5 XBRL: A New Tool For Electronic Financial Reporting Jia Wu and Miklos Vasarhelyi Department of Accounting and Information Systems, Rutgers University, New Jersey Abstract. eXtensible Business Reporting Language (XBRL) is an elec- tronic markup language for the purpose of corporate business reporting. XBRL is based on XML, which is the universal format for structuring documents and data on the web. In an XBRL compliant report, each finan- cial and non-financial item is enclosed by a pair of XBRL tags, which de- scribes the meaning of the item. These tags provide semantic information to the reports and make the financial reports not only human readable but also computer comprehensible. Leveraging the power of computers and the Internet, XBRL provides the financial community a standard to elec- tronically and automatically prepare, publish, exchange, and extract finan- cial statements. It is expected that XBRL will have widespread effects on financial reporting. First, preparing financial reports will be easier with XBRL. Financial information needs to be keyed into the computer only once. XBRL-ready accounting software can generate financial reports in different formats, such as for SEC filing, loan application, or corporate web reporting. It greatly reduces the manual input burden and entry errors. Second, the publication and exchange of financial reports can be facili- tated. Because XBRL-compliant reports use standardized tags, the reports can be conveniently exchanged between different software and computers, independent of the software formats and computer platforms. The financial statement users can view an XBRL report as easily as browse a web page. Third, since XBRL-compliant reports are computer comprehensible, the financial information contained in these reports can be reliably and auto- matically extracted through XBRL-enabled applications for financial analyses. The cost of financial analyses can be largely reduced. Decision makers, investors, creditors and other financial statement users can be al- 76 Jia Wu and Miklos Vasarhelyi leviated from the burden of manually analyzing the financial reports. Small- and mid-sized companies will have an equal opportunity to com- pete with industrial giants for the capital market. XBRL is undergoing fast development. Since its inception in 1998, over 170 companies and organi- zations including Big 4 accounting firms, FDIC, Microsoft, and SAP have joined the XBRL consortium. XBRL will become the standard for elec- tronic financial reporting in the near future. 5.1 Introduction The objective of this chapter is to introduce a new accounting tool called XBRL that can help accountants, decision makers, analysts and regulators to prepare, exchange, extract and analyze financial reports. eXtensible Business Reporting Language, better known by its acronym XBRL, is an XBRL-based markup language for the purpose of electronic corporate fi- nancial reporting. XBRL is based on XML, which is the universal format for structuring documents and data on the web. Basically speaking, in an XBRL-compliant report, each financial and non-financial line item is en- closed by a pair of XBRL tags, which describes the meaning of the en- closed item. These tags provide semantic information to the reports and make the financial reports not only human readable but also computer comprehensible. Leveraging the power of computers and the Internet, XBRL provides the financial community a standard to electronically and automatically prepare, publish, exchange, and extract financial statements. It is expected that XBRL will have widespread effects on financial re- porting. The beneficiaries of XBRL include but are not limited to account- ants, company decision makers, creditors, financial analysts, and regula- tors. First, for accountants, preparing financial reports can be facilitated with XBRL. Financial information needs to be keyed into the computer system only once. XBRL-ready accounting software can generate financial reports in different formats, such as for SEC filing, loan application, or corporate web reporting. It greatly reduces the manual input burden and entry errors. Second, for financial statement users, the publication and ex- change of financial reports can be simplified. Because XBRL-compliant reports use standardized tags, the reports can be conveniently exchanged between different software and computers, independent of the software formats and computer platforms. The financial statement users can view an XBRL report as easily as browse a web page. Third, since XBRL- compliant reports are computer comprehensible, the financial information contained in these reports can be reliably and automatically extracted 5 XBRL: A New Tool For Electronic Financial Reporting 77 through XBRL-enabled applications for financial analyses. The cost of fi- nancial analyses can be largely reduced. Investors, creditors and other fi- nancial statement users can be alleviated from the burden of manually ana- lyzing the financial reports. Small- and mid-sized companies will have an equal opportunity to compete with industrial giants for the