by John M. Covaleski
New York - The Extensible Business Reporting Language programming code for financial reports could provide a major boost to market investors, according to investment industry authorities at a recent symposium, here.
XBRL will provide for “the democratization of data,” said Alfred R. Berkeley, vice chairman of the Nasdaq stock market. He said that XBRL’s potential to help investors more easily gather and disseminate financial reports could open the door to reviewing companies that are now overlooked because there’s no analysis of their financial conditions.
Berkeley noted that 748 of Nasdaq’s 2,500 companies are not researched by investment analysts and another 396 have only one analyst assigned to them. “XBRL will make the fear factor go down so people will invest in those companies,” he said at a meeting co-sponsored by Edgar Online, which manages the Securities and Exchange Commission’s Edgar Web site, and the new distribution service for Business Wire.
Other speakers predicted widespread Wall Street acceptance of XBRL, the financial reporting version of Extensible Markup Language, a format in which items in electronic files are tagged for instantaneous recognition by applications and retrieval by users. XBRL International, a consortium of about 200 organizations brought together by the American Institute of CPAs in 1998, is developing it.
The tagging aspect of XML schemas allows users of information to automatically retrieve individual pieces of data and group them to meet specific needs. It’s what sets XML apart from the more pervasive Hyper Text Markup Language, or HTML, which tags entire documents, but not individual items within.
One of the main reasons for the symposium was to generate awareness within the investment industry, which, by most accounts, is largely unaware of or disinterested in XBRL. For example, Nasdaq has endorsed XBRL for several months, but only about 25 of its companies have since posted their reports in XBRL.
Attracting attention from Wall Street is critical to XBRL International’s hopes of gaining an SEC mandate. However, Mike Willis, the chair of the Preparers and Accounting Community of XBRL International, has repeatedly noted that the technology is at a “chicken and egg” stage because software developers will not build XBRL tools until there is market demand for them, and it will be difficult for users to embrace XBRL until the enabling software systems are available.
However, only 29 major business software vendors have added or announced plans to add XBRL capability to their products. But that list includes five of the six vendors of high-end financial applications that are commonly used by large public companies - Oracle, PeopleSoft, SAP, JD Edwards and Lawson Software.
Microsoft Corp., one of the earliest champions of XBRL, is expanding the ability of its Microsoft Office desktop applications to work with XBRL and with all XML languages. That vendor’s middle-market business accounting applications - its Great Plains and Navision lines - are XBRL-enabled.
Speakers at the symposium were bullish about the prospects for wider market acceptance. “In a few years, you’ll be flooded with XBRL just like you’re flooded with e-mail today,” predicted Walter Hamscher, chair of the XBRL International Steering Committee. He cited several examples of acceptance worldwide, including:
© The United Kingdom’s Inland Revenue, that nation’s IRS, will mandate the use of XBRL for all e-filers in 2008.
© Japan’s national tax agency is reviewing a similar XBRL program.
© The Australian Prudential Regulation Authority is using XBRL to gather reports from the 11,000 banks, insurers and pension funds that report to it.
© The Federal Deposit Insurance Corp. is proceeding with plans to implement XBRL in 2004 for the collection of information from its members.
Mark Schnitzer, executive director of the equity research group at investment bank Morgan Stanley, predicted the widespread use of XBRL because of the speed and economy it brings to research. He said that detailed research that now takes months - such as analyses of unfunded pension liabilities - could be whittled down to a few days with XBRL.
Liv Watson, an executive with Edgar Online, said that she expects XBRL to someday become as pervasive as bar coding is with retail store merchandise. Noting that bar coding began in 1978, she said, “It won’t take 27 years for XBRL to affect you.”
Rob Blake, Microsoft Corp.’s representative on XBRL International, reported that his company plans to soon release a “Research Assistant” software application that will enable financial analysis to be done with XBRL. He also reported that the next version of Microsoft Office, which features an enhanced ability to work with all XML codes, will include an optional tool kit to enable users to decipher XBRL-coded documents and produce Excel spreadsheets tagged in XBRL.
He provided an example of XBRL’s potential by showing the paper versions of several 10-K reports, including a 195-page document from General Electric. “In HTML, these documents are worthless because it’s just so hard to get to the data,” Blake explained.
He then XBRL-coded 10-Ks from Microsoft and Intel Inc. on his laptop, and, within a few minutes, created a spread sheet in which both companies’ comparable financial numbers were listed side by side.
Watson said that eliminating time from information retrieval is a major cost factor, citing a Gartner Group study that found that “information buyer” companies worldwide spend $404 billion annually to find information, while their workers spend up to 25 percent of their working hours looking for it.
To be sure, Microsoft and Intel are among only about 30 companies with financial statements in XBRL. Following his presentation Blake acknowledged that the lack of use remains the major hurdle.
