Saeed Roohani is Professor of Accounting at Bryant University and one of the leading authorities on XBRL education. He is Program Chair of both the 9th Global XBRL Academic Competition and the 8th Bryant XBRL Conference to be held on October 13. The first part of our two-part interview with Professor Roohani appears below.

(1) Along with Eric Cohen, you have been the driving force behind the Global XBRL Academic Competition since its inception eight years ago. What have been the significant trends in XBRL research over the past eight years? Or, put another way, what changes have you seen in the direction of XBRL research?

The major changes have been in the quality of research and the sophistication of research questions.  Earlier, most people were mostly addressing whether the financial community is “aware” of opportunities offered by XBRL – basically, a descriptive approach.  Now we see XBRL research that addresses implementation, value proposition issues, and internationalization.  The XBRL research articles are now more than descriptive, and include case studies and empirical studies.  We also see some articles exploring opportunities for XBRL GL.

(2) Which of the Competition’s projects do you think have contributed most to the development of XBRL?

It is hard to say any single one contributed more than any other.  It seems that every year the projects submitted by students follow different challenges and opportunities for XBRL; the projects generally vary with new XBRL applications and implementations around the world.  Overall, projects exhibiting new and promising applications of XBRL (e.g., continuous auditing) and the development of taxonomies for certain jurisdictions or countries have been rated highly by judges.

(3) Which subject areas do you believe are most fertile for future XBRL research?

I would answer this question by referring to the advantages that we in the XBRL community have stated over the years, namely, that XBRL makes business reporting faster, cheaper, and better.  We now have access to XBRL data reported by firms, so it’s time to get academics involved in the emprirical testing of various propositions about XBRL.  Will XBRL help continuous (more frequent) reporting where information becomes immediately available to the market upon release? Is there evidence that all parties in the supply-chain will benefit from standardized business reporting? These are the kinds of questions that should be explored.

(4) What is the state of XBRL education at the college level right now? Are separate courses in XBRL offered in few, many, or most college accounting programs? Or is XBRL incorporated as part of the curriculum within existing accounting courses?

I know most accounting textbooks mention XBRL and describe its goals. However, I’m not sure whether the coverage is enough to generate discussion about the usefulness of XBRL and its applications.  Two of my colleagues have been offering day-long XBRL workshops at the annual American Accounting Association for the past four or five years. At my school, Bryant University, we have an annual XBRL conference that encourages participation of academics, as well as the Global XBRL Academic Competition.

So there have been a lot of opportunities for academics to get involved in research and education.  However, many faculty and students automatically assume XBRL is a “technology thing,” not an accounting, reporting, or auditing subject.  The fact is that XBRL is more about financial accounting and auditing than technology itself!

With worldwide adoption of XBRL now demanded by many regulators, I have noticed much more interest in XBRL research and education.  Among the courses I teach at Bryant are XBRL reporting and its application, and I know a dozen more accounting faculty at other universities worldwide who cover XBRL and XBRL GL in a meaningful way in their courses. I am not aware of a course totally dedicated to XBRL, and I don’t expect it either.  I anticipate XBRL to be an active component of upper level accounting courses

(5) Let’s say a sophomore walks into your office who is committed to an accounting career and asks you what he or she should know about XBRL. How would you respond? Would you advise him or her that a general familiarity with the language is sufficient for prospective accountants? Or do you think being able to understand XBRL code – or actually write it – will give new accountants a huge advantage over their peers?

Actually, I’ve already been asked those kinds of questions.  One of my summer interns told me his boss asked him to investigate what XBRL is and find out how much he (i.e., his boss) should know about XBRL.  I recommended some of the introductory materials available on the web, including the various resources mentioned at XBRLeducation.com.

I think most accounting students won’t get involved in the mechanics of XBRL tagging, as software tools will do this. However, verifying the appropriateness of the tags, the use of proper taxonomy, authentication of XBRL documents, and knowledge of the XBRL filings required for regulators — all of these will be important to all accounting students.  My understanding is that XBRL is now part of the CPA exam, so students should at least be familiar with it.

(6) For financial professionals in the field, what advice would you give them regarding learning XBRL? How much XBRL knowledge do you believe they will need to do their jobs successfully and build their careers?

I would give the same advice to financial professionals.  In addition, financial professionals, such as analysts who develop financial models for clients, now have to be more knowledgeable about XBRL if they wish to absorb new and timely information generated by XBRL and available online.  XBRL allows a continuous flow of financial information on the web; this demands new and hybrid financial models to help their clients.

Depending on their specialty, financial professionals should be familiar with the applicable XBRL taxonomy for the entity, how to create an instance document with XBRL tools, and XBRL regulatory reporting requirements.

At this time, XBRL is basically focused on external reporting and so not much on management accounting.  However, XBRL GL is the XBRL link to internal reporting and auditing.  The prize winning student project of the Global XBRL Academic Competition in 2005/06 was about XBRL GL and continuous/internal auditing.

(7) What is the status of XBRL education in the US compared with that in other countries? Do you think the US is a leader or a laggard in XBRL education?

This question is difficult to answer.  Initially, it seems there was more XBRL awareness in U.S. educational outlets such as the American Accounting Association. Also, the adoption of XBRL by the FDIC generated some interest among U.S. academics. Then XBRL adoption took off a bit faster in other countries, such as Japan and Australia.

Interestingly enough, many emerging economies — somewhat motivated by the recognition opportunities accompanying XBRL — were eager to create XBRL-interest groups or adopt XBRL for external reporting. In most of these countries, college professors in accounting or finance have direct or indirect influence on accounting and financial reporting innovations and regulation.  In the past three months I have received several proposals from junior faculty or PhD students who reside in countries like China, Turkey, and Egypt and who have full scholarships to come to Bryant University for the purpose of XBRL education and research.

Written by Matt Kelly     Posted on August 27, 2008

Matt Kelly is editor-in-chief of Compliance Week, a magazine and online newsletter on corporate governance, risk, and compliance. Prior to his role at Compliance Week, Kelly was a reporter and contributor on corporate compliance and technology issues for magazines such as Time, Boston Business Journal, eWeek, and numerous other publications.

You know the Securities and Exchange Commission is serious about mandating XBRL technology when it announces that it’s going to implement XBRL itself.

At least, that’s what SEC Chairman Christopher Cox is promising. Last week he heralded the long, slow demise of EDGAR, the SEC’s decades-old filing system, responsible for eyestrain at countless computer terminals around the world. In EDGAR’s place will be IDEA — the hot new thing in corporate reporting systems, promising a paradise of faster, cleaner, easier-to-read corporate financial reports, all thanks to XBRL. Cox introduced IDEA (Interactive Data Electronic Applications) at a press conference complete with guest speakers, a live webcast, and a nifty IDEA logo hanging on the wall behind the podium.

This immediately suggests IDEA isn’t going to arrive any time soon.

The truth is that the gravity of any SEC pronouncement is inversely proportionate to the flashy media display accompanying its arrival. All the really deadly stuff is posted to the SEC website at 4:57 p.m. on a Friday. When you see clever logos and press conferences promising the imminent arrival of something, relax.

Indeed, a close reading of Cox’s remarks last week shows that EDGAR isn’t going anywhere. Companies will still make their corporate filings via EDGAR as always. Investors will still use EDGAR “for the indefinite future.” And while the SEC is promising that IDEA-like features will be grafted onto EDGAR filings by the end of the year, nobody has described exactly what those features will look like, or how investors will use them. Presumably the SEC’s own IT systems will allow investors to see the XBRL-tagged data, in a souped-up version of the XBRL reader applications on the Commission’s website right now. But that’s just a guess.

Yet again, we are seeing the fundamentally uncertain dynamic of XBRL adoption in the United States so far: an excellent idea, with no clear path to its implementation. I don’t doubt that IDEA will arrive at some point, and a new tool to display XBRL-tagged data as richly as possible is something the investing public will need going forward. But why launch this now, before the SEC even publishes whatever final XBRL mandate is coming down the road?

The SEC still hasn’t sold either Corporate America or Investing America on the utility of XBRL; those three or four small reader applications on the SEC website really don’t cut it. People might not necessarily like EDGAR filings, but they know EDGAR filings. IDEA has the opposite problem: everyone likes it, but nobody knows it — the SEC included. Until the SEC solves that problem by delivering tangible, practical examples of how XBRL filings will work in ways that investors understand, the technology is still a monster truck doing nothing more than roaring its engine.

