Moving Toward Bar Codes for Finance

Cost Savings

Observers say that XBRL and related financial languages ultimately can cut data-related costs between 30 per cent and 70 per cent. Some reasons for the cost savings are because the technology:  Eliminates the need to re-key data for analytical and other purposes. Cuts time wasted meeting the demands of regulators, lenders and others needing the information. Produces fewer errors when indexing and locating information. Allows faster and cheaper automated collection of data from different sources. Facilitates the production of documents such as internal management reports, financial statements for publication, tax returns and regulatory filings. Makes it easier to access the data on desktop PCs, PDAs and cell phones.    Getting Started: Review your company's business processes to determine which are best suited for adoption of XBRL. This review may reveal redundant operations, systems that aren't linked and other inefficiencies that could benefit from the change.

Important Dates in XBRL History     2005: The SEC began allowing companies to voluntarily submit financial information in XBRL interactive data format.    April 28, 2008: The SEC issued upgraded XBRL data tags (or taxonomies) that were developed based on Generally Accepted Accounting Principles after reviewing hundreds of actual SEC filings.     May 14, 2008: The SEC voted formally to propose requiring all public U.S. companies to provide financial information using XBRL within three years. The rules proposed would require companies to provide this information according to a phase-in schedule. After a 60-day comment period, the SEC will make a decision on adopting the rules in their current form or with changes.     August 1, 2008: The last day to submit comments on the proposed rules to the SEC.     December 15, 2008: The largest public firms (accelerated filers) with fiscal reporting periods ending on or after this date will begin having to submit XBRL reports to the SEC under the proposed rules. This involves approximately 500 companies.

"Technology is always evolving, and companies ... not just search engines ... can't be afraid to take advantage of change." --Eric Schmidt, Google Chairman and CEO

The plan would eventually encompass businesses that use International Financial Reporting Standards, which are required, or used as an option, by organizations in many parts of the world.
Worldwide, the momentum toward XBRL is building. The purpose is to tag data in the financial information supply chain with a common language so that it can be easily accessed, downloaded into spreadsheets and reorganized in databases. That way customized reports and comparisons can be generated by regulators, tax authorities, accountants, banks and other lenders, investors, analysts and journalists.

With XBRL GL, a general ledger taxonomy, the same process can be used by your company's managers, financial employees, and your accounting firm, facilitating the exchange of data flowing in and out of your business.

Despite the advantages and the looming SEC deadlines, a new survey done by Compliance Week found that many publicly traded companies are barely aware of XBRL. Nearly 80 percent of respondents said that no one on their staff is well versed in the financial reporting technology and 44 percent said they are just beginning to research XBRL.

How it Works

At the core of XBRL are computer tags that function like the bar codes used by retailers and shippers. The interactive data tags define specific financial terms, such as net income or cash, in a common way. They enclose data and identify its meaning, context and structure. Here are some examples of common tags:

100,000 50,000 850,000 25.30>

Those standardized descriptions are applied at the outset so the context isn't changed or lost as the data flows between applications and is used in other contexts. In addition, the tags can link the initial data to other concepts such as currency, financial periods, business rules, regulations, and calculations.

Among the benefits for public and private companies:

• One-Time Entry - The information needs to be entered only once, saving time and reducing the potential for data entry errors. The same information can be used by different software packages to produce printed financial statements, internal company reports, an HTML document for a Web site, and, if required, filings with the SEC.
• Create One, Publish Many - Typically, financial analysis involves entering data on a spreadsheet or purchasing data from secondary and potentially unreliable sources. With XBRL, the information is real-time and in a format that doesn't require copying it into any other format. This cuts costs, boosts the accuracy of analysis and financial reporting, and enhances internal corporate efficiency.

The technology can help improve your company's ability to make strategic decisions. Business success involves measurement, analysis and communication of information that is generally scattered throughout an organization and outside sources. XBRL GL, the general ledger taxonomy, can help your staff sidestep the inefficiencies of disparate, non-integrated and outsourced accounting and financial systems.

XBRL GL tags accounting and after-the-fact operation information in your company's accounts, journal entries or historical transactions. With those tags, your staff can unify accounting details across different systems and your accountants can more easily access this standardized data.

Because XBRL GL starts with generic representations of such business documents as orders, invoices, and checks, it provides one framework for that data as it flows from system to system, creating a seamless audit trail for financial, tax, statistical and management reporting.

Even if you aren't among the businesses that are facing mandatory use of XBRL or planning a prospectus for an initial public offering, consult with your accounting firm to determine whether your company could benefit from proactively adopting this new technology.

(If you are interested in learning more, you can check out the U.S. XBRL Web site by clicking here or the AICPA's Resource Guide by clicking here.