Mandatory Use of XBRL May Bring Benefits to BI Reporting
Time to get compliant: industry watchers see XBRL adoption as a fait accompli
- By Stephen Swoyer
- June 4, 2008
The U.S. Securities and Exchange Commission (SEC) has thrown a monkey wrench of sorts into your finely-tuned reporting infrastructure.
Earlier this month, the SEC proposed that U.S. firms use the eXtensible Business Reporting Language (XBRL) to format their financial disclosure statements. XBRL is an XML-based standard that provides a common means to define and exchange business and financial performance data. It's the scion of the not-for-profit XBRL International Inc., a consortium of approximately 450 organizations that's working to develop taxonomies that define the information exchange requirements for common domains. Proponents champion XBRL as a flexible solution that replaces legacy financial data collection methods, including paper-based and proprietary reporting systems.
The SEC endorses a phased approach to XBRL adoption, starting first -- in 2009 -- with companies that have market capitalizations in excess of $5 billion; smaller firms would have until 2011 to get XBRL compliant. It isn't a done deal -- the SEC plans to render its final decision in 60 days, after it has solicited input from stakeholders or other interested parties -- but U.S. regulatory bodies have been greasing the skids for XBRL adoption for some time. The SEC already sponsored a pilot program whereby organizations could opt to use XBRL to report their financial information; elsewhere, the Federal Deposit Insurance Corp. (FDIC) has long mandated the use of a form of XBRL reporting (involving XBRL taxonomies) for the quarterly financial statements, or Call Reports, it receives from more than 8,000 U.S. banks.
The upshot, says Gartner, is that U.S. firms of all sizes need to start planning now for XBRL. The good news is that most BI reporting tools already support XBRL, to some degree. Players such as IBM Corp., Information Builders Inc. (IBI), Oracle Corp., Microsoft Corp., and SAP, among others, all support XBRL. Both IBI and Oracle, in fact, recently announced expanded XBRL support. IBI's XBRL adapter for WebFOCUS (shipping for over a year) supports the latest revision of the (U.S.) XBRL taxonomies, while Oracle announced expanded XBRL support (via a new XBRL Manager component) in its upcoming Enterprise Performance Management System release.
Enterprise adoption has long been trending upward. Vendor reps say they're seeing more interest in XBRL -- most of it in just the last 18 months. "In my opinion, [XBRL is] becoming more and more common in the U.S. over the past year. It really started out in Europe and in Japan. They were the leaders," said Efram Litwin, who heads up IBI's WebFOCUS reporting product, in an interview late last year. "Now with the SEC buying into XBRL, it's becoming more and more of a requirement for companies. Right now, [companies] are still voluntarily exporting their information, but the SEC is really pushing this."
Even so, Gartner predicts, companies might have to supplement their existing business intelligence (BI) reporting and business performance management (BPM) tools with XBRL-specific tooling. "[I]n the short term, you may need to augment your CPM applications with XBRL tagging tools. Investigate vendors like Snappy Reports, Rivet Software and UBmatrix," counsels analyst Neil Chandler in a Gartner research note.
As is frequently the case, organizations can transform a mandate for change from without into an opportunity to revisit -- and optimize -- their financial reporting processes, Chandler suggests. "[Organizations should] closely monitor how XBRL is adopted by regulatory bodies around the world, such as the SEC, and plan [their] adoption[s] accordingly," he writes. "Consider how [they] can leverage XBRL to improve [their] internal financial and management reporting," Chandler concludes. "Visionary organizations will deliver significantly improved financial reporting by being early adopters of XBRL."
Although XBRL itself might seem like an accounting- or finance-only play, proponents say subsets of the standard -- such as the XBRL General Ledger (GL) -- have a much greater potential applicability, at least for enterprise users.
"XBRL GL is in many ways far more relevant to [BI professionals] than traditional XBRL -- which focuses on end reports -- as it is a standardized, generic, and holistic way to represent the business facts that flow from transactions and business events," said Eric Cohen, XBRL Global Technical Leader with PricewaterhouseCoopers (PwC), in an interview last year.
Because XBRL GL starts with generic representations of business documents (such as orders, invoices, and checks), it provides a single framework for representing data as it flows from system to system.
"The goal [is to have] a seamless audit trail for financial reporting, tax reporting, statutory and statistical reporting, and management reporting," Cohen said. "It is not just about accounting and tax, but also about operational and business information."
Few XBRL advocates position the technology as a replacement for data warehouse-driven reporting, either. Cohen, for example, argued that XBRL GL can complement or facilitate to an even greater degree the use of DW-driven reporting schemes. "[It can standardize] the flow of data into data warehouses, and [standardize] the flow of data from the data warehouse," he said.