And I won’t even delve into the philosophical subtext here, of why we should move into a world of real-time disclosure when every CEO in the country wails about the pressures of meeting short-term market expectations. That is a whole blog post unto itself.

Written by Bob Schneider     Posted on August 22, 2008

As I mentioned in my post last week, Ed Hodder has done a nice job of summarizing the comments the SEC has received from public companies on the Interactive Data to Improve Financial Reporting rule.  He notes that companies (1) had reservations about the detailed tagging of notes, (2) would like more leniency on grace periods, and (3) would prefer that the first XBRL filing be a 10-Q (instead of the 10-K that the majority issuers would start with under the proposal). One item I would add to the list is that several companies requested that traditionally filed (ie, ASCII or HTML) statements continue to be accepted for the foreseeable future.

Besides the filing companies, comments were received from CPA and law firms, industry associations, software vendors, individuals, and a few other entities. As one can imagine, their remarks ran the gamut from “XBRL is the greatest thing since sliced bread” to “What in the world do we need this for?” A few comments were as short as one or two paragraphs, while United Technologies offered answers to all of the (apparently) 93 questions the Commission asked in the proposed rule.  Some comments merely note a meeting with a concerned party took place. (It was interesting to learn, however, that SEC representatives met with Interactive Data Corporation to discuss “some instances of public confusion” about the company’s name and the SEC’s XBRL initiative.)

As listed on the SEC’s website, the comments are (unhelpfully) sorted by date. To help readers review comments pertinent to their interests and needs, I have organized them into categories by respondent type (industry association, CPA firm, etc.) and alphabetized them. I show the number of pages in the comment in parentheses. I divided the companies into those whose support of the rule is total, or nearly so; those with some reservations, as noted above; and those who generally dislike the whole XBRL initiative. Comments for foreign filers are also listed separately.

Companies Whose Comments Are Overwhelmingly Positive
Peter A. Bridgman, PepsiCo, Inc. (1)

John E. Stantial, Assistant Controller, and Margaret Smyth, Vice President, Controller, United Technologies Corporation, Hartford, Connecticut (16)

Companies that Support the Rule with Various Caveats
Samuel H. Pilch, Group VP, Controller and Acting CFO, The Allstate Corporation (3)

Katherine A. O’Brien, First Vice President and Director of Financial Reporting, Astoria Financial Corporation (2)

Jonathan Chadwick, Senior Vice President, Corporate Controller and Principal Accounting Officer, Cisco Systems (3)

Lawrence J. Salva, Senior Vice President, Chief Accounting Officer and Controller, Comcast Corporation, Philadelphia, Pennsylvania (3)

Reese K. Feuerman, Vice President, Controller & CAO, Constellation Energy (4)

Rudolf Bless, Managing Director and Chief Accounting Officer, and Susan Carpenter, Vice President, External Reporting Team, Credit Suisse Group (20)

Harvey L. Wagner, Vice President, Controller and Chief Accounting Officer, FirstEnergy Corp. (3)

Richard O. Lund, Vice President, Controller, General Mills (2)

Gregg L. Nelson, Vice President, Accounting Policy & Financial Reporting, IBM Corporation (5)

James Campbell, Vice President, Corporate Controller, Intel Corporation (4)

Douglas K. Chia, Senior Counsel, Assistant Corporate Secretary, Johnson & Johnson (4)

Bernard G. Dvorak, Senior Vice President and Co-Chief Financial Officer, Liberty Global, Inc., Denver, Colorado (4)

Susan M. Kinsey, Assistant Treasurer, National City Corporation, Cleveland, Ohio
(5)

Loretta Cangialosi, Senior Vice President and Controller, Pfizer, Inc. (4)

William H. Hernandez, Senior Vice President, Finance, PPG Industries, Inc. (2)

David F. Bond, Senior Vice President, Finance and Control, Safeway Inc. (3)

W. Ron Hinson, Comptroller and Chief Accounting Officer, The Southern Company, Atlanta, Georgia (7)

Larry G. Schultz, Senior Vice President and Controller - United States Steel Corporation, Pittsburgh, Pennsylvania (4)

Companies Whose Comments Are Mostly Negative
Richard J. Schlueter, Vice President and Chief Accounting Officer, Emerson Electric Company (4)

K. Michael Davis, Controller and Chief Accounting Officer of FPL Group, Inc., and Vice President, Accounting and Chief Accounting Officer of Florida Power & Light Company (3)

Clayton E. Killinger, Senior Vice President and Controller, Valero Energy Corporation (4)

Wayne S. DeVeydt, Executive Vice President and Chief Financial Officer, WellPoint, Inc.
(3)

Individuals
James J. Angel, Ph.D., CFA, Associate Professor of Finance, Georgetown University (2)

Scott M Draeger (Product manager for Dialogue;1)

Robert Gilmore, CPA, Redondo Beach, California (5)

Glen L. Gray, PhD, CPA, Dept. of Accounting & Information Systems, College of Business & Economics, California State University, Northridge (1)

Walter C. Hamscher, Technology Standards Consultant, Standard Advantage; Member, XBRL International Board of Directors; Concord, Massachusetts (2)

Pete Haynsworth, Independent Business Analyst, East Greenwich, Rhode Island (3)

Gary Purnhagen, Principal, Gary Purnhagen Consulting (3)

Jay Starkman, CPA, Atlanta, Georgia (8)

Paul M. Vuksich, Esq., Public Company Attorney, San Francisco, California (1)

Industry Associations and Other Entities
John Endean, President, American Business Conference (4)

CFA Institute Centre for Financial Market Integrity (17)

Dennis A. Johnson, Senior Portfolio Manager, Corporate Governance, California Public Employees’ Retirement System (4)

Stephen F. Roth and Mary Jane Wilson-Bilik, Committee of Annuity Insurers (10)

Christopher Cole, Senior Regulatory Counsel, Independent Community Bankers of America, Washington, D.C.  (3)

Society of Corporate Secretaries and Governance Professionals (6)

David K. Owens, Executive Vice President, Business Operations, Edison Electric Institute (3)

Christine DiFabio, Vice President, Technical Activities, Financial Executives International; Arnold C. Hanish, Chair, Committee on Corporate Reporting, Financial Executives International; and Taylor Hawes, Chair, Committee on Finance & Information Technology, Financial Executives International (13)

Bill Nichols, Director, Securities Processing Automation, FISD, Washington, District of Columbia (1)

Michael P. Krzus, Partner, Grant Thornton LLP and President, The Enhanced Business Reporting Consortium, Chicago, Illinois (3)

Andrey Kuznetsov, Research Analyst, on behalf of the Council of Institutional Investors (3)

Karrie McMillan, General Counsel, Investment Company Institute (30)

Phillip L. Carson, Assistant General Counsel, American Council of Life Insurers (15)

Juliet Estridge, Executive Director, Morgan Stanley Research; Michelle Teitsch, Executive Director, Morgan Stanley Research; Monika Nica, Vice President, Morgan Stanley ModelWare Taxonomy; and Aditi Talreja, Morgan Stanley Research (2)

George L. Yungmann, Senior Vice President, Financial Standards, and Sally R. Glenn, Director, Financial Standards, National Association of Real Estate Investment Trusts
(4)

Comments Concerning Canadian and Foreign Companies
John Mania, Product Manager, and Melanie Kurzuk, Senior Vice President, CNW Group (3)

Jacques Schraven, Chairman, and Dorien M. Fransens, Secretary General, EuropeanIssuers, Brussels, Belgium (Represents public companies in Europe; 4)

Brian Grassby, Vice President and Controller, Canadian Pacific Railway (4)

Noriaki Shimazaki, Chairman, Sub-Committee on Accounting Nippon Keidanren (Japan Business Federation) (2)

Remco Steenbergen, Deputy Group Controller, Senior Vice President, Philips International B.V. (3)

Eyal Desheh, Chief Financial Officer, Teva Pharmaceutical Industries Limited, Israel (3)

Ziegler & Ziegler (2)

CPA Firms and Accounting Associations
Robert M. Tarola, Chair, AICPA Preparer Working Group, New York, New York (9)

BDO Seidman, LLP (3)

Cynthia M. Fornelli, Executive Director, Center for Audit Quality (6)

