XBRL (eXtensible Business Reporting Language) - Term Paper Example

XBRL (Extensible Business Reporting Language) Introduction Extensible Business Reporting Language refers to a freely available XML-based specification, which employs the use of accepted standards and practices of financial reporting in the exchange of financial statements. This exchange occurs across all technologies as well as software, including the internet. As an XML-based framework, XBRL provides a method based on standards that can be used by the financial community in the preparation of financial statements in various formats. Extensible Business Reporting Language does not aim at establishing new standards in accounting. Rather, the main aim encompasses the enhancement of the already existing standards through the use of XML (digital language in business). XBRL can also be regarded as a computer programming add-on, which tags each segment that makes up the computer business information using an identification marker or code (Eccles & Krzus 67-90). Origins The origins of this specification can be traced back to calls on “a quantum leap over existing technologies” by reporting language SEC chairman, Christopher Cox, conceived by Charlie Hoffman, a rebel accountant. As a Certified Public Accountant with a passion for technology, Hoffman read a book in 1997 about XML. He noted that other industries widely applied the use of this technology in the conduct of their business. As such, he decided to discover how this technology could be implemented for financial statements. In April, the same year, he began to develop prototypes of financial statements, as well as audit schedules with the use of XML (Eccles & Krzus 67-90). While working with Tacoma in Washington, Hoffman had received an assignment from a client to transfer information on product pricing automatically from its accounting system to the internet. Consequently, he realized that XML could be adapted to perform the job. He got involved in the teaching of software experts on how they could read the balance sheet; together with these experts, they developed an XBRL version working within three months (Eccles & Krzus 67-90). Afterwards, he brought together many experts from the world of financial reporting. The key figures working alongside Hoffman included Mike Schnitzer of EDGAR online and Mike Willis of PricewaterhouseCoopers. History After the realization about the potential of using XML in financial reporting, Hoffman took the initiative to inform Wayne Harding, the AICPA High Tech Task Force Chairman. He asked Charlie to inform the task force about the potential of XML in September of 1998. The High Tech Task Force on AICPA came up with a product description, which proposed the creation of a set of financial statements through the use of XML. Karen Waller, a Certified Public Accountant and an AICPA member of staff helped in the perfection of the product description. On the 2nd October, 1998 the results of the High Tech Task Force were presented to the committee of AICPA in charge of Committee organization by Wayne Harding (Eccles & Krzus 67-90). Following the presentation, the AICPA declared its determination to fund the project, which would see the use of XML to create a set of financial statements. The prototype developed by Mark Jewett and Charlie Hoffman came to completion on December 31, 1998. Jeffrey Ricker of XML Solutions contributed significantly to the initial prototype. 50% of the development cost incurred in this initial prototype came from Knight, Vale and Gregory CPA firm. On the 5th of January 1999, this initial prototype was presented to the AICPA (Eccles & Krzus 67-90). Charlie Hoffman and Wayne Harding urged the AICPA to adopt it since XML proved essential to the profession of accounting. The AICPA requested the preparation of a business plan that could look into the base in regard to XML, particularly financial statements based on XML. This saw the code naming of the project as XFRML and the completion of the business plan took place on the 15th of June 1999. Those behind the creation of this plan included Charles Hoffman, (Independent CPA) and Louis Matherne, the director of I.T. in AICPA. Others included Wayne Harding (Great Plains) as well as Eric Cohen of Cohen Computer Consulting. In August of 1999, twelve companies joined AICPA as members of XFRML Steering Committee. The initial steering committee comprised of Arthur Andersen LLP, the AICPA, e-content company, Deloitte and Touche LLP, FreeEDGAR.com, Inc, Ernst & Young, Great Plains, FRx Software Corporation, PricewaterhouseCoopers LLP, Microsoft Corporation, and The Woodburn Group. The AICPA began the implementation of the business plan on August 30, 1999 when it announced the creation of an XML financial reporting specification. XFRML became XBRL steering committee on April 6, 2000; on July 31, 2000, the Extensive Business Reporting Language committee announced that there would be the release of this system for financial statements (Eccles & Krzus 67-90). Over the years, membership to the XBRL has increased significantly coupled with changes in the system. In 2001, XBRL announced the modification of its taxonomy; this would enhance the W3C recommendations and ensure the consistency of XML efforts with common tools used in software. In June 2002, the assets of XBRL solutions were purchased by UBmatrix. From 2003 onwards, numerous changes have taken place to enhance the use of XBRL by companies all over the world (Eccles & Krzus 67-90). The Present The use of Extensible Business Reporting Language in regulatory reporting has increased across the globe. Companies have employed this specification to ensure that they make maximize use of new technology in financial reporting. In the modern world, the use of data in terms of XBRL has risen significantly; this has seen the development of tools used to educate software companies, especially professionals in the field of information technology, and developers of information products (Eccles & Krzus 67-90). XBRL has become a standard part of the financial process of public companies as most of them use it in their financial reporting processes. The coding of the system contained in the Navision Financials 2.50 enables customers to communicate effectively. Extensive Business Reporting language has brought significant benefits, which include changes in technology such as technological independence and efficiency in the preparation of financial statements by organizations. In addition, organizations currently use this system as it is reliable in the extraction of financial information (Eccles & Krzus 67-90). Since information is only entered once, it can be rendered in various forms, which may include an HTML document for the website of the company as well as financial statements that can be printed. Other specialized formats used in this system include a raw XML file or an EDGAR document used in filing with the SEC. Currently, the use of embedded solutions as well as integrated software makes an attempt to bring this system into the process of account production. This makes the system to add workflow and control to what may be viewed as an area of high risks. As a result, the approach of Extensible Business Reporting language has gained massive popularity in most of the firms in the United States. Based on this, the SEC requires that the Group accounts be prepared in accordance to XBRL format. Thus, presently, Extensive Business Reporting Language has a wide usage all over the world as many organizations have adopted its use. The Future of Extensive Business Reporting Language In the future, companies will continue submitting SEC reports as well as filings using this system. This trend will most likely continue in the future until it will become mandatory for companies to report their financial data in the form of XBRL. Since the United States has taken the initiative, the rest of the industrialized world will emulate the United States. The recent trends within the United States may be replicated to other parts of the world, which will adopt the use of this system in financial reporting. The system has shown to be an essential tool, which regulators can be able to leverage easily. With the numerous changes and advancements in the field of information technology, many companies will turn to its use in financial reporting (Eccles & Krzus 67-90). The use of this system will lead to the digitization of business processes in the future. For instance, business reporting will be digitalized, thus enhancing transparency in the financial reporting of organizations. Communication between users of financial information, as well as businesses, will also become effective with the adoption of this system. In addition, companies will be able to choose better investment decisions in the future with the adoption and use of Extensible Business Reporting Language. Works Cited Eccles, Robert & Krzus, Michael. One Report: Integrated Reporting for a Sustainable Strategy. New York: John Wiley & Sons, 2010. Print. Read More