Financial reporting language could make sense of the bottom line

TORONTO — A Web-based specification could standardize the reporting of financial information and improve the way data is shared, analyzed and published.

The Canadian Institute of Chartered Accountants (CICA) Monday kicked off a week-long

conference that gave an overview of the methodology and future of extensible business reporting language (XBRL). Microsoft, CaseWare and a number of other software firms discussed applications of XBRL in the financial services sector, including credit risk analysis, regulatory reporting, consolidation and taxation.

An industry consortium formed about three years ago to provide a framework for handling financial information based on extensible markup language (XML), which is rapidly displacing HTML in many Internet applications. More than 140 companies have since joined XBRL International, including Canadian organizations like the Toronto Stock Exchange, Expert Development Canada, the Royal Bank of Canada and Public Works and Government Services Canada.

XBRL International steering committee chair Walter Hamscher said the initial benefits of the specification would come once public companies begin using it to publish financial statements to the outside world. Many companies might like to compare their annual report with that of a competitor, for example, but extracting the relevant information electronically can be a time-consuming task that results in information overload. Using XBRL’s metadata tags, however, executives could enter even queries such as “”IBM fixed assets”” and find the data they need through Yahoo! or other search engines.

“”It can be dangerous to compare figures,”” Hamscher said. “”But if you have unambiguous tags, it provides a consistency to the reporting.””

Establishing a common interchange could also reduce redundancies in financial reporting, Hamscher added, eliminating the need to enter information several times in order to prepare statements for printing, for the Web or for filing.

XBRL International has formed close ties with industry associations like the CICA because their members will play a critical role in making use of the language an accepted industry practice. Bill Swirsky, the CICA’s vice-president of professional affairs, said the possible use of XBRL by organizations like the Canada Customs and Revenue Agency (CCRA) is opening their eyes.

“”Once these benchmarks are in place, they won’t want to be left behind,”” he said. “”They know things are changing. The readiness is there.””

Hamscher said early adopters may include companies with several branch subsidiaries, or ones that have pursued a joint venture with another firm. Other users include analysts, investors and regulators who seek enhanced distribution and usability of existing statement information.

Bob Cuthbertson, chief operating officer for accounting software firm CaseWare Idea Inc. in Toronto, is leading the Canadian chapter of XBRL International. He said barriers to adoption will largely be broken as the group attracts more members, particularly CFOs and preparers of financial services information. He agreed with Swirsky that interest from the CCRA and Public Works and Government Services has given the movement some credibility.

“”There is this recognition on the part of two major government departments that XBRL is a way of achieving their reporting objectives and lowering the cost,”” he said, which should help sway large enterprises. “”For them, it’s the crucial information flow. In financial services, success is based on the ability to react in time.””

As a non-profit group, XBRL International is licensing the specification free of charge. Hamscher said the accounting industry-related firms involved would shoulder the costs of developing and maintaining any standards that develop.

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