Deloitte & Touche LLP (7)

Ernst & Young LLP (8)

Grant Thornton, LLP (7)

John Hepp, CPA, Chair, Accounting Principles Committee, Illinois CPA Society (3)

Mick Homan, Chairman, Financial Reporting Committee, Institute of Management Accountants and Bruce Pounder, Chairman, Small Business Financial and Regulatory Affairs Committee, Institute of Management Accountants (5)

Klaus-Peter Feld, Executive Director, and Ulrich Schneiß, Director Auditing, Institut der Wirtschaftspruefer in Deutschland e.V. (Institute of Public Auditors in Germany, 4)

KPMG LLP (5)

Sharon Sabba Fierstein, President, New York State Society of CPAs (5 pages, 2 pages of text)

PricewaterhouseCoopers LLP (5)

Rob G. Bosman, Technical Director, Royal NIVRA (Netherlands accounting association; 4)

Law Firms and Law Associations
Norman D. Slonaker, Chair, Financial Reporting Committee, Association of the Bar of the City of New York (7)

Foley and Lardner, LLP (3)

Keith F. Higgins, Chair, Federal Regulation of Securities Committee, and Linda L. Griggs, Chair, Committee on Law and Accounting, Section of Business Law, American Bar Association (20)

Sullivan & Cromwell LLP (5)

Software Vendors and Financial Reporting Companies
Philip D. Moyer, CEO / President, EDGAR® Online, Inc. (12)

Andrew C. Neblett, Chief Executive Officer, EDGARfilings (2)

Michael L. Rohan, President, Rivet Software, Inc. (2)

Eric P. Linder, CFA CEO, SavaNet LLC (7)

Michael Makris, UBmatrix, Inc. (1)

Gordon Ruckdeschel, Vice President, Vintage Filings (1)

Comments that Merely Note a Meeting Took Place
Memorandum regarding a June 19, 2008, meeting with representatives of Clarity Systems (1)

Memorandum regarding a meeting with representatives of Dynaxys LLC (1)

Memorandum regarding a meeting with representatives of Interactive Data Corporation (1 page)

Memorandum regarding a July 30, 2008, meeting with representatives of Microsoft Corporation (1)

Memorandum regarding a May 21, 2008 meeting with Andrew Neblett, CEO of EDGARfilings (1)

Memorandum regarding a July 29, 2008, meeting with Deepta Rangarajan, Co-Founder, IRIS, in Maharashtra, India (1)

Memorandum regarding a meeting with representatives of XBRL US, Inc. (1)

Finally, note that the comments contain the Transcript of International Roundtable on Interactive Data for Public Financial Reporting Held on June 10, 2008. I haven’t looked through its 80 pages yet; but judging from the list of participants, I’m certain the record of this meeting of international regulators contains important insights.

Written by Bob Schneider     Posted on August 15, 2008 

The dog days of August are upon us; but in the busy XBRL world, it’s hardly been lazy afternoons in the backyard and beer at the beach. If you’ve been vacationing at the lake or consumed with the Tampa Bay Rays, here’s a list of recent interactive data developments, materials, and announcements to bring you up to date.

(1) UBmatrix gave an excellent webinar on June 25 titled the SEC Mandate and Beyond. The initial presentation may well be familiar to you; within several minutes, however, you’ll hear a detailed talk on the specifics of the SEC’s proposed rule, as well as a discussion of key issues like the relative merits of the bolt-on versus embedded (or integrated) approach.

(2) As described in a post on the Bowne XBRL weblog, the Cleary Gottlieb law firm has put out a note on liability considerations in the SEC proposed rule. You may have to spend a little time registering to view it, but it’s time well spent. The note offers a detailed and informed perspective on liability questions, especially the issue of “raw” versus “viewable” XBRL data.

(3) Auerbach, Grayson – working with XBRL software company SavaNet – has become the “..first global broker to provide its global equity research reports in XBRL format…The application of the XBRL standard to research reports…allows for greater ease of access, interactive viewing, automated analysis and direct, hyper-detailed comparability.” It will be interesting to see if demand causes other equity research publishers to follow Auerbach, Grayson’s lead.

(4)  I don’t know how long it’s been on the Web, but KPMG has a well executed and, I think, extremely useful online XBRL course.  The course goes into much detail about the actual coding required to produce XBRL documents. It may take you a little while to learn how to navigate it; but for a more technical understanding of the workings of XBRL at no cost, it’s worth exploring. [UPDATE: Apparently the course has been around for a very long time. A reader writes in a Comment below that, although the course does a nice job of introducing many XBRL concepts, it is WAY out of date.]  

(5) The CoreFiling Taxonomy Library “bring[s] together over sixty individual public taxonomies from more than a dozen jurisdictions, including the recently completed US GAAP and IFRS 2008 taxonomies.” A how-to is provided with the actual library. It appears to be extremely well done. Charlie Hoffman’s favorable comments about the library are worth reading.  (BTW, I also liked this post of Charlie’s on how the US GAAP taxonomy allows accountants to better understand accounting.)

(6) Reviewing the comments on the SEC’s proposed rule, CFO.com finds that some companies are resisting the Commission’s timetable for XBRL adoption. WebCPA also has a piece on how New York CPAs are asking the SEC to hold off on a mandate for smaller firms.

(7) Two important fall conferences have been announced. The 18th XBRL International Conference will be held in Washington, DC on October 15-16. Perhaps not surprisingly, SEC Chairman Christopher Cox will be the keynote speaker.

The CFA Institute will be conducting a conference in London on September 26 titled XBRL for Investment Professionals. You can access online the list of speakers (which includes CFAI President Jeffrey Diermeier, as well Data Interactive guest bloggers Ralf Frank and David vun Kannon) and the brochure.

(8) The US GAAP Taxonomy – Tips, Tricks, and Traps, by Charlie Hoffman and Christine Tan, is another key document that can be added to the resources Neal and Mike provided in their post last week on getting ready for an XBRL mandate.

(9) Finally, the IFRS Taxonomy Modules Manager has been released. The IASC announcement describes its key features, and Gerald Trites at the XBRL Canada blog has a post about it. 

One item on the list that’s of particular interest is the comments the SEC has received on the proposed XBRL rule. Ed Hodder put up a post yesterday summarizing their contents. I’m reading through them too, and I’ll see if I can add anything useful to Ed’s note.
 

Written by Neal Hannon and Mike Willis     Posted on August 8, 2008

Neal Hannon is an XBRL consultant and the former Director, Financial Reporting Technologies for the Financial Accounting Foundation (FAF).  Mike Willis was Founding Chairman of XBRL International and is a partner with PricewaterhouseCoopers.

The SEC has been moving steadily toward the day when the EDGAR filing format is completely replaced by XBRL formats.  Interactive data gives regulators like the SEC the ability to process complex information contained in filings quickly and efficiently.  With the overhaul of the EDGAR system nearing completion, the day when companies will be sending “as filed” XBRL file formats will be soon upon us. 

On May 14, 2008, the SEC voted to release for public comment a proposed rule for public companies to file certain data with the SEC using XBRL.  The proposed rule is expected to become final sometime this fall.  Domestic and foreign large accelerated filers who file using US GAAP and have a worldwide public float above $5 billion will be subject to the new rule beginning with companies whose fiscal year ends after December 15, 2008.   This means that CFOs in the largest companies are putting XBRL on their agendas right now.

Ladies and Gentlemen, Start Your XBRL!
Chances are most companies are holding their first XBRL meetings right now.  Designated people within the finance function are gathering information and getting ready to make a decision that seems easy, but can be fraught with added cost and risk depending upon which way they elect to create their XBRL exhibits.  The XBRL decision should reflect a proper balance of risk, control, and cost that reflects individual company preferences. 

Let’s assume you are the Director of Financial Reporting for a very large company and you just received the phone call from the CFO about XBRL.  Tag, you’re it.  Your first meeting with staff confirms that the team needs to begin with the basics before the decision is made.  The first stop should be the SEC website where you can find information about the proposed rule, feedback from the Voluntary Filing Program, and various interviews with people who have experience in creating and using the US GAAP taxonomy (listen to the webcast of the March 19, 2007, SEC roundtable from 0:56 to 1:24).

