The benefits of extensible business reporting language (XBRL) have been well-articulated. By labeling data with XBRL tags, organizations can more easily exchange business and financial information. Recipients inside and outside the organization can view and work with the data in the format they want, thus facilitating legal and management reporting as well as benchmarking (see Prepare Today for the Reporting Language of the Future by Robert D. Kugel in the May 2007 issue of BPM Magazine). However, using XBRL does little good if your data is not accurate in the first place.

That's because XBRL, while beneficial, is still just a format, just a standard for electronically communicating business information. Merely tagging data with XBRL code does not ensure that that data is trustworthy. Take for instance a company that creates a profit and loss statement in a spreadsheet and tags the data with XBRL. Although XBRL can define what the numbers in the statement represent, where they came from, and to which reporting period they belong, it doesn't link back to how each number was produced, if there are discrepancies, whether each number was produced in a trusted way, and if it complies with the appropriate GAAP and regulatory rules.

For the purposes of legal reporting requirements, potential audits, and good corporate governance practices, CFOs can't afford to have data tagged separately from where the numbers are produced, which is unfortunately what happens when data is pulled from a general ledger or business performance management (BPM) system and entered manually into an Excel spreadsheet where it is converted to XBRL. When this happens, the result is yet another report and set of data that is outside the control environment and disconnected from the audit trail. This is why XBRL needs a companion, a secure and contained environment, such as a BPM system, in which XBRL-tagged data can be fully traced, audited, and authenticated from source to disclosure. With XBRL gaining momentum as an easy tool that can help companies comply with statutory regulations and lead to improvements in performance, the one qualifier, or reality check, that companies need to remember is that data, not the format, is still king.

XBRL-Embedded BPM Systems: Data You Can Bank On

BPM systems allow companies to collect, distribute, and audit information across applications, from consolidation to planning, reporting, and analysis. Such systems, when equipped with a single database and consistent set of user interfaces and processes, deliver a single version of the truth for a company's financials. They also leverage process automation to reduce the human involvement, errors, and time lags associated with intercompany reconciliations and consolidations as well as planning, budgeting, and forecasting cycles.

A BPM system's ability to deliver a consolidated view of the business and its financials via a single consolidated chart of accounts makes it a more appropriate place than a general ledger or ERP system in which to do statutory reporting. A BPM system serves as the ultimate and overarching system of record, often with G/L and ERP systems (with their multiple charts of accounts) feeding into it. Thus, the BPM system represents the final and most trusted source of reconciled and consolidated financial results -- and the system in which a company should tag its data for XBRL-based statutory reporting.

Hence, while XBRL is indeed the reporting language of the future, to get real value from XBRL, companies need to tag their data inside a BPM environment that offers the processes and controls necessary to keep information secure, accurate, and consistent while providing full traceability of compliance steps (that is, a system of record). The need for this foundation of transparency and truth is especially vital given the demands of legislation such as the Sarbanes-Oxley Act of 2002 in the United States and equivalents in Europe and Asia.

Corporate data must be controlled, validated, and trusted because it's the data that ends up in reports to the SEC or local equivalent, and it's the data that can get companies and their executives into hot water if it's not correct. That's why the best place for XBRL is inside a BPM system where the two technologies will work together to enable easier reporting and compliance, enhanced business reporting, and the accomplishment of strategic initiatives such as competitive analysis and performance improvements.

Legal reporting. While XBRL makes reporting easier, the process needs to involve more than simply using an XBRL tool in Excel. That's because when a company moves reporting data into Excel it breaks the link with its BPM system's trusted statutory consolidation data and audit trail. Errors are often introduced during this detached period when the data leaves the BPM system to become part of a tagged financial statement.

The solution is to make XBRL part of the core statutory consolidation system. Companies should map their internal chart of accounts to the taxonomies with which they need to communicate; this new data hierarchy should serve as the foundation in which companies generate their XBRL. The result: The BPM system serves as a framework to produce trusted data, which is communicated both internally and to the regulatory bodies in an efficient way via XBRL.

Compliance. BPM solutions that include a financial governance, risk management, and compliance (FGRC) application add even more trust and security to the statutory reporting process because they enable visibility into the controls and processes that create and validate the numbers in the financial statements. This data architecture is transparent enough to allow finance staff as well as corporate executives to see deep into the numbers, gain confidence, report faster, and make better decisions.

