The Institute of Management Accountants is advocating the use of XBRL to facilitate broader adoption of integrated reporting to give stakeholders a deeper understanding of a company’s performance and prospects for future success.

The International Integrated Reporting Council published a discussion paper, Towards Integrated Reporting, Communicating Value in the 21^st Century, making the case for integrated reporting and calling for feedback on how to drive acceptance and adoption. The IIRC defines integrated reporting as bringing together material information about an entity’s strategy, governance, performance, and prospects in a way that reflects the commercial, social, and environmental context in which it operates.

Looking well beyond the financial performance conveyed in a typical set of financial statements, an integrated report would provide a clear and concise understanding of how an entity creates and sustains value while also demonstrating good stewardship of its resources, according to the IIRC. The IMA’s XBRL Committee answered the discussion paper by pointing out that XBRL is the perfect tool to facilitate such reporting and drive more widespread adoption of it.

The IMA XBRL Committee is a standing advisory committee reporting to the IMA board, made up of experts in XBRL, internal and external corporate reporting, accounting and other standards, information technology, market adoption, research and academia. The committee says XBRL is already used by companies representing more than 75 percent of the world’s market capitalization for reporting financial information, making it the logical choice for extending the benefits it provides to financial reporting to the full scope of integrated reporting.

Brad J. Monterio, chair of the XBRL committee, said analysts, investors, regulators and even management are increasingly realizing that financial information alone is not enough to present a full picture of market performance. A growing number of hedge funds, venture capital funds, and private equity funds are paying close attention to integrated reporting, he said. “In some cases, they are looking only at companies that prepare this information,” he said.

The IIRC discussion paper is a platform for developing an integrated reporting framework for the global marketplace, Monterio said, so the IMA committee is looking at the framework from an XBRL perspective. “It’s a logical conclusion that if XBRL is becoming the standard for financial information to make it usable, can the same benefits be applied to nonfinancial information?” he said.

The IMA is encouraging the IIRC to develop an XBRL taxonomy in tandem with any integrated reporting framework to facilitate a more streamlined adoption. “CFOs and executive team members need to be aware that integrated reporting is the next stage of corporate reporting and the marketplace is placing value on this information.”

XBRL is revolutionary. But until its benefits are seen, this doesn’t matter.

2011: a review of XBRL in the United States

The year of 2011 marks several milestones in terms of the increase in quantity and the improvement in quality of XBRL data. Such changes will lead to widespread consumption of XBRL data for the year 2012 and beyond.

On the quantity side:

• Starting June 15, 2011, every company listed in the United States has been required to file their financial statements in XBRL, although many large companies have been doing so for more than two years.
• Over 7,800 companies have submitted their financial statements in XBRL to the SEC.
• There are more granular data from the footnotes: XBRL Level 4 detailed footnote tagging makes more this data easily accessible.
• Many financial analysts will be satisfied if they have the most recent three to five years of financial data. Many large companies have had close to five years of XBRL data available now.

On the quality side:

• More insights, better guidance: Armed with filing data from over 5,000 first-time XBRL filers in 2011, XBRL US, the FASB, and the SEC have been identifying common errors (see SEC’s Staff Observations) and conducting dozens of trainings, webinars and workshops to help companies prepare their XBRL filings.
• More accurate and complete: With the expiration of the limited liability provisions for XBRL exhibits two years after their first mandatory submission date, public companies will  be more serious about the accuracy and completeness of XBRL-tagged data (see XBRL Assurance Committee).
• Smarter XBRL software makes validation easier for preparers.

Consumption: the new theme in 2011

The two biggest XBRL events in 2011 reflected the shift of attention from preparation to consumption.

• “Get More Out of XBRL” is the theme of the 3rd Annual XBRL US National Conference, held between Sept. 26-27 in Nashville, TN.
• “Enhancing Business Performance” is the theme of the 23rd XBRL International Conference, held between Oct. 25-27 in Montreal, Canada.

XBRL Challenge: a new push in consumption

XBRL Challenge is a contest organized by XBRL US to promote the awareness of XBRL. Participants will develop “open source analytical applications for investors that leverage corporate XBRL data”. The deadline to submit the application is Jan. 31, 2012. XBRL US will reward the final winner in February of 2012 with a grand prize of US$20,000.