Next stop: the XBRL US website, where more specific information on the proposed rule, relevant tools, and implementation case studies can be found.  After gathering the proposed rule requirements, the users guide, and information gleaned from industry association websites (AICPA XBRL Resources, FEI XBRL Page, IMA Technology Excerpts) and large accounting firms (PwC XBRL Resources, Deloitte XBRL, E&Y XBRL Business Reporting, KPMG Knowledge Base), your background-gathering exercise is nearly complete.  Recent financial press articles (see CFO.com and Business Finance Magazine) and public webinars (see XBRL US) should round out your team’s basic knowledge. 

Next your team will need to decide how to prepare the required XBRL exhibits.

Three Ways to Tag
There are three ways a company can satisfy the SEC’s filing mandate.  These are:
(1) Outsource the XBRL to a financial printer or other EDGAR filing agent
(2) Use a bolt-on XBRL software package to create XBRL exhibits internally
(3) Integrate the XBRL mapping inside your normal financial reporting process

Outsource XBRL
Outsourcing may at first seem to be the logical choice for most companies.  If a financial printer is already engaged with a company for SEC filing, adding the XBRL filing to the normal SEC filing will in some cases make sense.  However, companies should take a good look at the pluses and minuses of this option. 

The advantages of outsourcing XBRL include:

1. XBRL tagging process is outsourced.  There is no need to learn about the internal process implications. 
2. If you are currently using a financial printer for filing SEC reports, they most likely will have already invested in how to file the proper XBRL.

The disadvantages of outsourcing XBRL include:

1. Most companies will not want to defer accounting decisions inherent in choosing XBRL tags to people outside the organization.  Creating an XBRL filing is really all about making a series of accounting reporting decisions.  Your CFO and the investing public will hold your team accountable for any XBRL mistakes.
2. Outsourced tagging will take place after your external reporting cycle is complete, adding incremental time and cost to the process. 
3. Outsourced XBRL will require an internal staff review, which has implications both in time to file and accounting staff time to recheck the XBRL formatted report.
4. Company specific extensions are likely and internal experts will be required to make these assessments even in an outsourcing scenario.
5. The current SEC proposal year-two requirements involve tagging the financial statements notes in detail and may provide a challenge to outsourcing solution providers.
6. Outsourcing is not likely to enhance a company’s compliance efforts.
7. Specifically, how does the third party service impact/enhance corporate reporting processes so that compliance with the year-two requirement to tag the notes to the financial statements in detail is accomplished in an effective manner?

Many companies will no doubt choose the outsource approach for their first round of filings.  If the SEC clarifies its proposed rule regarding liability [see Neal’s June 10 post] and clearly waives any liability associated with XBRL tagging, the outsourced approach will be a short-term path of low resistance. 

The Bolt-On Solution
Using a bolt-on tool, the process of creating XBRL is accomplished after the financial reporting process is complete.  Company financial disclosures are typically loaded into desktop applications and then mapped to the US GAAP taxonomy.  The software facilitates mapping of company data with the taxonomy, then creates the required XBRL formatted report. This process is known as bolt-on because it is a separate process that happens after the financial reporting process is complete. 

The advantages of the bolt-on approach include:

1. Brings the accounting decisions in-house.  When tagging financial reporting data in XBRL, many accounting decisions are made when choosing the proper elements.   The internal accounting team reviews the chosen taxonomy element immediately after the SEC filings are prepared. 
2. Develops in-house expertise in matching company accounting with XBRL taxonomy concepts.
3. Engages company personnel in the topic, enabling them to more directly apply it to a range of their internal compliance processes.

The disadvantages of the bolt-on approach include:

1. The process is inefficient.
a. A bolt-on process requires your internal team to perform extra steps beyond the normal financial closing process to create and verify the XBRL.
b. The process is disconnected with the normal process, opening the door for human error.
c. The XBRL exhibits may be hard to match the “as filed’ SEC reports, creating a possible out-of-compliance situation.

The process of creating XBRL tags cannot begin until after the closing process is concluded.  This creates additional risk of filing late. The process of importing financial data into the bolt-on tool is typically a manual process which increases the potential for error.

The bolt-on approach is typically used by companies which decide to keep the process of tagging their financials in-house.  An entire, separate process needs to be developed around the import of financial data, the mapping of the company data to the taxonomy, and the verification that the output is the same as the filed SEC schedules.  The extra cost to the external financial reporting team in both time and additional risk leaves some companies wondering about a better solution.

The Integrated Solution
XBRL is simply a way to express the accounting decisions of a company in an electronic format.  The decisions made during the closing process should be seamlessly and directly reflected in all output from the closing process, including XBRL.  The natural evolution of XBRL inside the corporate environment will find companies seeking out solutions that are fully integrated with their normal closing process.  Creating XBRL tags that are automatically in alignment with SEC requirements without extra effort will save time and money, and improve accuracy.

The advantages of the integrated approach include:

1. Brings the accounting decisions in-house and embeds them within the normal closing processes.
2. Develops in-house expertise for matching accounting decisions with appropriate XBRL taxonomy concepts.
3. Increases efficiencies.
a. Seamless integration within closing cycle
b. Internal audit trail that provides tracking for all events including XBRL
c. XBRL tags applied to actual filings for exact matching to SEC schedules
d. XBRL files generated simultaneously with standard SEC filings
e. Auto-post to corporate investor relations website is possible
f. In-house XBRL expertise facilitated
g. Improved timing of closing cycle identifies company as a leader
h. Verification of SEC filing and XBRL tags is accomplished before closing cycle is complete; no extra time or manpower required
i. Installation time and training low
4. Lowers total cost of ownership — no additional steps required to produce XBRL means no additional internal labor expended.
5. Reduces risk.
a. SEC normal filing and XBRL exhibits are automatically the same, lowering the risk of tagging outside of the normal close.
b. Risk due to delays in filing XBRL schedules are eliminated.
c. Accounting decisions are immediately reflected in the XBRL.

The disadvantages of the integrated approach include:

1. Initial investment may be higher. 
a. The software fees associated with an integrated solution are often higher as compared with a bolt-on solution.
b. The accounting staff will need to know enough XBRL to make the correct choices during the normal closing process.  This disadvantage will disappear once XBRL becomes routine.

Summary
Domestic and foreign large accelerated filers whose first fiscal period begins after December 15, 2008, are finding that the time for choosing the best method to comply with XBRL submission is now.  Soon after, all accelerated filers will be required to file in XBRL.  The three choices available to companies are outsourcing the activity, licensing bolt-on software, and integrating the XBRL inside the normal business close cycle.  Any of the alternatives will help companies get the job done. 

The alternatives present certain trade-offs when examined through the lens of corporate risk, efficiency, cost, and speed.  Knowing the likely outcomes of each alternative will help companies choose the path that is right for them today and in the future.

Written by Bob Schneider     Posted on July 31, 2008 

I’m sure I’m showing my age, but in the hundreds of times I’ve Googled for XBRL, I’ve rarely looked at the results in the Video section. Not surprisingly, when I finally spent some time there (and in the YouTube section too), I found some very good stuff. A Roger Ebert post on XBRL videos is definitely in order.  

So welcome to the 2008 eXBy Awards. The nominees for Best Interactive Data Video are…well, actually, I’ve included most of the watchable XBRL videos I found in Google results. (I haven’t included so-called webinars, many of which would earn top ratings. I’ve also excluded any items from YouTube’s HitachiXBRL channel, which has the presentations of Mike Willis and Dr. James Canton at Hitachi’s NextFinance conference.)

How XBRL Works   A short video by Charlie Hoffman that does a superb job of explaining the essence of XBRL and its raison d’etre. Charlie takes a typical financial statement footnote and demonstrates how its text can be structured for meaning (as opposed to merely presentation). He makes the argument of why a global standard (i.e., XBRL) is necessary and valuable for tagging business information.   

How Can Companies Streamline Enterprise Business   Jeff Thompson from the Institute of Management Accountants (IMA) explains that the uses of XBRL extend beyond financial reporting to such areas as SOX compliance. Jeff emphasizes that XBRL is as important for internal reporting as external reporting. He expresses the support of the IMA for XBRL adoption.

XBRL in Plain English   This short, informative introductory video from Just Systems has lots of fun graphics and a cheerful narrative. I was put off, however by some of the overstatement, like “Information in a non-XBRL world is a terrible thing” or “No longer will companies be able to obfuscate financial information.” Still, the video is definitely worth recommending to someone who is completely new to the subject.

