Canadian accounting firms, consultants and software vendors have worked out a set of local terms to help speed adoption of a business reporting language that could improve the electronic handling of financial
Like a dictionary of accounting terms, the Canadian taxonomy for extensible business reporting language (XBRL), which was announced Wednesday, covers primary financial statements issued in accordance with Canadian Generally Accepted Accounting Principals, or GAAP. XBRL came out of an industry consortium more than five years ago to create a standard for financial reporting based on extensible markup language (XML), which uses metatags to more effective share, analyze and publish information. The taxonomy was necessary because there are certain terms in the U.S. GAAP that aren’t included in the Canadian version, and vice-versa.
XBRL is already gaining momentum in the United States, in part because of a mandate from the Federal Deposit Insurance Corp. that all banks submit call reports with it. Earlier this year the Toronto Stock Exchange set the stage for Canadian adoption by publishing its year-end results using the standard. More than 40 Canadian organizations, including Royal Bank, Public Works and Government Services Canada and PricewaterhouseCoopers have joined a Canadian chapter of the XBRL consortium.
Thomas Taylor, project director for XBRL Canada at the Canadian Institute of Chartered Accountants, said the next step is to create additional taxonomies relating not just to financial statements but notes to the financial statements and management’s discussion and analysis of financial results. The group will also consider specific sector taxonomies such as financial services.
Taylor said XBRL will reduce redundancies in financial reporting because firms will only have to key in information once and applications will automatically process it for printing, filing or to publish it online.
“”It really will democratize the access to financial and other business information,”” he said. “”Once it becomes more generally accepted and adopted, everyone that is an investor will be able to analyze it as quickly as others.””
Some software vendors, like Hyperion, have already announced plans to deliver XBRL support in their financial applications. John O’Rourke, Hyperion’s senior product marketing manager based in Stanford, Conn., said Hyperion joined XBRL International three years ago and assigned a technical expert in Toronto to help with the standard’s development process. Acceptance for XBRL is coming, he said, but it has been organizations outside North America, like the Tokyo Stock Exchange and the Australian Prudential Regulatory Board, that have been early adopters.
“”We haven’t really had customers banging down our door for it at this point,”” he said. “”It was more interest around benchmarking their financial performance versus their peers.””
Statistics Canada is wrapping up the first phase of a pilot project this month with Fujitsu Consulting to work through some of the logistics of getting its own XBRL taxonomy set up. StatsCan has its own standard called Chart of Accounts for business reporting, but XBRL may be able to reduce the costs to respondents of completing its survey and collection costs and facilitate the streaming of financial information into its survey data.
“”We want to see that respondents could readily respond using XBRL and that their data can be put into XBRL-compliant format, that it can be transmitted here to StatsCan securely,”” said John Crysdale, chief of new standards development in the Standards Division of StatsCan. “”I think things have gone pretty well.””
The Canadian XBRL taxonomy comes at a time when accounting scandals have destroyed the reputations of high-profile firms both here and in the U.S., said George Farkas, president of XBRL Canada. The standard, he said, should help firms across the business community to put the principles of transparency and good governance into practice when they distribute information electronically.
“”Now we can go to Canadian business, to accountants throughout the country, to financial institutions and be able to show them the advantages XBRL,”” he said. “”In the past we didn’t have much of that because we didn’t have a taxonomy to show them.””
The Canadian taxonomy has been approved by XBRL International and will be available on a recently relaunched version of the XBRL Canada Web site.