capital market. XBRL is royalty-free and can be integrated with market-available soft- ware, which reduce the cost of using XBRL to a minimum. Users do not need to pay royalty fee to apply XBRL standards in their financial reports. Neither do the companies need to overhaul their existing information sys- tem to use XBRL. XBRL add-on modules can be imbedded in market- available software. Microsoft, together with PriceWaterhouseCoopers and NASDAQ, has developed a pilot XBRL application called “Excel Inves- tor’s Assistant” that can be imbedded in Excel. It can switch financial re- ports between traditional, Excel and XBRL formats with only a few mouse clicks. Ratio analysis, which can be presented in charts and diagrams, can be completed in just a few seconds. SAP and PeopleSoft have also added XBRL functionality into their ERP (enterprise resource planning) pack- ages. XBRL-compliant financial reports can be created automatically since all the required financial data are available within the ERP systems. More- over, it is expected that an XBRL-compliant report can be generated as easily with a few mouse clicks in the near future. In this chapter, we briefly discuss the history of XBRL development in section two. Then, in section three, we compare HTML, XML, and XBRL to give a clear picture of the differences and similarities between these three markup languages. In section four, the three components of XBRL are discussed. We discuss how XBRL can aid business intelligence in sec- tion five. We explain how XBRL works in this section as well. The bene- fits of using XBRL for financial reports preparers and users are explored. Section six primarily provides an XBRL vendor list. The last section con- cludes the chapter and points out some potential issues that need to be re- solved for XBRL development. 5.2 A Brief history of XBRL Development The start of XBRL can be traced back to April 1998, when a CPA named Charles Hoffman began to develop prototypes for financial reporting using XML. American Institute of Certified Public Accountants (AICPA) sup- ported and funded Hoffman’s initiative. In June 1999, Hoffman and sev- eral other people created a business plan for XML-based financial state- ments, called eXtensible Financial Reporting Markup Language 78 Jia Wu and Miklos Vasarhelyi (XFRML). Later in the year, they changed the name to XBRL since busi- ness reporting covers a broader range of reports than financial reporting. XBRL is undergoing fast development. The number on the XBRL steer- ing committee increased from 12 in 1998 to 170 in mid-2003, including many leading accounting, technology, and government organizations. The jurisdictions of XBRL have expanded from the U.S. into 12 European and Asian-Pacific countries. The first taxonomy---XBRL CI taxonomy, which serves commercial and industrial companies (representing 80% of pub- licly-traded companies in the U.S.), has been completed. XBRL specifica- tion for general ledger is currently available. It can tag the data at the gen- eral ledger level and facilitate data transmission between the transaction reporting and business reporting. XBRL specification has grown from 1.0 version to 2.1 version now. Additionally, a few companies have begun to adopt XBRL in their fi- nancial reporting. In February 2001, Morgan Stanley became the first company that tags its financial statements in XBRL for SEC filing and web reporting. Microsoft became the first technology company that uses XBRL for financial reporting in March 2002. The fast development and adoption of XBRL indicate the great potential role for XBRL to play among the business reporting world in the near future. More and more software vendors have joined the development of XBRL-enabling soft- ware. Microsoft, PriceWaterhouseCoopers, and NASDAQ launched the first XBRL pilot project in July 2002. UBMatrix, CaseWare and many other companies offer products that can create XBRL-compliant reports as well as XBRL taxonomies. To explain XBRL clearly, we need to discuss HTML and XML. HTML, XML and XBRL are all members of the markup language family. Markup language is different from other computer languages such as C and Java. It is not used for building computer applications. Instead, markup language is used for formatting and structuring data in a document and explaining the meaning of the data to the computer. Simply speaking, markup language adds tags to data items. These tags either tell how data should be formatted and presented to the user, such as HTML tags, or indicate the meaning and function of the data item, (in other words, it adds meta-data to the docu- ment) such as XML tags. All markup languages are both platform- independent and language-independent. Markup language runs on various operation systems such as Windows, Unix, Linux, etc. It also adopts Uni- code, which can represent hundreds of written languages in the world in- cluding Asian, Arabic and European languages. Generally speaking, markup language has more flexibility and interchangeability than other computer languages. 5 XBRL: A New Tool For Electronic Financial Reporting 79 Table 5.1.