XBRL: A New Tool For Electronic Financial Reporting

Abstract

eXtensible Business Reporting Language (XBRL) is a computer markup language for the purpose of corporate business reporting. XBRL is based on XML, which is the universal format for structuring documents and data on the web. In an XBRL compliant report, each financial and non-financial item is enclosed by a pair of XBRL tags, which describes the meaning of the item. These tags provide semantic information to the reports and make the financial reports not only human readable but also computer comprehensible. Leveraging the power of computers and the Internet, XBRL provides the financial community a standard to electronically and automatically prepare, publish, exchange, and extract financial statements. It is expected that XBRL will have widespread effects on financial reporting. First, preparing financial reports will be easier with XBRL. Financial information needs to be keyed into the computer only once. XBRL-ready accounting software can generate financial reports in different formats, such as for SEC filing, loan application, or corporate web reporting. It greatly reduces the manual input burden and entry errors. Second, the publication and exchange of financial reports can be facilitated. Because XBRL-compliant reports use standardized tags, the reports can be conveniently exchanged between different software and computers, independent of the software formats and computer platforms. The financial statement users can view an XBRL report as easily as browse a web page. Third, since XBRL-compliant reports are computer comprehensible, the financial information contained in these reports can be reliably and automatically extracted through XBRL-enabled applications for financial analyses. The cost of financial analyses can be largely reduced. Decision makers, investors, creditors and other financial statement users can be alleviated from the burden of manually analyzing the financial reports. Small- and mid-sized companies will have an equal opportunity to compete with industrial giants for the capital market. XBRL is undergoing fast development. Since its inception in 1998, over 170 companies and organizations including Big 4 accounting firms, FDIC, Microsoft, and SAP have joined the XBRL consortium. XBRL will become a key standard for electronic financial reporting in the near future.