Using BPM products with embedded XBRL, companies can then deliver their trusted financial results out to the market in the form of financial statements, press releases, etc. This can be done quickly, thanks to the efficient nature of XBRL reporting. The BPM system's "ringed-fence" foundation prevents the production of financial statements that are tagged with data that isn't trusted or fully reconciled, while XBRL provides a standard that makes it easier and less expensive to not only share trusted financial information but use it effectively in competitive analysis and in determining key business drivers.

Benchmarking and EBR. Companies that use BPM systems with embedded XBRL to report can also use them to pull in information from other publicly reporting companies and use that data for benchmarking and merger and acquisition (M&A) analysis. This data is valuable for a company that wants to benchmark not only its performance against that of competitors but its business value drivers and key performance indicators. Examples of data pulled into a BPM system using the XBRL format include earnings estimates, revisions, and trends; analysts' recommendations; sales estimates; expected dividends information; historical earnings-per-share perspective; and estimated long-term growth rates for a company, its industry, and the S&P 500. System users can also screen for companies by industry, sector, Standard Industrial Classification code, or trading exchange and open XBRL documents from other sources.

Together, BPM and XBRL also provide the foundation for enhanced business reporting (EBR). By providing the framework in which to collect and analyze a broad range of external financial and nonfinancial, historical and forward-looking, information -- such as market share, potential market share growth, HR and corporate social responsibility data -- BPM and XBRL enable companies to identify the true drivers of value within their business. This then drives a greatly enhanced BPM cycle which includes using XBRL to communicate to market, XBRL to pull in external data, XBRL and BPM to benchmark, BPM and XBRL to build an EBR framework, XBRL to communicate out to the market, and on goes the cycle.

XBRL, EBR, and BPM processes and applications, which must include external benchmarking, need to be viewed as inseparable from one another. Together they provide a solution capable of improving the business reporting supply chain, which will lead to more value being created for shareholders and other stakeholders.

How To Combine BPM and XBRL

As its adoption grows, XBRL is steadily shedding its undeserved reputation as a burdensome technology to deploy and maintain. Still, organizations need to recognize that implementing and getting the full range of benefits from XBRL, including return on investment, isn't an overnight process -- nor can it be accomplished without a BPM system that integrates XBRL and ensures consistent, accurate data (a single version of the truth) to enable users to extend XBRL's benefits across applications.

So how do you combine BPM and XBRL?

Fortunately, the answer is that some software vendors already have. XBRL publishing modules are available today that use a reporting definition (taxonomy) to enable companies to compose reports based on secure and trusted data extracted from their consolidation application. Companies can automate report production on a monthly, quarterly, or yearly basis, based on defined mappings and any number of available taxonomies. To get to this point, companies need to map their consolidated internal chart of accounts to the XBRL taxonomy embedded in their BPM system, which is a pretty straightforward process provided they have an XBRL-embedded BPM system.

To comply with rules defined in the various taxonomies, the XBRL publishing module enables the collection of additional data that may be required to supplement what is automatically retrieved by the consolidation application, thereby providing the company with a full editing and audit history. The reporting process, including data changes and importing data sets, is all recorded for later auditing. This ensures full transparency and auditability from source to digital disclosure.

Some companies may hesitate to present their competitive information in a way that allows rival corporations to pull it so easily into their own BPM systems. This trepidation is sometimes a result of a company not trusting its own data or due to the simple fact that it doesn't have competitive data to share (concerns that can both be dispelled by a BPM system that delivers a single version of the truth, thus boosting confidence, and incorporates nonfinancial data and business drivers). The truth of the matter is that nothing is secret anymore and the information of public companies is already in the public domain and available to competitors if they really want to go and get it. Besides, unless a company wants to compete in a vacuum, the benefits of finding out how the rest of the market operates far outweigh any potential downside caused by the market discovering how that same company stacks up against it.

When BPM software includes XBRL-tagged data on publicly traded companies, users can analyze actual and forecast data directly alongside their peers and competitors to create externally focused BPM. Ultimately, these users can conduct the type of analysis (drill down, slice-and-dice, analyze, and ad-hoc comparisons) needed to identify areas requiring further inquiry directly in their BPM application. By using solutions that leverage XBRL to collect, analyze, and report internal and external data on the business landscape, strategy, resources, key processes, and performance, businesses can enhance their reporting and gain insight into what improvements they need to make on value drivers that determine future financial performance, all within a secure and trusted BPM framework.

Trevor Walker is vice president of marketing for Cartesis in North America. He has 17 years of extensive marketing and BPM experience.

James Fisher, product marketing director at Cartesis, has over 10 years of experience in the enterprise group reporting and performance management industry.