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?