In search of ROI for XBRL.(eXtensible Business Reporting Language)

In the summer of 1998, just as the brand new Extensible Markup Language (XML) was reaching recommended status from the World Wide Web Consortium, Charles Hoffman began to think about how the new language would benefit the world of accounting. From humble beginnings, Hoffman's pilot project quickly grew into an international consortium with more than 400 member entities contributing to the worldwide growth of the eXtensible Business Reporting Language (XBRL).

Successful projects such as the FDIC call modernization program ("Making Clean Deposits," Strategic Finance, February 2006), the Dutch Water Authority, the Australian Prudential Regulatory Authority, and the adoption of XBRL by stock exchanges from Tokyo to Toronto have placed XBRL squarely in the sites of governmental agencies who want to digitize the collection of data from their constituents. Successful internal use of XBRL GL at the Wacoal corporation ("Breathing New Life into Old Systems," Strategic Finance,March 2004) demonstrated the use of XBRL as a way to bridge the gap between legacy systems and new systems. Recent announcements from the two major stock exchanges in China, the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE), indicate that financial information from exchange member companies will soon be available in XBRL.

And yet some industry analysts question why XBRL isn't in common use in the United States after all these years. In the January column, we saw that Chairman Christopher Cox has voiced public support for interactive data and has actively promoted the Securities & Exchange Commission's XBRL Voluntary Filing Program (VFP). As of this writing, however, only nine companies have sent the SEC a total of 22 separate filings. Corporations, breathless after adjusting to the new reporting requirements under the Sarbanes-Oxley Act of 2002, aren't warming up yet to using XBRL for external financial reporting.

Ring the XBRL Bell Softly

XBRL isn't resonating within corporate America yet. A few key people in leading corporations such as Morgan Stanley, United Technologies, and Microsoft are ringing the XBRL bell softly by participating in the SEC Voluntary Filing Program, but the rest of corporate America is asleep.

Companies required to file with the SEC have a very strong focus on their required filings. Understandably, the attention placed on external financial reporting is so strong that alternative methods of filing with the SEC usually aren't considered until required by law. Companies will realize soon, however, that the move to interactive data will represent tremendous advantages for both internal and external business reporting.

Understanding "interactive data," a term coined by SEC Chair Christopher Cox, is the key to discovering the real return on investment for companies who adopt XBRL. The movement to interactive data has the potential to transform internal business reporting as well as external filings.