XBRL Convergence   A series of six videos (1, 2, 3, 4, 5, and 6), each eight or nine minutes, of Mike Willis’s presentation in June to the CalCPA Council. Mike begins with a discussion of convergence and explains how it’s a much larger issue than simply combining IFRS and US-GAAP.   He goes on to discuss XBRL in detail and how it will change the way financial professionals work.  A very good introduction. 

SEC Chair on XBRL   This video from 2006, with Chairman Cox discussing his plans for developing US GAAP taxonomies,  is now significantly dated. But it’s still useful for understanding how he views the benefits of XBRL for financial reporting.

The Business Value of Bringing XBRL into the SOA Fold — Part 1  (NOTE: I had technical glitches trying to get this video to work.) Presented by Dianne Mueller and the staff of Just Systems, the video touches on a variety of topics, including the use of XBRL at the FDIC and SEC, the corporate reporting supply chain, and XBRL taxonomies. Dianne does a good job of putting XBRL into the broader context of all XML languages. Part 2 and Part 3 cover the technical aspects of XBRL solutions and are of more interest to developers and other IT specialists.

And the 2008 eXBy for Best Interactive Data Video goes to…
….Charlie Hoffman for How XBRL Works. Congratulations, Charlie!

In truth, it simply isn’t fair to compare videos of widely differing lengths and purposes and award one winner.  All of the nominees are to be congratulated, and I hope you’ll spend a little time checking out their work.

Dominic Jones, who writes the highly regarded IR Web Report blog and is a leading voice in the investor relations field, kindly agreed to do an interview with us. He is a principal of Clarity! Communications of Canada  and has more than 15 years of experience in journalism, investor education, and online investor relations communications. The second part of the interview, beginning with question (7), appears below; the first part was published last week.

(7) The SEC has tried to familiarize users with XBRL by making available several viewers with various types of data – company information, executive compensation, etc.. What is your opinion of these viewers? Do they do the job of convincing investors and other users that XBRL has something special to offer?

The viewers are quite basic in their functionality, but they are a good foundation for further development. It was important for the SEC to develop its viewers and make the source code available. But the best viewers will come when vendors start designing products based on investors’ needs.
 
One thing I don’t think the XBRL community realizes is that human-readable applications of XBRL, such as Microsoft’s Investor Central, are actually not as good or as usable as what is already being done on a few investor relations websites with considerable effort using old-fashioned, hand-coded HTML.

Some companies produce interactive quarterly reports in HTML that include functionality that is more sophisticated than that being done by Microsoft’s Investor Central. These HTML reports are being published simultaneously to the companies’ earnings releases, whereas Microsoft’s Investor Central is only updated several days after it has released its earnings. 

Of course, the companies that are currently doing things the hard way in HTML are going to benefit handsomely from the efficiencies that XBRL will bring. They will be able to do what they are currently doing in a fraction of the time and at much less cost.

It concerns me that the XBRL community has not managed to engage the mainstream web development community to use and experiment with XBRL data. My sense is that many people view XBRL as some kind of closed technology for financial software vendors and accounting firms. They don’t see it as open web technology similar to other semantic technologies.

(8) Advocates of interactive data say that the greater transparency and ease of analysis that XBRL statements offer will reduce the cost of capital for smaller companies. Others suggest that XBRL will have the opposite effect for at least some companies, revealing negatives that had previously been hidden. Do you think interactive data is a boon to smaller companies seeking capital, or do you think the advantages are overstated?

Both outcomes are probably true. Well-managed smaller companies will probably see benefits, while poorly managed ones will suffer. The same goes for big companies.

For me, the telling thing will be how management uses XBRL inside the business to make better decisions. Simply bolting XBRL on at the end of the financial reporting process might give investors data in a standardized electronic format, but it doesn’t help management beyond the opportunity to potentially be included in the universe of companies investors are applying their screens against.

If I am investor, a key data point will be to know if and how management is using interactive data inside the business. If XBRL allows investors to make better, faster decisions, it can do even more for you if you are managing and growing a business. In that sense, one of the most important tags in an XBRL filing with the SEC might be the one that identifies the vendor and technology a company used to prepare its XBRL documents – are they integrating XBRL into their internal reporting or bolting it on at the end by sending it to a financial printer?

(9) Companies now use their websites to varying degrees for IR purposes. The SEC’s proposed rule includes a provision that companies provide their XBRL files on their website simultaneous with their submission to the SEC. Overall, how do you see an XBRL mandate affecting the use of a company’s website for IR purposes?

By itself, the requirement to post XBRL files on corporate websites will have little or no impact on corporate investor relations websites. Companies simply have to post raw XBRL files on their sites. There’s no requirement to render those files in a human readable format or provide them via a web feed.

Until regulators recommend specific standards and recognize corporate website postings as being sufficient to meet broad disclosure requirements, companies will not invest in their websites. Interestingly, in countries where there were until recently no established newswire services or web-based regulatory databases – such as Germany, Sweden, and even the UK – companies have invested in their corporate websites, and those sites are on the whole much better than what you will find in the US.

Investors have been complaining for years that they want better web resources from US companies, but the vast majority of companies have failed to respond. I don’t think XBRL by itself will change that.

(10) Where do you see XBRL adoption three years from now? Do you think, as planned, most public companies will be submitting their financial statements and notes to the SEC in XBRL format? Or will there be numerous delays before a broad-based XBRL mandate is achieved? 

I don’t see anything delaying the proposed schedule because it is already very conservative. If anything, there is a strong case that can be made for moving a lot faster. And this might happen if new technologies come along that make it easier to tag financial and other information in XBRL and then distribute it to investors in real time at little or no cost. 

Even though XBRL has been 10 years in the making, we are still only in the very early stages of adoption. We shouldn’t forget that under the SEC’s proposed schedule, after three years fewer than half of US issuers will be tagging the face of their financial statements and their footnotes in detail. The rest will still only be tagging the face of their financials in detail and their footnotes will still be in block tags.

The MD&A will remain untouched. Proxy statements and the executive compensation information in them won’t be tagged. And perhaps most important, earnings releases won’t be in XBRL. Then there is still the problem of ensuring that XBRL data from one country is directly comparable to that from a company in another country.

So three years from now, I think we will still be waiting for the promised revolution that interactive data was supposed to bring.   

Dominic Jones, who writes the highly regarded IR Web Report blog and is a leading voice in the investor relations field, kindly agreed to do an interview with us. He is a principal of Clarity! Communications of Canada and has more than 15 years of experience in journalism, investor education, and online investor relations communications. The first part of the interview appears below; the second part will be published next week.
 
(1) What is your overall view of the SEC’s interactive data initiative? Was Chairman Cox right to make XBRL implementation an important priority of the agency? 

I do think it is an important strategic initiative when you look at it in a global context. Other countries have already moved to mandatory XBRL, including major economic powers like Japan and China. At the same time, the rest of the world is moving to a single accounting standard. And with investors easily able to invest anywhere in the world, there was a risk that US companies could be disadvantaged. I believe companies in countries where XBRL has not been championed by regulators to the same extent could find it harder to attract investors in the future.

Of course, Chairman Cox has basically had to ram XBRL down the throats of a reluctant audience, and he may need to do a lot more convincing. There have been few volunteers for the XBRL pilot program, which in itself should be instructive to the SEC about the lack of initiative that US companies take in communicating essential information to their shareholders. Our own research of how companies use the web in their investor communications has been consistent in finding that US companies are not leaders on the global stage.

The XBRL mandate will help US companies to catch up and take the lead over corporations in other countries. And I hope it will prompt companies to give more thought to how they are using technology to keep their investors informed and engaged on a broader scale.  

(2) Under the SEC’s proposed rule, about 500 of the largest US firms will be the first to submit XBRL exhibits, and other companies will be phased-in over time. Which comes closer to your point of view: (a) Good move. The big firms have the resources to do this with the least pain – let them go first. The smaller companies will learn from their experience. (b) Bad idea. This limited universe of only the biggest companies means whatever XBRL data there is will be mostly useless to analysts and investors. Implement it in one feel swoop for everyone.

I see the proposed implementation schedule as a political rather than a technical decision. It is a compromise designed to avert a backlash from issuers who already feel there is too much regulation that imposes unnecessary expense on companies, especially smaller ones. The SEC has shown it is very sensitive to smaller companies, as we have seen with the repeated delays in Section 404 of SOX.

