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The Challenge of XBRL: Business Reporting for the Investor

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The Challenge of XBRL: Business Reporting for the Investor Thechallenge of XBRL: business reportingfor theinvestor Alison Jonesand Mike Willis Abstract The Internet nancialreporting language known asXBRL continues to developand has now reachedthe point wheremuch of its promised benets areavailable. The authors look atthe history of this project, provide acasestudy of how Morgan Stanleyhas madeuse of the system andpredict some developmentsfor the future. Keywords Financial reporting, Financial services,Internet Alison Jones isan Assurance enyears ago, only ahandful of visionaries could haveforeseen the impactof the Internet Partner specializingin on the entire business world andthe information-exchange community. Today, a technology, infocomms and T decadelater, we areon the brinkof anInternet revolution that will redene the ‘‘business entertainment,and media. She reporting’’ paradigm.This revolution will not taketen years to impactbusiness communication. isthe PricewaterhouseCoopers The newInternet technology, eXtensibleBusiness Reporting Language (XBRL), is alreadybeing XBRLServices Leader for the deployedand used across the world. UK, andrepresents the rm on theUK XBRLconsortium. For many companies, the Internet playsa keyrole in communicating business information, MikeWillis, Deputy Chief internally to management andexternally to stakeholders.Company Web sites, extranets and Knowledge Ofcer of intranets enableclients, business partners, employees, nancial marketparticipants and PricewaterhouseCoopers’ other stakeholders to accessbusiness information. Although the needfor standardization of Global Assuranceand Business documents usedin business commerce has long beenunderstood, until recently,no tool has Advisory Services(ABAS) beenuseful for the exchange of business reporting. Without that necessarytool, business practice,served as the founding reporting information on the Internet is not immediatelyusable because there areno universal, chairof theXBRL International software-neutral standards for reporting that havegained general acceptanceand incorpora- SteeringCommittee. Mr.Willis tion into business information production andconsumption software. is in AccountingToday magazine’s 2001and 2002 lists This is changing. XBRL is platform-independent, freely availableand offers universal standards of thetop 100most inuential for dening business information. XBRL is gaining widespreadacceptance, support and people. advocacyfrom arange of keyconstituencies, including the accounting, software, regulatory andindustrial sectors. XBRL offers awayto overcome communication barriers causedby incompatible business information systems andsoftware, byproviding acommon language that developerscan share, enabling their products to communicate directlywith each other using Internet technology. XBRL allows information producers to re-use information in their systems for multiple reporting purposes without re-keying. Italso provides business-information ‘‘ We are onthe brinkof an internet revolution. ’’ DOI 10.1108/09657960310491172 VOL. 11NO. 3 2003,pp. 29-37, ã MCBUP Limited,ISSN 0965-7967 | BALANCE SHEET | PAGE 29 consumers withdirect access to desiredspeci c information in areport andimmediate use of this information in analyticalsoftware for decision making. This article explores the foundations of XBRL’s growth, from the demandside and in the context of achanging Internet environment; explains how XBRL will transform the business information supplychain; looks atXBRL’ s impactthrough the eyesof aleading nancial services company,Morgan Stanley,and discusses the steps assurance professionals cantake now to makethe XBRL transition through XBRL GL,the journal taxonomy (XBRL GL). Makingbusiness reports more relevant The nancial-reporting world is changing. Let’s look atwhatmany nancialservices companies seein anewbusiness-reporting standard,XBRL. Hungry to makecompany reports more relevantand useful for decision making,the nancialservices industry –the largest business information producers andconsumers in the world –haverecognized, supported and advocatedwidespread XBRL adoption. This industry sees the benets of anenvironment in whichnot only publiccompanies, butinformation consolidators, regulators andindustry organizations all offer: f instantly accessible,immediately re-usable, secure reporting data. .. f that is requestedfrom, anddelivered right into, desktopanalytical software ... f along withthe context that makesit relevantand more readilymapped and integrated into a consolidated report and/or analysis ... f so that greater volumes of business information aremore quicklyand cost effectively obtained. .. f andmore analysis canbe performed ... f andbetter investment decisions canbe made . ... If