As any BPM pro knows, generating financial results for external stakeholders is a resource-intensive and time-consuming task. A typical publicly traded company needs to report its results to the SEC and the IRS as well as produce an annual report, file credit applications, and deliver voluminous disclosures to industry-specific regulators such as the FDIC.

Each of these audiences may require the same information to be presented in a different format or level of detail, with various explanatory notes included. At the receiving end, the consumption of financial information can be equally daunting, requiring users to re-key information from financial filings into spreadsheets for analysis.

This is where extensible business reporting language (XBRL) comes in. With this technology, financial information and supporting text from internal systems can be expressed in a single specification that can be used to generate the information required by each of these audiences without any need for re-keying of information. A single XBRL document can be converted to printed output, published via the Web, fed into an SEC database (e.g. EDGAR) or forwarded to a creditor for analysis.

XBRL Goes Global

While the notion of XBRL-based reporting may be new to many finance executives and BPM practitioners, the emerging standard has actually been around for over a decade.

Back in the late 1990s, a group of accounting practitioners saw the need for an XML-based financial reporting standard and created a consortium to define it. With the backing of the American Institute of CPAs, a number of accounting firms, financial services organizations and software vendors, the first XBRL specification for U.S. Generally Accepted Accounting Principles (GAAP) reporting was released in July of 2000 and updated in December of 2001.

Since then, XBRL taxonomies have been developed for other jurisdictions and accounting standards such as UK GAAP, Canadian GAAP, and international financial reporting standards (IFRS). At the same time, the XBRL International consortium has been working hard to educate and lobby regulatory bodies around the world on the benefits of adopting the standard. Many were quick to understand the value proposition of XBRL; the list of adopters is impressive, including the Australian Prudential Regulatory Authority, the Tokyo Stock Exchange, the Shanghai Stock Exchange, the United Kingdom's Inland Revenue, and the National Bank of Belgium, to name a few.

Strangely, one of the last regulators to adopt the standard was the United States' own SEC. After extensive research and study, in 2008 then-chairman Christopher Cox announced plans to replace the EDGAR system for collecting and disseminating financial results of public companies with an XBRL-based system.

The SEC's XBRL Mandate

Following that announcement, the SEC defined the timeline for adoption of XBRL-based filings for publicly traded companies, beginning in June of 2009 (see Exhibit 1). In the first year of XBRL filing, companies are required to perform detailed XBRL-tagging of their financial statements and "block tagging" of footnotes and supporting schedules (meaning an XBRL tag is wrapped around a table or a paragraph of information which may contain a number of different values or metrics.)

Things get a lot tougher in the second year of filing, when companies are required to perform "detailed tagging" of the footnotes and schedules included in their filings. This can hugely increase the number of elements to be tagged; it can take 3,000 or more tags to cover all of the financial statements as well as individual values within supporting tables and footnotes.

In addition, during the transition period from EDGAR to XBRL, companies will be required to file their financials in both formats. In the short term, then, the transition to XBRL clearly means extra work for publicly traded companies.