By Anne Rosivach
Congress is beginning to mandate the use of computer-readable tags, the eXtensible Business Reporting Language (XBRL), as a way to track federal spending and to improve transparency in government reports. Bills that contain language calling for the implementation of data standards, such as XBRL, have not yet passed into law, but the requirement could become part of the final "payroll tax cut" bill, according to the American Institute of CPAs (AICPA) e-newsletter, the CPA Advocate.
Currently, all public companies in the United States listed with the Securities and Exchange Commission (SEC) are required to attach exhibits containing the computer-readable data tags to their filings. The XBRL exhibits enable investors to compare information among companies using analytic software.
"Accountants are the natural experts to turn to for help in looking at XBRL-formatted data, and they are the most logical professionals to champion the use of XBRL within an organization."
Brad Monterio spoke with AccountingWEB about XBRL developments in the United States and worldwide. He is a member of the IMA Global Board of Directors Planning & Development Committee and chairs the IMA XBRL Committee.
In addition to the bills pending in Congress, what are some other potential uses of XBRL by governments?
"I understand that the IRS is looking at the results of the XBRL mandate in the United Kingdom, where all entities were required to file their tax returns in XBRL format as of April 1, 2011. There is a growing trend overseas to use XBRL in tax filings," Monterio said. "Similar requirements or voluntary programs exist in Germany, China, and the Netherlands. China, the Netherlands, and Australia also have broader legislative mandates for XBRL across government agencies.
"And on a state level, the Honorable Kim Wallin, CMA, CPA, State Controller of Nevada, has been a real trailblazer in the use of XBRL by state governments. She has begun a pilot program to analyze grant and American Recovery and Reinvestment Act (ARRA) reporting by state agencies."
What are some of the benefits of XBRL to organizations not listed with the SEC?
"There is no reason that the benefits of XBRL should be limited to public companies and external compliance reporting," Monterio said. "XBRL streamlines and automates information sharing. It is platform independent. It helps bridge the gap between systems in an organization. Data from different systems within the organization can be viewed and analyzed more easily through XBRL.
"Companies of any size and not-for profits of any size can realize real efficiencies and major cost savings through data sharing internally where information is presented in an XBRL format.
"Without the use of XBRL, financial reporting in an organization can be a very manual, linear process, subject to errors and inefficiencies. It may depend on data in an Excel spreadsheet that may have formulas built in to give that data context. This is okay if that data stays in that cell, but if you move it, the formulas and context do not stay with the data. With XBRL, the structure and context of the data stays with it, no matter where you move it.
"XBRL removes the 'silo mentality' that could exist between sales/marketing, operations, and finance, making information more contextual, and the tracking, analysis, and sharing more collaborative.
"Management accountants working within the finance departments of an organization will have to be persuaded of the value of XBRL to internal reporting and the potential savings involved, and initially it could be a tough sell. However, the full value of XBRL is realized when an organization fully integrates XBRL into their systems."
How can accountants bring value to their clients by championing XBRL?
"Companies will reach out to their accountants to provide independent assurance that the data is tagged properly and extended properly in a consistent manner. Accountants can add value by ensuring that there are controls in place to flag exceptions, errors, or potential problems with information in the process that can identify risks early on," Monterio said. "Accountants are trained to look at structured information in a consistent manner. They are the natural experts to turn to for help in looking at XBRL-formatted data, and they are the most logical professionals to champion the use of XBRL within an organization.
"Tax authorities and other groups that share a common set of data (e.g., bank loan information) can build taxonomies that give context to their information. XBRL reports will provide real-time data to decision makers, making it usable across different divisions of a business and even by outside stakeholders, such as banks."
What are some developing trends in the use of data standards and XBRL?
"Data standards will be an important component of Integrated Reporting. Companies are beginning to prepare reports that integrate financial and nonfinancial data. These reports show linkages between an organization's strategy, governance, and financial performance and the social, environmental, and economic context within which it operates.
"Accountants can play a key role in integrated reporting by assuring that nonfinancial or environmental, social, and governance (ESG) information is measured against a uniform, global standard and verified for accuracy. Stakeholders will be relying on this information and it must be independently verified.
"XBRL taxonomies have already been developed for nonfinancial information (by the GRI, WICI, IRIS, and others) and are underway by other organizations covering ESG-related information.
"Social analytics is another trend that is rapidly gaining steam, and XBRL plays a role there as well. Through the advent of social media platforms and wiki-type online collaborative workspaces, people have the ability to come together and share analytical models, insight, and information in ways they could not have previously. The power of the collective-hive mind is able to drive analysis of XBRL tagged data through these online social analytics communities and allow retail investors, among others, to benefit from the insights of analysts and professional investors."
Brad Monterio has extensive experience in the financial services, financial technology, and accountancy sectors working with XBRL, integrated reporting, and ESG. He is a direct member of XBRL International, Inc., and active with the ASAE and the GRI. Monterio is a member of the IMA Global Board of Directors Planning & Development Committee and chairs the IMA XBRL Committee. He has been working with XBRL since 1999 when it was cofounded by the IMA and a handful of other experts and organizations. He has been focused on driving market adoption of XBRL around the world during the last decade.