Getting application developers involved in XBRL is a great idea. They can make consumption by investors easier. They can create a new generation of financial applications.

As a software developer with a finance background, I fully understand the potential of XBRL. The global standard computer language can fundamentally change how financial data is defined, organized, and exchanged. The language defines the attributes of each data and its relationship to others. The standard taxonomy defines common terms used in the dataset. The language and taxonomy are the nuts and bolts for financial application development. Financial data can be dissembled and re-assembled by computer programs. Financial analysts can interact with the richer financial dataset in new ways.

On the other hand, the XBRL standard is complex, even for software developers. Unlike HTML, XBRL uses many XML files, and each serves its own purpose. Grasping XBRL is challenging.

Challenges bring talents. Application developers will make XBRL transparent to end users. Some system or data providers may also make application developers’ life easier.

As Philip Moyer said in a recent XBRL Challenge webinar, there is a critical mass of XBRL data now. Get application developers involved. Let them play with the data. Good things will usually follow.

Let’s expect to see some amazing apps using XBRL data in 2012.

Companies marching through the paces of detailed XBRL tagging don’t like to hear it, but we’re still just on the cusp of seeing real utility in the repository of data that is starting to build via XBRL. Investors have a long way to go to learn how to use the data to make investment decisions.

Regulators, on the other hand, have had a bigger head start, and the Securities and Exchange Commission is rolling up its sleeves to determine how it can use the data to better regulate capital markets. The SEC has said it is gradually getting more of its accountants up to speed on using XBRL to perform its routine filing reviews.

A recent academic study out of the University of Virginia demonstrates how XBRL data can be mined and managed in a way that makes it much easier to spot outlier elements in balance sheets and income statements. Those outliers can be indicative of any number of things – from investment opportunities to possible fraud, the authors conclude.

Randy Cogill, a professor in systems and information engineering at the University of Virginia, and his assistant, Steve Yang, applied graph similarity measurement to XBRL-rendered financial statements to measure structural differences in those financial statements. Graph similarity measurement has been used in applications such as text mining, pattern recognition, and computer vision, among others.

The authors selected a sample of 44 public companies in the retail and energy sectors for their analysis. They formulated the financial statement similarity measurement problem as a generalized graph similarity problem and constructed a graph similarity metric to measure the similarity of financial statements. They confirmed that the graph similarity metric is sensitive to structural changes in balance sheets, laying a foundation for discovering more important monetary movement patterns in financial statements, the authors say.

Yang said one of the benefits of XBRL data is that it lends itself to such modeling and measurement so that users of the information can extract any information they need. With so much information to digest, it’s the best way to glean meaningful insights. He envisions the findings could be useful for investors, who might build automated tools to help select financial information that is most important to them.

He also sees the benefit for regulators, who can use the tools to identify outliers that command extra attention. “It could be that they will find a deviation is because someone is doing something wrong,” he said, whether intentionally or unintentionally. “They can extract very valuable information from this complex structure.

At the recent XBRL International conference in Montreal, the XBRL International consortium released the first draft of its Abstract Model , developed by its Abstract Modelling Task Force (AMTF). The abstract model is meant to establish a common framework for communicating and understanding the XBRL technology.

The abstract model should be of particular interest to software engineers, who are looking for a common language to communicate and understand the XBRL technology, the consortium said. The task force developed the abstract model to give developers a strong foundation for implementing XBRL solutions. The Abstract Model includes use case diagrams, class diagrams, object diagrams, and sequence diagrams. The draft model represents an important element the strategic core vision developed by the XBRL Standards Board to continue the momentum of the XBRL standard

Conor O’Kelly, chairman of XBRL International Standards Board, said the task force welcomes market feedback on the abstract model to help assure it will increase comparability, make XBRL easier to use, and lower barriers to XBRL software development. The working draft represents a meta-model for XBRL 2.1 and Dimensions 1.0, separating the semantics defined in those specifications from their syntactical representation.

