XBRL in the Accounting Industry
eXtensible Business Reporting Language (XBRL) is a language for the communication of business and financial data. Using XBRL provides businesses with major benefits in the preparation, analysis and communication of business information. The benefits are seen as being so great that both the Securities and Exchanges Commission and the International Accounting Standards Board are using it and encouraging others involved in the business and accounting world to make use of the new technology. There is a school of thought that filing accounts in accordance to GAAP using XBRL could reduce accounting scandals, as it makes number crunching easier and faster, however whether this is true remains to be seen.
The International Accounting Standards Committee Foundation (IASCF) and the European Committee of Central Balance Sheet Data Offices (ECCBSO) joined together in an XBRL project. The website detailing the project was launched in Dublin on 31st October 2005. The two groups worked on a project which produced a standardised common digital reporting format based on IFRS using MS Excel and XBRL. The new format is known as the reduced format.
The Securities and Exchange Commission (SEC) have also introduced a pilot scheme where companies use XBRL to file their accounts. In using XBRL the data filed can be more easily searched and analysed as it is 'tagged'. The scheme was implemented by the SEC in March 2005, however as yet the take up has been slow. This could be due to many other changes such as the Sarbanes-Oxley Act implementation, meaning companies are already dealing with many changes and have not had time to analyse the benefits and drawbacks of filing using XBRL so have decided to file as they always have until they have more time to analyse the benefits.
The benefits or potential pitfalls of XBRL have not yet been discovered due to its current limited use to file accounts, however the accounting authorities appear to be backing the use of XBRL so it seems to be only a matter of time until XBRL is used by the majority to file accounts. Only when this happens will the potential benefits be fully realised.
The International Accounting Standards Committee Foundation (IASCF) and the European Committee of Central Balance Sheet Data Offices (ECCBSO) joined together in an XBRL project. The website detailing the project was launched in Dublin on 31st October 2005. The two groups worked on a project which produced a standardised common digital reporting format based on IFRS using MS Excel and XBRL. The new format is known as the reduced format.
The Securities and Exchange Commission (SEC) have also introduced a pilot scheme where companies use XBRL to file their accounts. In using XBRL the data filed can be more easily searched and analysed as it is 'tagged'. The scheme was implemented by the SEC in March 2005, however as yet the take up has been slow. This could be due to many other changes such as the Sarbanes-Oxley Act implementation, meaning companies are already dealing with many changes and have not had time to analyse the benefits and drawbacks of filing using XBRL so have decided to file as they always have until they have more time to analyse the benefits.
The benefits or potential pitfalls of XBRL have not yet been discovered due to its current limited use to file accounts, however the accounting authorities appear to be backing the use of XBRL so it seems to be only a matter of time until XBRL is used by the majority to file accounts. Only when this happens will the potential benefits be fully realised.
posted by Helen Mark at 3:09 PM
1 Comments:
I agree that the potential benefits of XBRL will not be fully appreciated until the majority use it to file accounts. However I think its simple standardised format has numerous advantages including, it will allow data to be produced efficiently in various formats. A simple analytical tool could be used to automatically calculate ratios and identify critical areas. Similarly if the files are stored electronically they can be easily accessed by all stakeholders. Although the increased access to this financial information will increase the risk of the data being accessed by unauthorised users thus its is vital that all companies have firewalls in place, several spy ware packages running and basic security measures in place in order to minimise this risk.Therefore accounting firms must ensure that they have adequate security measures in place before using XBRL, not only to protect XBRL files but all data stored and transferred.
Overall I believe the use of XBRL will be a massive success within the profession, increasing the efficiency of analysing, accessing and recording data. However I think the introduction of using XBRL will be an upheaval for the accounting firms, particularly as many staff will require training to use the new reporting system. Similarly the introduction will be costly in terms of the possibility of upgrading the systems to run the reporting system, ensuring security is in place and adequate training is given to staff. Although in my opinion the costs will be beneficial to the firms in the long term.
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