this sounds likea fund manager’s or nancialanalyst’ s wishful thinking, reconsider. For many in the nancialservices industry, andalso in other keystakeholder groups, the stage is nearly set for XBRL reporting. They havea point. The systemis alreadythere XBRL is alreadyincorporated into many of the most widelyused enterprise products –or soon will be.Therefore, the capabilityfor companies to produce XBRL-enabled reports is latent in corporate business reporting systems on afairly extensive basis.The most popular engine of nancialanalysis, Microsoft Excel,will becapable of consuming information in XBRL enabled companyreports withthe next version of Microsoft Ofce, due out this year.Preparing and consuming XBRL enabledinformation will bejust another ‘‘Ofce’ ’ feature verysoon. Financial marketparticipants arenot the only stakeholders demanding XBRL reporting. Regulators areamong its leading proponents. For reporting companies in Australia, the UK, Japan,and the USA,the reality is here.Regulators themselves areadopting XBRL to streamline the job of intensive information processing, enhanceregulatory analysis andlower the XBRLat aGlance XBRL is an XMLbased informationformat that placesself-describing tags around discrete pieces of business information.Once tags are assigned, it is possibleto extract only desired information, rather than havingto download or print anentiredocument. XBRL is platform-independent:It will work on any current or recent-year operating system, or any computerand interfacewith virtually any software. XBRL is exible,allowing a nancialreport created in onesoftware to be transferred to someone using an entirelydifferent softwareand XBRL willallow the recipientto easily import the data rightinto their ownsoftware application. PAGE 30 | BALANCE SHEET | VOL. 11NO. 32003 associated costs. For this, theyneed companies to provide them withXBRL enabled information –theycan ask for it,at least initially; theycan also require it,in time or immediately. XBRL’s purpose is not to redene accounting terms or replaceexisting accounting principles. Its job is to provide universal denitions for existing terms so that business information on the Internet canbe readand understood bydisparatereporting andanalytical software without any intervention byhuman hands andwithout regard to whichsystem originates or consumes the information. This has the effect of: f lowering the cost of information production andconsumption; f increasing the speedof information exchange;and f enhancing accessand re-use of information so that reports becomemore relevantto their audiences. By necessity,the universal XBRL denitions require business information expertise –whichis to say,they require accounting, nancial reporting andbusiness reporting expertise.The accounting industry createdXBRL andcontinues to playa central role in developing and rening the standards through XBRL International (www.xbrl.org).This group of over 200 entities is the focal point of the accounting industry’s collaboration withmajor companies, industry organizations, regulators, software makersand other organizations from all over the world. To understand how far reaching the interest is in making XBRL reporting areality,take a look at XBRL International’s membership roster: http://www.xbrl.org/members. Members resolve to incorporate XBRL into their products andservices, and dedicate resources to workto make XBRL standards the bestthey can be. Accountants andexecutives who havenot alreadydone so should use the site to gain afuller understanding of whatXBRL is andwhat it cando andjoin the efforts to createstandards that arelikely to becomecentral to the tasksof internal and external reporting. XBRLbusiness reporting and thenew Internet environment Beyond stakeholder demandsfor XBRL reporting, executivesmust also recognize how fundamental XBRL is to corporate reporting in the context of the Internet’s broader transformation. You mayhave heard the term, ‘‘Web services’’ ,buteven if you havenot, the important point here is that the software industry is using this packageof Internet technologies –now –to standardizehow programs talkto eachother. The Extensible MarkupLanguage (XML) is the language of Web services.It is usedas the starting point for creating specic-purpose languages, such as XBRL for business reporting. XML basedlanguages, including XBRL, describedifferent kindsof dataand text through ‘‘tags’’ whichgive information anidentity anda context that canbe recognized andunderstood by disparatesoftware products. By providing the means of universal communication across all forms of business information software, XBRL promotes instant information accessibility through directinformation exchange. For example,a companypublishing XBRL enabled nancialstatements on its Web site can present the information in atraditional format. However,even if information
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