In developing the abstract model, the Standards Board envisions it will lead to the production of training materials, the definition of standard API signatures, and the reorganization of existing specifications. Ultimately, the goal is to enhance data comparability and develop application profiles.

The task force acknowledges there have been significant advancements lately in other modules related to the core XBRL 2.1 and Dimensions 1.0 specifications. Specifications such as formulae, rendering, and versioning have all added substantial features and capabilities on top of the two existing core specficiations, the task force said.

The scope of this modeling project, however, was defined at the outset to be inclusive of only the XBRL 2.1 and Dimensions 1.0 specifications, the task force notes. As such, the task force “has been respectful of this scope boundary, and has thus been careful to ensure that all constructs in the abstract model are traceable back to either the XBRL 2.1 or Dimensions 1.0 specifications,” it says.

In addition to publishing the working draft, XBRL International also is looking for a few good candidates to assume a leadership role as chair of the Abstract Modeling Task Force. The new chair will oversee comments and revisions to the working draft of the Abstract Model and will guide the consortium in leveraging the output of the group both internally and in the marketplace. The incoming chair also will advise the Standards Board on future model development.

In his continuing dig into XBRL submissions to assess utility and functionality, Charles Hoffman is finding income statement data hard to figure out.

Hoffman is often credited with founding the concept of XBRL and inspiring the American Institute of Certified Public Accountants to invest in developing it. He has been studying more than 5,500 XBRL filings to the Securities and Exchange Commission to get a sense of the semantic model of financial reports that XBRL produces.

The assessment of the balance sheet and the cash flow were straightforward enough, he said. But the income statement is a lot more challenging. In fact, he calls it maddening.

“The income statement has a lot more moving parts,” he said. Not all income statement elements apply to all filers in the same way. Items like income from operations, discontinued operations, noncontrolling interests, extraordinary items, perhaps even income taxes make it impossible to build a one-size-fits-all income statement.

That makes it hard for filers to sort through the GAAP Taxonomy, he says, and find the concepts that are appropriate to their particular data. If companies had a series of examples to follow, it might give them a clearer roadmap to submitting data that would ultimately be more comparable, he says.

The income statement also doesn’t carry subtotals in the same way as the balance sheet or the cash flow statement, making it more difficult at time to cross reference or verify numbers, he said. All of that, combined with the nature of XBRL user software, makes it difficult for users of income statement data to find what they might be looking for, he said.

To illustrate, Hoffman says he has discovered that filers are generally using three different concepts in the Taxonomy to report net income or loss. He worries perhaps there is too much ambiguity as to which of the three most chosen concepts should be used under different reporting scenarios.

Of nearly 4,000 filings he has examined, nearly three-fourths report income (or loss) from continuing operations before taxes, but a wide variety of labels are used, and many filers even created extensions for this concept, giving it the exact same name as the concept provided by that name. Hoffman wonders if some filers carried it forward from an earlier XBRL submission when the taxonomy in place did not have a concept for this item.

He found revenue for 84 percent of the filings where he searched for it. He’s pretty sure the other 16 percent report revenue somewhere, but he’s just not sure where. “There are so many different ways to report revenue,” he said. Some companies provide a total for revenue, making it easier to find, but some do not, making it much more difficult to find, he said.

Hoffman said he’s hopeful his exercise will help practitioners focus more on how to make XBRL more consistent across companies and therefore more useful to users of financial information.

Charles Hoffman, often credited with founding XBRL, has been studying more than 5,500 XBRL filings to the Securities and Exchange Commission to get a sense of the semantic model of financial reports that is emerging through the XBRL process. He’s curious to see how well SEC filings adhere to that model.

He analyzed both 10-Ks and 10-Qs looking for some patterns of consistency in how companies are selecting tags to relate common financial reporting concepts. Hoffman found that 21 different generators were responsible for creating his sample of 5,525 filings, which logically suggests there might be more diversity in implementation than if the entire sample were generated by a single source or only a few sources.

The analysis focused on some fundamental elements that should be common among virtually all financial reports for public companies: assets, liabilities, equity, profit, loss, cash, revenue, basic entity information and the like. Despite the large number of sources, 3,170 of the filings, or 57 percent, had a combination of all the key characteristics where Hoffman was hoping to see some patterns.

