The tipping point for XBRL

This could be a milestone in illustrating the benefits of using XBRL for companies filing financial data.

Last week, Microsoft submitted a Form 8-K filing to the US Securities and Exchange Commission (SEC) comprising financial data for shareholders, using XBRL.

Why is this significant?

First, it needs a bit of understanding as to what XBRL is. Simple explanation: it’s an emerging XML-based standard to define and exchange business and financial performance information. For more, read the technical description on Wikipedia.

In lay terms, it means this:

XBRL enables producers and consumers of financial data to switch resources away from costly manual processes, typically involving time-consuming comparison, assembly and re-entry of data.  They are able to concentrate effort on analysis, aided by software which can validate and manipulate XBRL information.  As just one example, searches for particular information which might in the past have taken hours can be completed with XBRL in a fraction of a second.

Those who stand to benefit include all who collect business data, including governments, regulators, economic agencies, stock exchanges, financial information companies and the like, and those who produce or use it, including accountants, auditors, company managers, financial analysts, investors and creditors.  Among those who can take advantage of XBRL include accountancy software vendors, the financial services industry, investor relations companies and the information technology industry.

Along with a few dozen other listed companies in the US, Microsoft has been participating in an experiment with the SEC since 2005 to file data using XBRL.

With this filing last week, though, Microsoft claims it’s the first company to submit data using a new XBRL taxonomy released last Wednesday that allows the description of data according to US Generally Accepted Accounting Principles (GAAP).

If that’s true, this could well open the doors wide for more companies to use XBRL for their SEC filings. Once you see how one company has successfully done it, you should be able to follow their lead.

And it might help kick-start more and general XBRL usage in other countries, eg, across Europe. At least, more awareness:

[…] In Europe, the United Kingdom’s tax agency, HM Revenue and Customs, will require businesses filing tax data in XBRL by 2010. Other XBRL projects are underway in Belgium, Denmark, Germany, Italy, the Netherlands, and Spain.

In the case of the UK, though, the government has some major work to do to build confidence in the taxman’s ability to look after people’s data.

Not everyone in listed companies will see wider XBRL usage as a good thing, as an article in CFO.com a year ago suggests:

[…] By using the XBRL programming language, which eliminates the need to rekey data into computer models and analysis tools, investors and analysts will be armed with real-time, easily digestible information about companies big and small. What’s more, the transition to XBRL will likely lead to more knowledgeable and inquisitive shareholders and analysts who will pepper earnings calls with hard-hitting questions […]

Better get used to more business transparency!

Might the development of taxonomies directly linked to financial reporting standards, and Microsoft’s filing, be regarded as XBRL’s tipping point?

Neville Hobson

Social Strategist, Communicator, Writer, and Podcaster with a curiosity for tech and how people use it. Believer in an Internet for everyone. Early adopter (and leaver) and experimenter with social media. Occasional test pilot of shiny new objects. Avid tea drinker.

  1. David Phillips

    Hi Neville
    Yes this will affect the financial PR sector and corporate affairs departments. The combination of more, more easily shared (and faster) financial transparency will take some getting used to and will arm investors ‘on the go’. For the investor relations people (those whom Colin Farrington finds do not need to be involved in social media) this will be a bit of a shock. The online commentators will be there first and delivering their point of view to City folk using RSS.

    In the meantime, the Financial PR people will find they are constrained. XBRL has little to offer to add statements, notes and added briefing. because they did not support the now defunct PR mark up language (XPRL) they are properly shafted by the accountants, a professional profession by comparison.

    As a founder of XPRL, I am disappointedly and irritated by the lack of vision and the endless ostrich like appearance of PR when anything digital crops up.

    Perhaps there is a need for some PR leaders who do have the vision to understand the opportunity offered by the digital space; position the industry where it can engage and participate and who have the strength to make the institutions take responsibility for forward thinking.

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