• What is XBRL?

• Who owns and manages XBRL?

• Why should an attorney care about this XML standard?

• Don't companies file with the SEC using other formats such as ASCII, HTML, XML, and PDF? What is the difference?

• What are taxonomies?

• What are the unique benefits of publishing financial and business reporting information in XBRL?

• What is the relationship between accounting standards and XBRL?

• Tell us more about the SEC's adoption of XBRL.

• What does a company need (in the way of software, training, etc.) to implement XBRL?

• Can companies file XBRL documents themselves, or do they need to use a third party service?

• Does using XBRL implicate any new or different confidentiality concerns?

• Does using XBRL implicate any new or different liability concerns?

• How stable is XBRL?

• Who else is leading the way in using XBRL?

What is XBRL?

XBRL, or eXtensible Business Reporting Language, is a royalty-free, XML-based information format for the electronic communication of financial and business data. As a technology standard, it provides a consistent method for the preparation, exchange, and analysis of business information with cost savings, greater efficiency, and improved accuracy and reliability.

Who owns and manages XBRL?

XBRL represents an open standard, developed and maintained by XBRL International, which is a not-for-profit consortium of 300 companies and agencies worldwide working together to build the XBRL specification and promote and support its adoption. Consortium members meet periodically in international conferences, conduct committee work regularly via conference calls, and communicate in e-mail and phone calls throughout the week.

Why should an attorney care about this XML standard?

Because XBRL is the only XML-based standard focusing on financial and business reporting, it is positioned to become the standard way of recording, storing, and transmitting financial and business reporting data. For example, on February 3, 2005, the Securities and Exchange Commission announced a final rule to establish a voluntary program for reporting financial information using XBRL. (In September 2004, the SEC issued a Concept Release to solicit comment regarding the use of tagged data like in XBRL.) See “ Tell us more about the SEC's adoption of XBRL.” Financial regulators, tax authorities, stock exchanges, and market analysts worldwide are adopting the standard, so companies should anticipate XBRL representing a primary way of reporting externally.

Don't companies file with the SEC using other formats such as ASCII, HTML, XML, and PDF? What is the difference?

Yes, the SEC does receive filings in ASCII, HTML, XML, and PDF. XBRL-related documents are supplemental submissions and do not replace the required HTML or ASCII version of the financial information they contain.

ASCII (American Standard Code for Information Interchange) is one of the first electronic formats that facilitated information transfer. In the 1990's, HTML (Hypertext Markup Language) became a widely accepted standard for tagging and formatting data and text to present on the Internet. Today, XML (eXtensible Mark-up Language) provides an open-source standard for the automatic processing of tagged data using definable and shareable schemas. PDF (Portable Document Format) is a proprietary format for electronic document exchange that preserves document integrity so files can be viewed and printed.

As an XML-based standard, XBRL defines the schema (through the use of taxonomies developed on the XBRL specification) for formatting financial and business reporting data. See “ What are Taxonomies?” For companies and consumers of the information, XBRL has three distinct advantages:

• It provides an external standard of definitions so companies need not recreate definitions, interpretations, or mapping;
• It maintains data in an electronic form that does not require re-keying; and
• It provides a data format that supports more efficient analysis.

What are taxonomies?

Think of taxonomies as catalogs. For example, if you were to need an auto accessory, you would look up the part in a catalog that specifies not only which part is for which car models, but also provides the unique “barcode” so that a dealer can locate the part in inventory. Taxonomies are the catalogs for financial and business reporting. There is even XBRL to support general ledgers, with taxonomy for the column headings of a ledger, and it too is extensible.

Sometimes used interchangeably with “schemas,” taxonomies provide standard sets of definitions. In terms of the XBRL specification, taxonomies contain definitions for how items should appear in a graphical user interface (UI) such as in a tree view, the element names, the user-friendly labels, and how things calculate (such as line items adding up).

What are the unique benefits of publishing financial and business reporting information in XBRL?

XBRL supports the automatic exchange and reliable extraction of financial information by software and across the Internet. For example, companies that need to report in multiple languages or capital markets interested in communicating with foreign investors can publish simply with XBRL. For every accounting concept such as Cash and Cash Equivalents, XBRL also includes a presentation element so that the accounting item can be shown in various languages, reducing the cost of publishing.

XBRL can enable investors to collect data more quickly and apply advanced analytics of financial reports more easily. Information that is tagged can be automatically searched, retrieved, and analyzed without common manual data collection and analysis errors.

At the general ledger level, XBRL would give auditors a tool for enhanced financial analysis, risk assessments, and additional internal control testing. For example, if a control system provides real-time testing for employee fraud, a set of queries with parameters set by the controller would run and return invoices or payments in amounts that might be suspect. These amounts might be just below the authorization approval limit or numerous purchase orders created to bypass authorization limits, with similar descriptions and account coding. Audit and review flags can be set where a situation would trigger an automatic approval routing or manager review.

What is the relationship between accounting standards and XBRL?

XBRL is not an accounting standard; it simply represents a format for transmitting information. Through the creation and application of taxonomies it reflects data reported under different accounting standards.