It’s an impressive indicator of the quality of the XBRL submissions given how new the technology is, in Hoffman’s view. “There is definitely a leveragable semantic model peering out from that set of 5,525 SEC financial filings,” he wrote.

Hoffman found every sample reported the concept for the entity’s name, but only 21 percent reported the concept for their trading symbol. He surmises registrants must not find the trading symbol concept to be useful. While every sample reported the document period end date, Hoffman found on closer examination that about 20 filings reported it as the submission date or some other date rather than the balance sheet date.

While 97 percent of all filings reported a concept for assets and for liabilities and equity, he found five filings where they didn’t balance, either in the HTML or the XBRL filings. Hoffman found that 96 percent of filings reported one of four concepts for equity – stockholders equity, stockholders equity including the portion attributable to noncontrolling interest, partners’ capital, and partners’ capital including the portion attributable to noncontrolling interest – and he sensed some inconsistency in the use of the equity concepts.

Hoffman was disturbed to note that net income/loss is being reported under three different concepts. There are separate concepts in the taxonomy for profit/loss, net income/loss, and net income/loss available to common stockholders. “Basically, there is ambiguity as to which of the three of those concepts to use in different reporting scenarios,” he wrote.

Hoffman says his next move will be to drill another level lower into the cash flow statement, which he expects to be easy. Then he will take on the income statement, which he expects to be more difficult because there is more variety in how companies report income, so it will be more difficult to detect patterns. “A bottom-up approach may be superior to a top-down approach,” he wrote.

Staff members at the Securities and Exchange Commission have parceled out a new bit of XBRL guidance by adding another Q&A to their staff interpretations and frequently asked questions on interactive data disclosures.

The SEC’s Office of Interactive Disclosures focused this time on units of measure and how they are used in interactive data filing. Those staff members apparently are seeing confusion, so they thought it might helpful to explain for the benefit of all who are dealing with XBRL filings.

Depending on the element or tag in the taxonomy that is selected and the amount that is being reported, every amount expressed in an XBRL submission is linked with three things: an “XBRL item type,” an underlying “data type,” and a “unit,” or unit of measure. A common XBRL item type such as “Monetary” can be further described with a data type, as in a “Non Negative Monetary” data type, which excludes negative amounts.

Typically, that is still not enough to completely define a given amount that a company might need to report in its financial statements. That’s where units come into play. Data types use unit types to further define or characterize the information that is being reported. In many cases, the unit is US dollars, but it might also be megawatts, millions of barrels, millions of bushels, or employees.

The staff explains that the “Pure” XBRL item type is used most frequently with elements that describe percentages, rates, and ratios, and it is used most frequently with the “pure” unit. But here’s where the staff has seen some confusion. The SEC is having a hard time comprehending how the pure unit could be used to describe any item type other than the pure XBRL item type, and it can’t see how the pure unit makes sense with anything other than ratios, rates, or percentages.

So here’s the staff’s advice: if you’re thinking of using the pure unit with anything other than a pure XBRL item type, and if you’re thinking of using the pure unit with anything other than a ratio, a rate, or a percentage – don’t do it.

The staff says a standard units registry is expected to be provided in a future version of the Document and Entity Information Taxonomy to further refine direct selections. In the meantime, the filers should select the unit type that most closely fits the item and data type. The Q&A guidance also provides a table showing some common associations among XBRL item types, data types, and units.

The IFRS Foundation has published more interim releases for its 2011 IFRS Taxonomy to reflect new accounting standards that have been issued in the past few months. The latest releases focus on fair value measurement, disclosures regarding interests in other entities, other comprehensive income, and employee benefits.

The latest interim release provides new tags related to Presentation of Items of Other Comprehensive Income (amendments to IAS 1) and IAS 19 Employee Benefits, both issued by the International Accounting Standards Board in June. Only a few weeks prior, the IFRS Foundation also published an interim release to provides tags related to IFRS 13 Fair Value Measurement and IFRS 12 Disclosure of Interests in Other Entities, issued by IASB in May.

