The American Institute of Certified Public Accountants' (AICPA) merger of the management of its Extensible Business Reporting Language (XBRL) development and Enhanced Business Reporting (EBR) initiatives may be more than just a reshuffling of operational hierarchy. It has set the table for two formerly separate efforts to help each other accomplish their intertwined missions, which both involve bringing business reporting into the 21st Century.
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The AICPA has moved the XBRL and EBR Consortium management efforts under a single assurance services management team, and appointed Amy Pawlicki, an assurance and advisory services director and its liaison to the EBR Consortium, to oversee the coordination of EBR and XBRL activities, and be the management team's liaison to the institute's Assurance Services Executive Committee.
The AICPA and several organizations whose operations are connected to financial reporting in 2004 founded an EBR Consortium to promote a business reporting model that combines a company's current and past performance with an understanding of its future prospects versus the current reporting model'sreliance mainly on past performance records.
XBRL is a technology in which key elements of electronically-formatted business reports are tagged so that they can be immediately accessed and collated to meet the needs of the reports' preparers and end users. The AICPA in 1998 organized a consortium of technology vendors and businesses that deal with financial reports to launch development of XBRL, and the effort has since blossomed into a worldwide movement with separate XBRL development consortia in the United States and more than a dozen other countries, and an XBRL International group.
The combined management appears to be a natural since the EBR Consortium and the XBRL development effort share some of the same founding members, the AICPA, Microsoft Corp. and PriceWaterhouse Coopers. And the business reporting company, PR Newswire is among those active in both efforts.
Moreover, the merger reflects the profession's growing awareness that XBRL is needed to advance EBR's ultimate mission of greater transparency in financial reports, and to meet current business realities. An Assurance Services Executive Committee draft white paper on reporting and assurance notes the current reporting model was adopted during the Industrial Age and is not designed âto complement the vast array of new business models that companies now follow in the Information/Knowledge Age.â
It further notes the current model âis limited by its focus on static, paper-based, summary-level reports, whereas technology has evolvedâ far beyond that. The paper makes a strong case that XBRL is in fact meeting all the demands of the new economy, such as making information available on demand, real-time and enabling users to âdrill-down into underlying concepts, data and relevant resources.â
The research paper predicts that XBRL will someday become as ubiquitous in business reporting as bar coding is in product distribution. Separately, Peter J. Wallison, resident fellow in the American Enterprise Institute, writing in the "The New Republic" in December 2004, said the capabilities of XBRL can indeed help the EBR Consortium accomplish its mission.
Pawlicki says the combined management will make it easier for team members to recognize areas where XBRL and EBR overlap and move forward with development for both efforts. âWe don't need to keep two separate teams up to date and the one team can see the whole landscape and better respond.â she says.
Most immediately, Pawlicki says the combination could assist in the development of XBRL taxonomies (tagging systems) for Generally Accepted Accounting Principles (GAAP) reporting and for key annual report parts such as Management's Discussion and Analysis (MD&A).
Pawlicki will represent the AICPA at the XBRL consortium in the United States, and Arleen Thomas, senior vice president of member competency and development, will represent it at the XBRL International group. They take over for the AICPA's former XBRL point person, Louis Matherne, who left the institute in April for the Information Systems Audit and Control Association
Pawlicki is also charged with making individual CPAs more aware of XBRL and how they can put it to use in their practices and for their clients. âThat is one of the most important things I will do,â she says.
Still new to the position, she says a formal communications strategy for XBRL has not yet been developed. But she added that she expects XBRL to be featured more prominently at AICPA member meetings. Improvement there should not be hard, since the technology has been low-profile or invisible at most institute conferences and at state society conferences.
However, XBRL took center stage at the institute's National Conference on Current SEC and PCAOB Developments late last year when Securities and Exchange Commission (SEC) Chairman Christopher Cox said that the technology âwill shape the futureâ of business reporting. and "will do for business reporting what bar coding did for product distribution.â
XBRL has also been the subject of banking industry conferences since last October when regulators, led by the Federal Deposit Insurance Corp., began requiring banks to use XBRL in filing their periodic call reports into a national repository.
Still, market acceptance of XBRL is limited, which could be another issue for the AICPA's EBR-XBRL management team. As of late May the SEC reported that just 20 companies had joined a voluntary XBRL reporting program it launched in January, and its first such voluntary program, begun in April, 2005, attracted only nine takers.