by John M. Covaleski
New York - Extensible Business Reporting Language, the programming code for transmitting financial report information over the Internet, could get the biggest marketing boost of its four-year life when Microsoft Corp. releases a new version of its Office desktop software suite with new XBRL import and export capability.
The XBRL development effort led by the American Institute of CPAs has endeavored for several years to make their language the financial reporting standard by encouraging the Securities and Exchange Commission to require its use. However, the SEC cannot mandate use of any reporting platform until that platform has widespread market acceptance.
Microsoft could help usher in that widespread acceptance, as its Office suite has some 400 million users worldwide. Office 11, scheduled for release in "mid-2003," will not be XBRL-specific, but instead will work with all codes, including XBRL, that are built off the XML, or extensible markup language, programming framework.
In a major upgrade from its previous XML capabilities, the new Office will have XML conversion capabilities built in, and the ability to import the codes of specific XML "schemas" such as XBRL, in order to work in the designated schema, according to a Microsoft spokesman. In XBRL’s case, Office 11’s spreadsheet tool, Excel, will be able to accept data in XBRL format, or work with non-XBRL data to output spreadsheets that are XBRL-formatted.
XBRL is one of hundreds of codes that are derivations of XML, an Internet industry framework for languages that describes data and establishes individual "tags" for specific elements in structured documents, such as financial reports.
Because items are individually tagged, report preparers can readily reposition specific elements in financial reports to satisfy the requirements of different parties, such as lenders, regulators, investors and analysts, and those parties can automatically retrieve the items that they want.
Office 11 could do for XML and XBRL what desktop applications did for market acceptance of computerization, by enabling users to realize all the benefits of the new technologies without having to understand them, said Rob Blake, Microsoft’s XBRL group manager and a member of the XBRL U.S. consortium’s steering committee. "This will mask the underlying technology and let knowledge workers do what they do best -- access, transmit and work with information -- and do it more quickly and thoroughly," he said.
The XML/XBRL capability will also be embedded into Office applications other than Excel, including the word processing tool, Microsoft Word. Microsoft is among more than 170 members of the XBRL U.S. development consortium, comprised of regulatory bodies, technology and financial services companies, publishers and accounting industry groups and firms, including all of the Big Four.
Paul Penler, principal at Ernst & Young and vice chairman of the U.S. consortium, acknowledged that the Microsoft move could help gain much-needed market notice, and lamented the situation in trying to gain an SEC mandate. "This really is a chicken-and-egg situation," he said, "The SEC cannot mandate something that is not a standard, but if they did mandate it, it would automatically become the standard."
The XBRL development group has been courting the SEC since its start, and has had some success. For example, former SEC chair Arthur Levitt, in one of his farewell addresses to the accounting industry, commended the AICPA’s work on XBRL.
More significantly, Edgar Online, the Norwalk, Conn.-based provider of financial information derived from the SEC, has been among the most active members in the consortium. Edgar Online also operates a Web site at www.xbrlexpress.com , that is an information source on XBRL and a repository for XBRL-formatted financial reports.
However, any SEC mandate on xbrl is clearly being prevented by the lack of market buy-in. For example, the xbrlexpress.com Web site has just 80 XBRL-formatted reports on its site and less than half of the approximately 50 technology company members of the XBRL U.S. consortium have implemented the code in their products.
Meanwhile, XBRL has been gaining support in the United States and worldwide. What began as an effort that was strictly focused on XBRL development for the U.S. has since expanded into separate development efforts in several other countries.
Microsoft has long been leading the XBRL charge. It is one of the original members of the U.S. consortium, was among the first companies to post its financial statement in XBRL, and helped Nasdaq implement a program under which the stock market’s Web site provides access to XBRL-tagged financial data from some Nasdaq-listed companies.
Meanwhile, other XBRL supporters are using a new technique to gain the SEC’s attention -- citing XBRL as a possible remedy to the financial reporting crisis caused by last year’s accounting scandals.
Separate research documents from PricewaterhouseCoopers and a group of professors both underscore XBRL’s potential to provide two things that could thwart fraudulent reporting -- greater and easier access to reporter data, and greater transparency of transactions covered by the reports.
XBRL is among several technologies that "can overcome users’ knowledge limitations by acting as a decision aid," said a report on financial report transparency authored by professors from the universities of Washington and Indiana. More specifically, the report found that XBRL’s ability to drill down to specific bits of information "can draw attention to a firm trying to play down stock option compensation by choosing disclosure in footnotes rather than on the income statements."
PricewaterhouseCoopers made XBRL a focal point of a report titled, "The "Trust Challenge," in which it interviewed senior executives at 43 financial institutions. It said that financial institutions are positioned to take a leadership role in restoring public confidence and that "XBRL would be particularly useful to them."
Mike Willis, a PwC partner and the XBRL consortium’s founding chairman, said that XBRL’s fraud-fighting capabilities include the ability to rapidly gather data and find details buried in places like footnotes.
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