From a public company’s perspective, there is nothing to prevent them from adopting XBRL earlier than required and making sure their data is included along with the first wave of companies. But I’m not sure how much there is to gain from being early because it’s not clear yet how and when data vendors and analysts are going to use XBRL.

Obviously, it would be better for investors to have access to data on the full universe of US companies much sooner. Even after the third year when all companies are filing parts of their 10-Qs and 10-Ks in XBRL, I think investors will still see it as only a small step towards what they really need, which is all corporate disclosures – especially earnings releases — tagged in a machine-readable format, and faster reporting of that data.

(3) There’s been much discussion about whether assurance should be required for XBRL statements. Do you think analysts will ignore interactive data if it doesn’t have an auditor’s imprimatur? Or do you think analysts believe tagged data doesn’t require additional assurance and will happily use XBRL exhibits? 

Most of the people who are calling for third-party assurance over XBRL are connected to auditors and I think that makes people suspicious. I’m in the camp where I think it only becomes a big issue when something goes wrong and people start looking for ways to correct the problem. The fact is no amount of assurance from a third-party will be completely foolproof. People who want to commit fraud will find ways to do it with or without XBRL or an audit.

Some have argued that if you don’t have some kind of audit, then companies will play fast and loose with their data because there will be no one looking over their shoulders. I don’t fully buy that argument. I think they are overlooking the huge penalties that the market exacts on companies that issue unreliable information, and that is enough of a disincentive for firms to be sloppy in applying XBRL.

Finally, I see auditor assurance as a barrier to widespread adoption because it will impose additional, unknown costs. But if a company decides it wants to have its auditors give their stamp of approval on its XBRL data, then they should be free to do so. This will likely give investors greater confidence in the data, the benefits of which could more than offset the cost of the audit.

(4) Thus far, most IR professionals have not shown great interest in XBRL. What do you think are the main reasons for their indifference?

Most US investor relations officers (IROs) are not directly involved in disclosure technology and have a very poor understanding of it. This is mostly because about 75% of investor relations sections on US corporate websites are outsourced to hosting services. IROs have generally been entirely hands off when it comes to these sites so they’ve lost out on a lot of important learning over the years. They don’t understand what HTML is, so XBRL is even more alien to them.

And because their clients are oblivious, the two major firms that host investor relations websites have had little reason to innovate or implement best practice. I don’t expect this will change much because IROs mostly will not be directly responsible for implementing XBRL inside their companies, although they may be part of the decision-making around which tags the company is going to use.

Of course, once XBRL data is in the hands of investors and analysts, IROs will be on the frontlines dealing with the questions. But until that day comes, IROs don’t have an incentive to pay attention to XBRL. Unfortunately, a lot of IR departments are probably in for a rude awakening when analysts start asking more detailed questions once they have XBRL data to work from.
 
(5) Overall, how do you see the role of IR professionals changing because of interactive data? What difference will it make in their day-to-day activities? Do you think XBRL adoption will create greater opportunities for IR practitioners, or will it reduce the need for their services?

In the short-term, there will probably be a lot more need for IR practitioners who can explain their companies’ accounting decisions to analysts and investors. I expect that there will be a lot more questions of a technical accounting nature.

In the longer-term, however, my view is that XBRL will commoditize historical financial data. There’ll be less reason for analysts and investors to devote time and resources to formatting and analyzing data from the past because there will be little to gain from doing so if everyone has the same information and the same ability to analyze it using computers and software.

At this point, the focus will probably turn to external factors and to more analysis of a firm’s future potential. IROs will be under greater pressure to explain their companies’ strategies and the context in which their businesses operate. The ability to communicate these soft factors to investors will become much more important. They will need to become more proactive communicators.

I guess I am saying that by making data easier to analyze, XBRL will make data somewhat less valuable while factors that are not easily measured, such as management credibility or innovation, will become much more valuable.  

(6) How does XBRL adoption change the education and experience requirements for IR professionals? How would you suggest both new recruits and experienced IR pros prepare for an interactive data mandate?

I don’t think it changes the requirements much by itself. But as part of a broader trend of increasing use of technology in disclosure and communications in general, I expect that IROs will need to become much better communicators and much better at understanding how to use technology to ensure that their companies’ stories are reaching investors.

XBRL is going to give analysts and investors more time to research what others are saying about companies. And much of what is being said about these companies will be online. IROs are going to have to understand more about how to use new media and how to monitor and respond to what is being said.

However, the basic requirements of a good IRO will remain the same: a good understanding of how investors make decisions; a solid understanding of accounting; and outstanding communication skills.

Written by Matt Kelly     Posted on July 15, 2008

Matt Kelly is editor-in-chief of Compliance Week, a magazine and online newsletter on corporate governance, risk, and compliance. Prior to his role at Compliance Week, Kelly was a reporter and contributor on corporate compliance and technology issues for magazines such as Time, Boston Business Journal, eWeek, and numerous other publications.

Not long ago, Compliance Week polled its readers — financial reporting and corporate compliance executives — to see how prepared they are for the XBRL mandate hurtling towards them from the U.S. Securities and Exchange Commission (SEC). The results were less than encouraging.

It’s true our survey did go out in early June, just after the SEC published its proposed rule to mandate XBRL technology. Perhaps the results are a snapshot in time, and will improve in coming months as the XBRL mandate comes closer to (and eventually becomes) reality. But from what we saw, the picture right now is a raucous high school class: everyone still doing his or her own thing, while the teacher pleads for them to pay attention.

Specific findings include:

• Of the 236 respondents, 104 (or 44 percent) said they had just begun researching XBRL and their companies had done no previous testing. Another 26 respondents (11 percent) said they had no knowledge of XBRL at all.
• A substantial majority of 79 percent said their companies had no XBRL expert on staff at all. Nineteen percent had an expert on the financial reporting team, and 2 percent had an expert in the IT department.
• Sixteen respondents (7 percent) participate in the SEC’s voluntary filing program. Another 6 percent say they’ve done some small pilot tests, and 2 percent say they’ve been testing their own systems comprehensively.
• Some 30 percent of respondents say their companies haven’t yet tested XBRL, but say they’ve been following the topic closely.

What’s more, the results suggest that large companies — the ones that will start adopting XBRL probably in a matter of months — are just as unprepared for the change as small companies. Of the 47 respondents with 20,000 or more employees, 34 percent had either just started researching XBRL or done no homework at all. Thirty-eight percent of companies with $5 billion or more in annual revenue were in the same predicament.

The SEC is not sounding any alarm bells yet. Officials there believe most of Corporate America will come around to the reality of XBRL soon, and they’re probably right. Standard procedure among most corporations is to ignore any new rule from the SEC until the last minute, and then scramble to comply with it as quickly as possible. That’s what happened with the Sarbanes-Oxley Act four years ago, and that’s what is happening now.

The SEC also has one invaluable card to play: XBRL genuinely isn’t as hard to implement as SOX and its dreaded Section 404 provision. That had been everyone’s fear two years ago, when SEC Chairman Christopher Cox began his campaign to make XBRL the law of the financial reporting landscape. But Compliance Week has been keeping tabs on the several dozen companies participating in the SEC’s pilot XBRL program. Almost universally, their opinions boil down to: “Oh, that? It was confusing for a quarter, but then it wasn’t anything special after that.”

Words to warm any securities regulator’s heart. And words to suggest that, despite the current confusion, the SEC may yet just pull this XBRL thing off.

Written by Peter Boritz     Posted on July 14, 2008

Peter Boritz is the chief technology architect for Snappy Reports XBRL. In the first part of this article published last week, he offered an overview of XBRL software and general advice on what to buy. In this second and final installment, he provides a list of features to keep in mind when purchasing XBRL products.

1. A good software program should be visual and intuitive and easy to use. Although the tasks at hand may seem complex, a good software program dissects tasks down to an understandable array of accomplishments that can be completed through a step-by-step approach.

2. The software should be able to extend private and published taxonomies. A published taxonomy is most likely produced by a regulatory agency, as the US-GAAP is. Your business may create private, internal extensions to published taxonomies for specific uses. An example might be for a filing company that has many clients in the trucking business. It could create a taxonomy extension to the US-GAAP specifically for their trucking business clients. Each client could then extend the trucking business extension to the US-GAAP, as required.

