Meet the XBRL mandate with an integrated solution
Delaney Turner 270003RQ8K Delaney.Turner@ca.ibm.com | | Tags:  vision11 ibmsoftware business_analytics
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Editor's note: The following article outlines the SEC mandate for XBRL and explores the ways Finance officers can meet it with Clarity FSR from Clarity Systems, an IBM company. Finance professionals can also learn more about the IBM solutions for the Office of Finance at Vision 2011, The Premier Event for Financial Management, happening May 15-18 in Dallas.
Everyone who works in corporate finance has probably at least heard of XBRL. And if you’re an IT person who supports your company’s finance department, you’ve definitely heard of XBRL.
XBRL is the abbreviation for “eXtensible Business Reporting Language.” It’s the name given to both a method of formatting financial statements and a worldwide initiative aimed at making corporate financial information more uniform and more transparent. XBRL is here, and here to stay. And in this article, we’ll introduce you to a few of the basics.
The serious game of “tag”
XBRL involves the labeling or “tagging” of information in a financial report or regulatory filing with metadata that precisely defines what each term means. The definition is consistent from one company’s documents to another’s because the tags are referenced to an agreed-upon taxonomy (essentially, a dictionary), which gives an exact definition for each term.
Here’s the reason we need XBRL. If you’re in the market to buy, for example, a new car, you’ve got plenty of ways to research your choices and make “apples to apples” comparisons. But if you’re an investor trying to research publically held companies, the apples-to-apples part is a lot more difficult. Figures like earnings per share or net income are easy enough to find and compare. But the pages and pages of numbers that appear in an annual report, for example, can have slightly different—or significantly different—meanings from one company to another. And important details can be hiding in plain sight in the footnotes. XBRL is intended to change all that.
XBRL is in the process of being adopted by regulatory authorities around the world. In the U.S., XBRL reporting has been mandated by the U.S. Securities and Exchange Commission (SEC) and is being phased in over several years, with the largest companies already submitting their filings in XBRL-tagged format. One of the key individuals who began the drive for XBRL several years ago is the former Chairman of the SEC, Christopher Cox. During his tenure as Chairman, Cox stated that his goal for XBRL reporting was nothing less than the “democratization of financial information and analysis, and the empowerment of individual investors.”1 (Mr. Cox will be the featured keynote speaker at the Vision 2011 Conference in Dallas on May 16, where he will give an address titled Technological Modernization in the Era of Transparency.)
The benefits of XBRL, however, are not just for investors and regulators. For the finance organizations that use it, XBRL “dramatically expedites the automated processing, collection, and analysis of business information.”2
Let’s get granular
XBRL tags are not altogether different from the HTML tags you can see when you open a Web browser and go to the View menu and click Source. There, you may see a <b> that indicates boldface text, or a <p> that indicates a new paragraph. In XBRL, the tags all refer to the taxonomy, which is consistent for all companies filing in XBRL, so you can be confident that a given number means the same thing for Company A as it does for Company B.
In the early phases of XBRL reporting, “block tagging” is sufficient. That’s where a discrete block of text, such as a footnote, receives only one tag. In the latter phases, “detail tagging” is required for virtually every number in the report. In the final phase of detail tagging (called “Level IV”), several thousand tags may be applied to documents in a single filing period.
It’s a complicated process, but it’s one that must be done at every publicly held company, and must be done accurately.
Outsource, “bolt-on” or integrate?
How can finance and IT work together to meet the XBRL mandate in the most efficient way and with the lowest risk of error? Finance organizations have been taking three different approaches, each with its own advantages and disadvantages.
For your short list of XBRL solutions
Most industry analysts prefer the integrated approach. And we’d like to recommend one integrated solution for your short list of XBRL alternatives. It’s CLARITY FSR from Clarity Systems, an IBM company and one of the most recent additions to the IBM Business Analytics family.
CLARITY FSR enables you to tag documents once and then automatically re-use the tags in future reporting periods, thanks to the solution’s unique Tag OnceTM functionality. CLARITY FSR also makes collaboration and workflow management easier, so you can keep track of who is responsible for various part of a document and keep the taxonomy current with minimal effort. In addition, CLARITY FSR includes features that help you audit changes to your documents, so you know who changed what and when. It also enable you to maintain consistency when a document is produced in different output formats, such as Microsoft® Word, PDF or Adobe InDesign.
For further information…
We could go on, but we promised to give you just the basics. So if you’d like to learn more about XBRL, you can get an excellent overview by downloading a free PDF of the book, SEC XBRL for Dummies from our website. (Look for the familiar yellow cover on the right-hand side of the web page.) And if you’re deeply involved in your own company’s XBRL initiative, you won’t want to miss the Vision 2011 Conference, May 15-18 in Dallas. It’s the best place to see the CLARITY FSR™ solution in action and learn in depth and in detail about a full range of topics in financial management.
People like former SEC Chairman Christopher Cox have high hopes for XBRL’s capacity to make financial information easier to find and easier to use for everyone. And with the right approach, it can be a boon, and not a burden to your finance organization.