XBRL continues its march to the forefront of reporting.(Extensible Business Reporting Language)

As technology continues to pervade company operations, the Securities and Exchange Commission is beginning to push its decade-old filing system into the 21st Century as quickly as possible. The speed of business has increased rapidly and the SEC is taking the first steps to enhance financial reporting and shorten filing time. XBRL, which stands for eXstensible Business Reporting Language, is an interactive form of financial reporting that stands to eventually become the standard by which information is filed with the SEC.

It is a language that uses items, called taxonomies, to provide an analyst looking at financial information with not merely a number or a piece of data, but the definition of that reported element. These taxonomies can then be analyzed and compared with information in other taxonomies. Its adoption is currently being advocated by XBRL International, which is a not-for-profit collection of about 450 companies and organizations working to implement the language across all industries. According to the organization's website, XBRL provides each item on a financial filing with a tag that is computer readable. This allows for a computer to identify individual parts of a company's data and, consequently, to analyze it, store it or share it with other companies.

XBRL also stands to eliminate errors and significantly decrease the number of companies forced to restate their financial information. SEC Chairman Christopher Cox said that, in November 2006, over half of public company restatements were the result of misapplying basic accounting rules and only 5% due to intentional misstatement or fraud. "There is an enormous opportunity for automation to help corporate finance staffs and auditors avoid simply missing things--and to avoid the kinds of unintentional mistakes that can have big consequences," Cox added.

By eventually making the switch to XBRL, the SEC would be joining the ranks of the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve and the Comptroller of the Currency, all of which currently require banks to file using interactive data. Since 2005, more than 8,000 banks have been using XBRL to submit quarterly Call Reports to regulators. Data from the participating institutions is also placed online for public use and analysis. The bank requirement began with a very successful test run in October 2005, which illustrated the benefits that XBRL can provide to users by improving transparency and reducing the burden of financial analysis.

In a speech given at the 14th International XBRL Conference in December 2006, Cox also noted that XBRL has the potential not only to reduce errors but also to detect them after they occur, noting that software has been created that continually identifies flagged transactions and brings them to the attention of internal and external auditors. "It's not hard to imagine that in the very near future, companies of all kinds will be able to rely on interactive data to flag anomalous data and fix accounting errors in real time," Cox added.

As the SEC's aging EDGAR system (Electronic Data Gathering, Analysis and Retrieval) continued to gather dust, ...