XBRL for Financial Statements Questions and Answers

The following is a list of the more frequently asked questions regarding XBRL and how it will impact those who prepare and use financial statements.

What is XBRL?
What is XBRL used for?
What are the benefits of XBRL for Financial Statements?
Who will benefit from using XBRL?
How does XBRL work? How does XBRL do this? How can you be sure to get the correct information using XBRL?
How can companies create these XBRL statements?
How does this fit into SEC’s EDGAR? What are they doing?
What does this mean for preparers of financial statements?
Why is the AICPA heading up this effort?
What is the future of XBRL?
What will you charge for people to use your specification to create financial statements?
Is this going to cause a change in accounting standards?
Where can I get more information?
How is the AICPA related to the W3C?
How does XBRL impact International Reporting Standards?
What is the difference between XBRL and FpML, Fix, FinXml. OFX, XML/EDI? Are all of these efforts needed?

Question: What is XBRL?

XBRL (Extensible Business Reporting Language), formerly code named XFRML, is a freely available electronic language for financial reporting. It is an XML-based framework that provides the financial community a standards-based method to prepare, publish in a variety of formats, reliably extract and automatically exchange financial statements of publicly held companies and the information they contain. XBRL is not about establishing new accounting standards but enhancing the usability of the ones that we have through the digital language of business. XBRL will not require additional disclosure from companies to outside audiences.

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Question: What is XBRL used for?

XBRL, at least at first, will be used to digitally publish financial statements of companies that are issued to external users. An XBRL-based financial statement is a digitally enhanced version of paper-based financial statements, which include the balance sheet, income statement, statement of equity, statement of cash flows, and the notes to the financial statements as well as the accountant’s report. “XBRL for Financial Statements” enables a dramatic improvement in the processing of financial reports. XBRL documents can be prepared efficiently, exchanged reliably, published more easily, analyzed quickly, retrieved by investors simply, and enables smarter investments

Potential XBRL applications:

  • XBRL for Financial Statements - financial statements of all sorts used to exchange financial information
  • XBRL for Taxes -specification for tax returns which are filed and information exchanged for items which end up on tax returns
  • XBRL for Regulatory Filings – specifications for the large number of filings required by government and regulatory bodies
  • XBRL for Accounting and Business Reports - management and accounting reporting such as all the reports that are created by your accounting system rendered in XML to make re-using them possible
  • XBRL for Authoritative Literature - a standard way for describing accounting related authoritative literature published by the AICPA, FASB, ASB, and others to make using these resources easier, "drill downs" into literature from financials possible

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Question: What are the benefits of XBRL for Financial Statements?

XBRL solves two significant problems through efficient preparation of financial statements in many forms and reliable extraction of specific detailed information from the different forms of financial statements.

The first problem is that preparing a financial statement for printing, for a Web site, and for filing today means that a company could typically enter information three times. With XBRL, information will be entered once and the same information will be “rendered” as a printed financial statement, an HTML document for a Web site, an EDGAR filing file, a raw XML file, or a specialized reporting format such as periodic banking and other regulatory reports.

The second problem is that today, extracting specified detailed information from a financial statement, even an electronic financial statement like an EDGAR filing, is a manual process. For example, a company cannot tell a computer program to “Get the depreciation expense for 1999” from an electronic financial statement. If a financial statement is prepared using XBRL, computer programs can easily extract every piece of information in that statement. This also includes Web browsers on the Internet.

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Question: Who will benefit from using XBRL?

The following is a brief summary of how XBRL and XML will affect various participants in the financial information supply chain:

  • Companies who prepare financial statements: More efficient preparation of financial statements because they will be created one time and rendered as printed reports, on Web sites, as Edgar filings, or as other regulatory filings.
  • Analysts, Investors, and Regulators: Enhanced distribution and usability of existing financial statement information. Automated analysis, significantly less re-keying of financial information from one form into another form, receiving information in the format you prefer for your specific style of analysis.
  • Financial publishers and data aggregators: More efficient data collection lowers operating costs associated with custom, idiosyncratic data feeds and reducing errors while concentrating on adding value to the data and increasing transaction capacity
  • Independent Software Vendors: Virtually any software product that manages financial information could use XBRL for its data export and import formats, thereby increasing its potential for full-interoperability with other financial and analytical applications.

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Question: How does XBRL work? How does XBRL do this? How can you be sure to get the correct information using XBRL?

There are three requirements for the successful deployment of XBRL. They are:

  • Creation of a specification that is the same for all companies that is consistent from one financial statement to another.
  • An application that will allow the creation of financial statements” tagged” with XML that adhere to the specifications.
  • Style sheets which render information for a specific or variety of formats.