XBRL International partners with accounting standards bodies, as well as with cross-industry representatives, to develop accounting standards-based taxonomies. For example, the IASB is developing a taxonomy that reflects International Financial Reporting Standards (IFRS). National XBRL jurisdictions will extend this taxonomy to reflect their particular local implementation of IFRS. Taxonomies will thus be available to enable those reporting under IFRS in different countries to use XBRL, enhancing efficiency and comparability as adoption of IFRS expands around the world.

Tell us more about the SEC's adoption of XBRL.

In February 2005, the SEC announced a final rule to establish a voluntary program for reporting financial information using XBRL. The voluntary program is effective March 16, 2005.

In September 2004, the SEC issued a Concept Release to solicit comment regarding the use of tagged data like in XBRL. Comments received electronically are available here .

The Final Rule outlines voluntary program content and format:

Mandatory Content consists of a complete set of information for all periods presented in the corresponding official EDGAR filing from one or more of the following categories (as filed in the corresponding official EDGAR filing):

• The complete set of financial statements (the only exceptions are that notes to the financial statements and schedules related to the financial statements may be omitted unless the volunteer is a registered management investment company, in which case it must include Schedule I – Investments in Securities of Unaffiliated Issuers );
• Earnings information set forth in Form 6-K or Items 2.02 or 8.01 of Form 8-K (whether contained in the body of the Form 8-K or Form 6-K or in an exhibit, and whether filed or furnished); or
• Financial highlights or condensed financial information (if the volunteer is a registered management investment company).

Optional Content can consist only of a complete set of information that is:

• For all periods presented in the corresponding official EDGAR filing;
• Related to financial information in the corresponding official EDGAR filing that is simultaneously submitted as Mandatory Content; and
• From one or more of the following categories (as filed in the corresponding official EDGAR filing):
  • audit opinions;
  • interim review reports;
  • reports of management on the financial statements;
  • certifications; or
  • Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), Management's Discussion and Analysis or Plan of Operation, Operating and Financial Review and Prospects, or Management's Discussion of Fund Performance (“MDFP”).

What does a company need (in the way of software, training, etc.) to implement XBRL?

SEC registrants that want to enter the voluntary program need to learn data-tagging concepts and related software tools, as well as keep current with taxonomy changes and software advances. Tools are coming into the market that support tagging of Excel and Word documents. Other products allow tagging or mapping to XBRL from their general ledger to reporting applications.

Depending on what your company would like to do, you can start by simply tagging the financial statements in XBRL and providing these as supplemental filings to the SEC, or you can evaluate how to transform the flow of data in the business reporting supply chain. Organizations such as Finance Executive International (FEI) are collaborating with XBRL-US and Microsoft Canada to provide awareness primers on XBRL.

XBRL International also is working on developing training materials.

Can companies file XBRL documents themselves, or do they need to use a third party service?

If companies regularly file directly with the SEC, they can submit XBRL documents themselves. The SEC has revised the EDGAR filing manual to define the specific requirements. If you use a third party publishing service, work with them to understand the impact of producing taxonomy extensions (schema file – XSD) and XBRL documents (XML) files.

Does using XBRL implicate any new or different confidentiality concerns?

Publishing external reporting in XBRL should not implicate new or different confidentiality concerns. Companies publishing their financials in XBRL will likely extend the standard taxonomies to represent specific reporting concepts to their business. A company's XBRL taxonomy extension provides an XBRL “tag” for disclosures that are included in the company's official SEC EDGAR filing (for example). The tags do not provide any additional information beyond that included in the filing, so they do not create any confidentiality concerns.

Companies may create their own private extensions to the public taxonomies for their own purposes. These extensions are not for public use and therefore do not create confidentiality concerns.

Does using XBRL implicate any new or different liability concerns?

XBRL documents are furnished ; they are not “deemed incorporated by reference,” but they are subject to all other liability and anti-fraud provisions of the Exchange Act and Investment Company Act. In its adopting release discussing voluntary XBRL filing, the SEC states:

Rule 402(b) provides additional relief from liability under the Securities Act, Exchange Act, Public Utility Holding Company Act, Trust Indenture Act and Investment Company Act for information in a volunteer's XBRL-Related Documents that complies with the content and format requirements of Rule 401, to the extent that the information in the corresponding portion of the official EDGAR filing was not materially false or misleading.

Rule 402(b) also provides additional relief from liability to volunteers that fail to comply with the content and format requirements of Rule 401 if:

• The volunteer has made a good faith and reasonable attempt to comply with the content and format requirements,
• As soon as reasonably practicable after the volunteer becomes aware that the information in the XBRL-Related Documents does not comply with the content and format requirements, the volunteer amends the XBRL-Related Documents to correct the problem, and
• The information in the corresponding official EDGAR filing was not materially false or misleading.

How stable is XBRL?

XBRL as an XML-based standard is stable. Consider the number of worldwide projects where it has been adopted by stock exchanges, that regulatory bodies have mandated filing in XBRL, and that agencies have implemented XBRL to make their systems more efficient and cost effective. (XBRL International's Solution Showcase offers more information.) For example, in the U.S. banking industry, the Federal Deposit Insurance Corporation is leading the way in modernization by producing its monthly Call Report system with XBRL.

XBRL International also has produced technical guidance for those who create or extend taxonomies and for software vendors creating tagging or authoring tools. These are only possible with a stabilized specification for XBRL.

Who else is leading the way in using XBRL?