The Foundation decided to issue the interim release to get the tags developed and accessible to companies for use immediately rather than waiting for an annual taxonomy update. It represents a step in the direction of integrating the development of new tags with the development of the accounting rules they define, a stated goal of the IFRS Foundation, in the hopes that it might minimize the possibility that companies could select inappropriate or obsolete tags to describe emerging accounting requirements. By contrast, the Financial Accounting Standards Board in the United States accepts comments on the U.S. GAAP Taxonomy continually, and seeks comments periodically on prospective taxonomy updates, but issues updates to the taxonomy on an annual basis.

The Foundation earlier published an interim release related to common-practice concepts to reflect disclosures companies commonly make under IFRS. Those tags were developed not necessarily because any specific standard explicitly requires the disclosures. Instead, the disclosures are common enough that having tags associated with them will identify them as comparable to other like disclosures made by other companies, making all XBRL-submitted information more comparable.

The U.S. Securities and Exchange Commission in particular has urged the IFRS Foundation to expand the IFRS Taxonomy to make IFRS financial statements submitted in U.S. capital markets more comparable. So far, the SEC has not yet endorsed an IFRS taxonomy for IFRS filers in the United States, leaving those companies dangling under a requirement to submit their financial statements in XBRL with no approved method for doing so. The SEC has not released those companies from the XBRL submission obligation, but has indicated it will not take enforcement action against IFRS filers that do not meet the 2011 XBRL submission requirement.

The IFRS Taxonomy interim releases allow entities to report electronically using the latest IFRS without needing to create custom extensions or risk making an erroneous tag selection. The IFRS Foundation says the additional items in the latest interim release are consistent with the XBRL architecture of the 2011 taxonomy as described in its 2011 taxonomy guide and its Global Filing Manual. All interim releases are due to be incorporated into the 2012 IFRS Taxonomy, which is scheduled to be published in the first quarter of 2012.

Around 2005, the SBIF (Superintendency of Banks and Financial Institutions) and the SVS (Superintendency of Securities and Insurance) started to discuss XBRL. They were the first Chilean institutions to do so.

Six years later, the SBIF has made no concrete progress; it is still just talking about XBRL. Banco Central de Chile (Central Bank of Chile) and Bolsa de Comercio de Santiago (Santiago Stock Market) have expressed interest in XBRL, but that is the extent of their involvement.

Meanwhile, the SVS implemented the Chilean taxonomies based on the IFRS (International Financial Reporting Standards) Foundation, starting with SVS CL-CI 2008. However, XBRL technology is being used only by a few software companies and some advanced users. It is still far from reaching the promised level of transparency for financial information.

Take, for example, the recent La Polar crisis of confidence in retail markets. La Polar (Empresas La Polar SA ) is a regulated retail company that mishandled customer debt for years. This mishandling inflated its stock prices. Yet La Polar used XBRL to report to SVS for the last two years.

Who validated La Polar's reporting? Who audited its financial statements? Why did nobody detect its crisis, whether before or after XBRL was used in its financials? Given the lack of effect that XBRL had on La Polar, how can we say that transparency bestows any advantage at all?

Just making taxonomies and collecting files does not produce a more transparent market. SVS established conditions for regulated companies to report in XBRL, but it did not monitor the process as it affected real numbers and real companies.

Before IFRS, the SVS provided regulated companies with free software tools such as the SEIL for filling out forms. The reporting format was pretty much ad hoc. The SVS then took the files generated by these software tools and turned them into .pdf files.

Currently, because XBRL is an open and international standard, every regulated company has to provide its own reporting tool. The SVS posts announcements on the IFRS section of its web, waiting for companies to take up the XBRL. Still, as soon as deadlines arrive, crises spring up everywhere.

