capabilities to tools used for reviews and attest work. “The market potential for this would be incredible,” he said.
Some large regulatory bodies are working with XBRL by having systems custom-built that can tag any electronic formatted files with XBRL and can then read and work with the tags.
The most prominent project so far is the Federal Deposit Insurance Corp’s ongoing development of a $39-million XBRL system to gather periodic “call report” financial statements from the approximately 9,000 financial institutions that it regulates.
Although not listed on the agenda, the XBRL meeting will likely include discussion of the FDIC effort and similar projects underway by other regulators from around the world. Regulators with XBRL reporting systems already working or in serious planning stages include the Australian Prudential Regulatory Authority, which oversees that nation’s financial institutions; the Australian Taxation Office, that country’s IRS; England’s U.K. Inland Revenue agency; and the Korean stock exchange Kosdaq. An XBRL International report also notes that Japan is developing an XBRL system for electronic tax filing.
The ultimate dream of XBRL development activities in the United States would be to have the Securities and Exchange Commission develop an XBRL-based reporting system for the public companies that it regulates.
XBRL’s quick retrieval capabilities would make it easier for the SEC to more frequently review companies’ financial records, and Willis noted that more frequent SEC reviews are mandated by Sarbanes-Oxley’s Section 408.
However, he and other XBRL officials don’t expect an SEC move in the immediate future. They note that it’s difficult for the SEC, as a nationwide regulator, to require companies to report in any format that is not already in use nationally, and, despite the hype about the November conference, XBRL is still far from pervasive.
The SEC has not indicated any intentions to move to an XBRL reporting format in the near term, but it has shown support for the technology. For example, the original U.S. XBRL consortium members include Edgar Online, the Norwalk, Conn.-based provider of financial information derived from the SEC. Baker, in his Cato Institute paper, said that SEC Chairman William Donaldson “has endorsed the concept of using tagged reports.”
Meanwhile, XBRL activities, such as the Seattle conference, will concentrate on making financial executives and software vendors more familiar with the technology.
Vendors who will make presentations at the Seattle conference include UBMatrix, a developer of software that lets companies create XBRL-compliant tags for use in their business applications. The company’s executives include Charles Hoffman, the Tacoma, Wash., CPA who originally conceived XBRL.
Hoffman brought his XBRL concept to the AICPA with the help of AICPA Council member Wayne Harding. At the time, Hoffman was an accounting software reseller for Great Plains Software and Harding was an executive with that company, which has since become part of Microsoft Corp.
Six years later, and prior to the Seattle conference, Hoffman expressed confidence about XBRL’s future.
“We have not had widespread acceptance, but we have quality acceptance, like the FDIC program, and it should keep getting better,” he said.
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