XBRL is explained by the problems solved. If there is not a consistent specification that works for all companies, preparation of automated rendering and extraction tools will need to be prepared for each different specification used to create financial statements. This is not very efficient. This is why the accounting profession's vision is to create one specification that everyone uses. There will be specifications that will meet the needs for each particular industry, but all specifications will use a similar framework.

There is one way to achieve this consistency: XML (not PDF, HTML, raw text, SGML, or any other method). The goal is to create a standards-based method to prepare, publish in a variety of formats, exchange and analyze financial statements across all software formats.

XBRL for financial statements will provide agreement on the terms used by establishing uniform categories for financial data. Yet, the system remains flexible to accommodate any company’s internal environments, processes, systems, and even styles.

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Question: How can companies create these XBRL statements?

Accounting software vendors will put XBRL type tags in their accounting systems to allow users to cross-reference their accounts to this framework enabling a more efficient reporting process and a more efficient experience for the users of financial information.

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Question: How does this fit into SEC’s EDGAR? What are they doing?

XBRL can automatically "Edgarize" financial statements into 10K, 10Q and other filings.

Down the road, we see the SEC using XML as a filing format. Actually, they already “tag” information, however, the level at which information is tagged does not provide enough detail. EDGAR documents have some detailed tags, but most of the information in the EDGAR files is in “groups” of information. For example, EDGAR documents tag an entire table full of information. But you don’t know what the table is, or what each line item of information is, or for what year.

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Question: What does this mean for preparers of financial statements?

This initiative is not required but we believe that companies will find it preferable because it solves many problems that preparers experience as explained above. It lowers their cost of preparing and distributing financial statements and enhances communications to their various stakeholders.

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Question: Why is the AICPA heading up this effort?

As the premier national professional association for CPAs in the United States, the AICPA is playing a major role in facilitating the development of the common specifications that will be used by the entire accounting profession to support XBRL.

In addition, all businesses, large and small, are undergoing fundamental change. We see the CPA as the person who can help businesses change to fit into this new digital world. CPAs have been the creators and managers of the accounting language or the underlying language of business.

We view this as a natural next step in the clarification and development of this fundamental business language. CPAs have been changing over the past years, and we expect to see more change. Additionally, it is the core purpose of the AICPA to enhance the access and breadth of financial information available to the investing public. Our vision is for CPAs to be the “Premier Knowledge Professionals” and to help companies understand and take advantage of technologies like XML and the Internet.

We believe that CPAs are the premier knowledge professionals who leverage electronic business and information to solve business issues and capitalize on opportunities.

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Question: What is the future of XBRL?

A recent study of public companies conducted by AIMR indicated that 66% of companies surveyed have a Web site and that 76% of those companies provide financial information on their Web site. The study also indicated that analysts preferred Web sites to obtain information, even when other sources exist, because it is easier. Another study indicated approximately 80% of major US companies are making some type of financial disclosure on the World Wide Web.

Soon every public company will have a Web site where they will make their financial information available to interested parties. Also, companies applying for a loan will make their financial information available to the bank in XBRL. That financial information will be e-mailed to the bank and will automatically be imported into the bank’s loan analysis software. We believe that every piece of authoritative accounting literature, reporting precedent, and other research materials will be represented in XML to make this information easier to use and made available to various audiences.

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Question: What will you charge for people to use your specification to create financial statements?

Nothing since the specification will be freely licensed. The accounting industry will bear the cost of developing and maintaining this standard, as it is fundamental infrastructure for the industry. Having one specification will keep costs to a minimum.

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Question: Is this going to cause a change in accounting standards?

No. The XBRL specifications will use and rely on the existing accounting standards.

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Question: Where can I get more information?

Again, see the XBRL public Web site or the AICPA Web site. (http://www.XBRL.org or http://www.aicpa.org) See http://www.xml.org and http://xml.com for overview information on XML standards.

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Question: How is the AICPA related to the W3C?

The W3C (http://www.w3c.org) was founded to develop common protocols to enhance the interoperability and lead the evolution of the World Wide Web. It develops standards, such as XML, for public use on the Internet.

The AICPA (http://www.aicpa.org) is the premier national professional association for CPAs in the United States. It has more than 330,000 members.

The AICPA is simply using the XML standard that was developed by the W3C and is in no way related to the W3C.

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Question: How does XBRL impact International Reporting Standards?

We are creating an open framework that provides for concurrent development of XBRL specifications in other countries and jurisdiction

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Question: What is the difference between XBRL and FpML, Fix, FinXml. OFX, XML/EDI? Are all of these efforts needed?

All of these identified efforts with the exception of XBRL are transaction-oriented specifications for specific purposes. XBRL is reporting-oriented. All of these efforts are needed since they all serve different purposes.


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