• Some companies objected to XBRL's "complexity," saying that XBRL allows only basic financial statements to be filed, not the notes Some companies said they were able to report only the basic financial statements, not the notes, due the complexity of the XBRL implementation for notes– and the notes contain the largest part of IFRS taxonomies. The SVS accepted this and allowed the notes to be optional for all companies. Only one of several hundred companies sent notes in any case. Thus the SVS lost relevant information that it used to gather with the aid of SEIL tools and disseminated to investors as well as the general public. Transparency, in this case, translated to less information.
• Some companies sent their reports only in .pdf form, because they had heard news only of IFRS, not of XBRL.
• Some companies used demo XBRL tools and some used IT consultants to prepare their XBRL reports. Unfortunately, the data in the resulting reports had the wrong information.
• In a very few cases, companies sent XBRL financial reports in .pdf form. Only in a few cases the companies sent information consistent in both formats: PDF and XBRL.

Were there any penalties for companies that did not send their reports? How about penalties for companies that sent the wrong information? Did the SVS admit any mistakes in their strategies or change them? While I was there, none of this occurred.

I would like to see the SVS give XBRL the importance that it deserves. However, I doubt that will happen until their customers, their users, and the public call out for it. I hope that their users don't wait for more La Polar-type tragedies before they make their voices heard, making politicians seethe with rage calling for greater transparency – but without admitting to their earlier laziness and neglect.

A major milestone in the SEC’s XBRL mandate will be achieved in August. It will be the first time that all companies with a 12/31 fiscal year-end date will be required to submit XBRL exhibits with their second quarter 10-Q. While all Large Accelerated Filers (LAF) companies were required to submit XBRL exhibits after June 15, 2010, all remaining filers, including smaller reporting companies will now also be required to begin submitting these exhibits.

The Securities and Exchange Commission’s XBRL mandate grouped all public companies into three groups, or tiers, based on their filing status. The first tier, Large Accelerated Filers (LAF) with a public float over $5 Billion (approx. 500 companies) were first required to begin submitting XBRL exhibits back in 2009. In 2010, all remaining LAFs were phased into the XBRL mandate (approx. 1,000 companies). This year, approximately 7,000 companies will begin submitting XBRL exhibits. Each of these groups will be addressing a new aspect of the rules.

Tier Three: All non-LAF companies are in this group. For the first twelve months after June 15, 2011, these companies are required to tag all line items in their primary financial statements and “block” tag their footnotes and schedules. Ideally, in preparation for the XBRL requirements with their second quarter 10-Q filing in late August, they have already completed their selection of their tags that accurately reflect the accounting concepts behind each line item in their primary financial statements, and went through a “practice run” with their last 10-Q filing in May. This would give them a good idea as to the impact that this additional requirement will have on their filings. It is important to remember that these companies will still have to file their documents in the HTML or ASCII format, and that they will have to allow for more time to create the XBRL format. Therefore, they will have to put “pencils down” earlier than they may have been accustomed to in the past.

Tier Two: LAF companies that have a public float under $5 Billion fall into this category, and they began submitting XBRL exhibits last year in 2010. As of June 15, 2011, they are now required to begin tagging their footnotes and schedules on a detailed level. Besides tagging their primary financial statements, they will also be required to tag:

• All Accounting policies in the Significant Accounting Policies Footnote
• Each table within each footnote as a separate block of text
• Within each footnote, each amount (i.e. monetary value, percentage, and number) separately

This additional tagging requirement will substantially increase the number of tags required in the XBRL exhibits and the amount of time required to create them. Companies required to submit these detailed tagged XBRL exhibits will need to know just how much additional time is required to create them with the additional tags. On average, the jump in the number of tags from the first year is 150 tags to 900.

Tier One: The LAF companies that have been submitting XBRL exhibits since 2009, and began tagging their footnotes and schedules on a detailed level last year, will now lose their limited liability protection for filings after June 15, 2011. The SEC rules allowed this limited liability protection for 24 months after a registrant was phased into the XBRL mandate. This clause in the rules provided protection against federal securities laws if the XBRL exhibits did not comply with the XBRL rules, as long as it was deemed that the company did not deliberately attempt to mislead the public. Unfortunately, this is quite vague, and these companies should discuss this with their Auditors and Legal counsel.

So while the SEC’s XBRL mandate has a multi-year phase-in of the requirements; at this point all companies that have SEC filing requirements are now required to submit XBRL exhibits when they are filing new financials.