XBRL, the XML-based business reporting language, is poised for widespread adoption in 2003 according to Paul Penler, principal at Ernst &Young and vice chair of the U.S. XBRL Consortium. The standard, which covers reporting of financial statements, tax return, regulatory reports and other reports with aggregated financial information will help financial information flow more efficiently and effectively through the market, saving time and money, says Penler.
Penler explains that XBRL has been in the pioneering stage over this past year with about a dozen organizations already using the standard. But the coming year will see greater adoption and implementation throughout the industry as financial firms XBRL-enable their delivery and use of financial information and vendors of financial reporting software do so as well.
"Our goal is by the end of 2003 to get at least 75 percent coverage within the top 15 to 20 financial reporting packages," he says. He adds that several vendors of Enterprise Resource Planning and General Ledger software such as SAP have already XBRL-enabled their products, but many more still have work to do. Larger participants such as Deutsche Bank, Bank of America and the FDIC are already piloting their own XBRL-enabled technology.
He adds that the FDIC has estimated saving 20 to 30 percent by moving to XBRL-based reporting. Deutsche Bank has also estimated saving 100,000 man-hours per year through XBRL-enablement. "There is the same benefit for internal use by stock exchanges, large banks, market analysts, regulators and data intermediaries who all process tens of thousands of financial statements for their internal processes."
In addition to cost savings and efficiencies, Penler says that new guidelines from regulators such as the Securities and Exchange Commission and the Accounting Oversight Board are also accelerating the adoption of XBRL. These regulators want to see the amount of time that companies take to file reports such as 10Ks and 10Qs reduced and they are also encouraging companies to have more financial information on their Web sites. Utilizing XBRL would enable companies to accomplish this faster and easier by standardizing the format in which reports are compiled and distributed via the Web.
But ultimately, in order for the widespread adoption to occur, Penler says that users--those that prepare the financial information and those that consumer it--have to understand the value and benefits of using XBRL. To accomplish this, Penler and the XBRL Consortium are working to release implementation guidelines or best practices early next year. These guidelines would be made available to preparers of financial statements describing how to move to XBRL, covering things like how to select the proper software and the processes that need to be changed.
Nasdaq has already jumped on the XBRL bandwagon with its recent pilot program for XBRL reporting for users to access XBRL information from over 20 listed firms through its Web site. (See "XBRL Hits the Street to Streamline Business Reporting," WS&T November 2002)