3. Software should be able to create reporting period contexts and allow users to specify some basics, such as currency type (if applicable) and numeric precision. A reporting context defines (1) whose data is it (who) (2) the reporting period (when) and (3) a unit of measure, such as dollars or euros (what). The who, what, and when defines an XBRL object referred to as a context.

4. Software should be able to create reporting segments. A reporting segment provides additional information regarding a context.

5. Software should be able to extend taxonomies for new elements, labels, and references from within the program. This is very handy when the element you want does not exist and you would like to create it on the fly. A good mapping program should allow you to extend and map from the same dashboard. A good filing program should allow you to do the same. In both cases, extending an element not only refers to creation of an element, but also creating a corresponding label, and all necessary arcs and locators required to do the job.

6. Locators are more technical than users need to understand. A good program handles locators implicitly, without the need for users to know or understand what they are, or that they exist.

7. Arcs should be created indirectly through intuitive operations. Users shouldn’t have to know what an arc is or does. Users should be able to drag and drop objects into place and handle specific operations in relation to objects selected. Arcs should be created and maintained through functions users perform, not through a technical understanding of what an arc is and does.

8. Users should be visually able to see report totals, and be able to distinguish calculation arcs from dimension domain member totals. A good filing program will calculate and display totals as changes are made to the filing. Totals may take two flavors: (1) dimensional domain member totals, or (2) totals determined through calculation arcs. Real- time totals are necessary in order to quality-control your filings against your data source, such as an Excel spreadsheet or other document.

9. It should be able to create dimensional and calculation total (arcs) for newly extended elements. In many cases, when you extend for a new element, the newly created element has siblings. Those siblings have mathematical relationships that must be mirrored in the new element. For instance, if you create an extended element for construction payables, and that element is a sibling to accounts payable, construction payables must be included in all calculation arc totals that accounts payable participate in. The same is true for dimensional domain member relationships, defined in the definition link base.

10. It should be easy to drag and drop, type, or map business data into filings. Many Excel-based programs have users dragging taxonomy elements into Excel data cells. Stand-alone programs generally do the opposite. They drag data from spreadsheets or other data sources to elements in the filing. Both equally achieve the same purpose. Neither is preferable to the other.

A spreadsheet displays data the way users work. The process of dragging and dropping requires that elements be displayed side by side. The preferable format for displaying elements is in a format similar to the spreadsheet. This is not as difficult task as one may think. Software can display elements in one of many report formats. For instance, if you are working with a balance sheet or income statement in your spreadsheet, a good software program should be able to render the taxonomy as a corresponding balance sheet or income statement along side. This makes it easier to relate your data source to the taxonomy and provides excellent groundwork for maintaining quality control.

11. It should provide filtering mechanisms in order to narrow down the scope of possibilities. The US-GAAP contains over 12,000 elements. Possible flavors of filtering include:

a. Industry level filtering. The US-GAAP (March 2008) provides for filtering based on one of five industries:
• banking
• brokers and dealers
• commerce and industry
• insurance
• real estate
Most businesses would most likely fall under commerce and industry. Choosing the industry first filters out elements not specific to your industry of interest.

b. Role module (report) filtering. This allows users to visually display a reporting module within the taxonomy in presentation view (as it would be printed). For instance, if you have a balance sheet-related concept, role module filtering shows you the balance sheet and only those elements within the balance sheet.

c. Sounds-like filtering matches concepts to elements based on word pattern matches. For instance, if the concept contains the word revenue, a pattern matching filter might display all elements that also contain the word revenue.

12. Mapping and its corresponding data should be persistent. That means you load data and map once and you are done. A good program will allow you to load data once and re-use it against multiple taxonomies.

13. Mapping should provide an inventory of unmapped facts. Unmapped facts will never show up on a report, but they must be accounted for. Some facts are intentionally not mapped – for instance, if you are bringing data from your financial system or spreadsheet for total assets. If total assets is calculated within the taxonomy, mapping in a total assets value may multiply the result in some programs, others will do a comparison and generate an error if the two do not match.  You must still be able to account for the fact that total assets is intentionally not mapped. There may be other data facts that are mistakenly not mapped. An audit list of mapped and unmapped data facts must be clearly displayed.

14. A good program makes the mapping process easier. You should be able to map based in relation to a report module. This means focus on mapping to the balance sheet or income statement, one at a time. You should be able to filter down to parts of the report as necessary. For instance, work with only the liabilities or payables section of the balance sheet. A good mapping program provides mechanisms to extend taxonomies by being able to create extended elements from within the mapping tool and then be able to map to those extended elements from a single dashboard.

15. Filing programs should be able to track the people who entered and made changes to the filing and the date and time of changes.

16. Reports need to be produced in human readable format. Popular possibilities include web, Excel, or Word. Other possibilities may include postscript.

17. Elements should be displayed in label view and be translatable to other languages. Language translations are built into the taxonomy. The US-GAAP is currently English only. The IFRS has translations for most languages spoken throughout Europe, including Spanish, French, and German and a host of others. You cannot expect people in foreign subsidiaries to work properly unless they can visually see elements in their native language.

18. Software should be able to map to elements relative to tuple attributes. Although tuples are not used within many taxonomies, they are still part of the specification and need to be addressed.

19. Software should ensure that abstract elements are not mapped to. Abstract elements are for organizational purposes only. They cannot be mapped to.

20. Software should ensure that published taxonomies, such as the US-GAAP, are not internally modified in any way by the program.

21. For internal reporting, be able to extend dimensional domain-members for proprietary business facts.

22. For the security conscious, only those users having logins and passwords should be able to have access to the software. Some programs allow administrators to grant and deny permissions to people for specific tasks, but not others. For instance, taxonomy developers may not have access to data or vice versa.

23. Finally, software should provide easy access to external references. Many programs display references through a pop-up tool tip that is displayed automatically as the cursor travels over a related element.
 

As many readers know, Walter Hamscher is an XBRL pioneer and one of the smartest people in the field. He recently gave us a wide-ranging interview in which he discussed a host of XBRL topics, including the SEC’s proposed mandate, the pace of XBRL adoption in the US and abroad, assurance issues, and Inline XBRL. The fifth and final installment of the interview, which begins with question (12), appears below. The first, second, third, and fourth parts were published over the past few weeks. 

(12) One of your special strengths is communicating technical topics to diverse audiences in plain English. It seems that XBRL poses a special challenge in this regard, i.e., it’s very hard to explain even the rudiments of XBRL without getting highly technical very quickly. Do you think it’s possible to give general business audiences a sense of what XBRL is in plain English?

Well, I used to think that and I think it’s still possible. But I would certainly say that as a community we often expose way too much of the technology. The reason we’ve had to do that is because we haven’t paid enough attention to the applications, so we wind up talking about the data format, and the taxonomies, and showing people angle brackets.

For example, you can use the Web for years and only know that there is thing called a browser; you don’t even know that there is a thing called HTML. Whereas we have done it the other way around. We talk a lot about the language without really focusing on applications; there is no fully defined notion of an XBRL browser, there is no basic application that uses XBRL. There is also this kind of mental wall between using Excel spreadsheets and using XBRL. We never should have let that wall grow up between the two ideas.

People are going to use spreadsheets. Spreadsheets are incredibly powerful, they are a great idea; we really should be talking about how XBRL is something that makes the data in spreadsheets more consistent, more usable. It’s very easy to find text on the web that makes it sound as if XBRL is some alternative to spreadsheets. I mean that is just silly, it’s not an alternative. It’s an improvement to spreadsheets.

I would go so far as to say that even if I never see another application other than Excel using XBRL I would be happy. That is not a problem for me, but for whatever reason there are not enough Excel-based applications, plug-ins, and alternatives to make XBRL come alive for people.

So we talk about the standard, we talk about the taxonomies. The reality is that, instead of talking about the taxonomy, we should talk about — it should almost be like a hidden sheet within an Excel Workbook. “Oh, and by the way, this hidden sheet has a bunch of definitions in it,” and so on. We would be a little further along in having people be familiar with XBRL, but we always talk about the data structures rather than the application.

Well it seems to me you’re almost saying that the underbelly of XBRL, all those angle brackets – it’s not worthwhile trying to explain that to people. We should just go ahead and try to develop applications in the same way we use a browser, where most people don’t worry about the HTML at all.

I wouldn’t go so far as to say that we should ignore it, but let me put it this way. I had to write the Preparers Guide for the US GAAP Taxonomies, and it was frustrating because I couldn’t refer to any particular application or set of specific operations that one would do.

I can make all those operations and give them names, and give them a sequence, and never actually refer to the software and then talk about things like axis and dimensions and so on. I don’t really think that most users need to know that anymore than when they are creating a chart in PowerPoint they really need to know how all that stuff works underneath.

How exactly that line is drawn I don’t know. But I think that is, unfortunately, where we are. If I had it all to do it over again, I know that I would have liked to spend a lot more time on simple applications and Open Source software to get the stuff into the hands of developers so that they could actually be used in existing applications.

I think we have a complex specification because financial reporting is complicated, and it’s going to take a while for all the software to catch up to it. But once the software does catch up, I think people will see enormous value in XBRL and they will do things with it we haven’t even thought of.

(13) Where do you see the future of XBRL? Do you think it will go beyond the financial realm to become the lingua franca for all business information? Is there anything specific the XBRL community should be doing now to foster its use? I think you have answered that to some degree in discussing the development of software, but is there anything you would like to add?

For our current XBRL community, it’s very important that they go get the free products, download them, try them, and give feedback to the vendors. Even if the feedback is “I couldn’t get it to work,” that’s valuable to the vendors.

It’s the vendors who are in this community that have invested a great deal in it. In contrast with that investment, I don’t sense that they get enough useful feedback from the XBRL user community. I don’t think the vendors are quite getting the feedback they need about what are the simple features that their tools need in order to make all this usable. I think if everybody who went to the Eindhoven Conference would spend a few hours downloading the free tools and try to use them, and then just send a note to the vendors and say, “this didn’t work, but that did,” that would be a great, great, great thing. Because I just don’t think that happens enough.

The other part of your question was whether I think XBRL is going to be the lingua franca for all business information.  Actually I do, and I think that the evidence for that is that there is absolutely nothing else on the horizon that comes even close.

So the first question is, will there ever be a lingua franca? You can believe that or not believe it.  But if you do believe there is going to be one, then XBRL is definitely going to be it — there is no alternative.

So then the question becomes, is the lingua franca needed? Well, I think with the globalization of markets and the globalization of all kinds of reporting — including business performance metrics and sustainability reporting – it’s obviously yes; there’s a huge number of other opportunities for XBRL.

We just need the software, and we need the community to really get engaged in trying the software and giving feedback to vendors.

Written by Peter Boritz     Posted on July 7, 2008

Peter Boritz is the chief technology architect for Snappy Reports XBRL. In this first post of a two-part article, he offers an overview of XBRL software and advice on what to buy. The second part describing features to look for in XBRL products will be published next week.

Looking for XBRL software can be a perplexing task. Understanding XBRL and the many requirements necessary for you to run your business can be challenging, and software features can vary greatly among vendors. So how do you determine which is the right XBRL software for your business?  Some initial questions to ask include:

• What are the goals and objectives of your XBRL implementation?
• Where is your XBRL data coming from? How will you be delivering and processing it?
• What security issues do you have? How will you dissect and distribute tasks and privileges to authorized users?

Minimally, any program needs to be able to create instance documents and extensions in XBRL format. This is the end result of our labors.

Uses for XBRL generally fall into one of two categories: external reporting for regulatory compliance, or internal reporting for data consolidation and reporting.

External Reporting
External reporting applies to regulatory compliance with government agencies. An agency publishes a taxonomy that functions as the basis of the reporting. For the Securities and Exchange Commission in the United States, that taxonomy is either the US-GAAP or the ICI Risk Return.

Specific reports are built into taxonomies. These may include the basics, such as balance sheet and income statement, and may span out to a wide range of other items, depending on the nature of the information desired to be collected. Reports may collect a combination of numerical financial information, as well as text-based disclosures.

A good XBRL implementation allows users to work with taxonomies on a report-by-report basis. This means you might see the balance sheet in human readable format, and work with just the balance sheet or income statement as circumstance requires. The US-GAAP incorporates over 12,000 elements. To work without having at least a report display and filtering mechanism makes the process confusing and tedious. Being able to filter through taxonomies is imperative for any software product you choose. Better programs allow you to filter through specific sections of reports, such as just the payables portion of the balance sheet.

If you are entering numerical data into a filing, a good implementation displays totals in real time as data is entered. These totals can then be compared to the spreadsheet or other data source being used as the basis of the filing. When you see totals in the filing equal to that of your source document, you at least reasonably know that all values have been accounted for.

Internal Reporting
XBRL provides a very powerful process for data consolidation and reporting. Company policies and procedures can be expressed through one or more taxonomies that define business data and the relationships of the data from which the organization operates.

The problem of businesses operating through personal spreadsheets used privately by employees becomes a thing of the past. All business data can be consolidated and distributed to those authorized from a common repository design, based on business concepts expressed through one or more taxonomies.

Architectural Configurations of XBRL Software
XBRL software generally falls into one of two architectural categories.

1. Excel spreadsheet add-ons are accessible from within Excel. Many professionals using Excel in their jobs feel comfortable using software that supplements Excel features. The advantages of an XBRL ad-on are familiarity and ease of use.

Since this architecture is dependent on Excel to operate, Excel add-on programs are limited by the scope of Excel’s capabilities. Excel interface programs are single user programs, as Excel is. Data sharing is limited to distributing spreadsheets from desk to desk. They work well for single proprietor businesses or in cases where filings are handled by one person and one person only.

2. Standalone XBRL programs are designed specifically for XBRL. They are limited only by the functionality offered.

Key differences are how or if data is shared among users.

a. Single user standalone programs Single user programs are designed for single practitioners and companies having a one-person external reporting manager.
b. Enterprise programs  Enterprise programs allow for the exchange of ideas throughout the business. This includes business data, taxonomies, and extensions. Enterprise programs may take the form or either multi-user single database applications, or distributed databases accessed through an internet or network protocol.
c. Networked programs Networked programs are designed for a wider scope of development where users need to be able to access multiple independent databases and projects. This is distinguished from enterprise in that each project/database is independent of each other and each has its own access security, personality, and protocols.

Data Integration
Integration is the process of bringing data from your spreadsheets and financial systems into XBRL. At a minimum, software should be able to process spreadsheets, since spreadsheets are an integral part of any accounting professional’s toolkit. A good software product should also be able to import data from most business systems. Methods for importation of data can vary from product to product. Some products allow data to be imported once, and then re-used for multiple applications of the data. Others require a data import for each application, even if the data being imported is the same.

Seamless and Disparate Solutions
Software architecture can vary greatly. Some software products implement a seamless solution using a common data repository. This allows users to set up connections to enter content and others to retrieve and process data. Other systems are unable to do this. They may rely on third-party products to transform and transmit instance documents, and then re-transform them at the other end. For most applications, a seamless solution is preferable. Software that does not implement a common data repository or is lacking in taxonomy/data connectivity between servers must generally transform and re-transform instance documents as a substitute.

As many readers know, Walter Hamscher is an XBRL pioneer and one of the smartest people in the field. He recently gave us a wide-ranging interview in which he discussed a host of XBRL topics, including the SEC’s proposed mandate, the pace of XBRL adoption in the US and abroad, assurance issues, and Inline XBRL. The fourth part of the interview, which begins with question (9), appears below. The first, second, and third parts were published over the past few weeks; the final installment will appear next week.  

(9) At the recent XBRL International Conference in Eindhoven, you gave a presentation on how Inline XBRL can simplify some of the problems that arise for regulators seeking to encourage preparers to submit full financial statements and other formatted documents. Could you give us some idea of what Inline XBRL is, along with some examples of what it can accomplish?

Most people have been using Internet browsers now for years. They are familiar with the notion that you can be looking at a page, rolling your mouse over parts of it, and it may pop-up things or may change colors — things can happen in my browser as a consequence of that.

People are also very familiar with the notion that when you send an email and, say, you attach a file to it, they don’t know anything about how it actually might work inside, but they know conceptually the notion of attachment and those related functions.

Inline XBRL is really a way of saying: “Here’s an HTML page on a website and it contains financial information you can extract and use immediately.” Inline XBRL is a way of putting the XBRL right into that web page, so tha