The XBRL engine builds speed: governments and regulators see interactive data as the key component in the global financial reporting machine, but companies and internal auditors have been slow to plug in

Internal Auditor, August, 2008 by Liz Fisher

COMPANIES RESISTANT TO CHANGE

Despite signs of global acceptance by governments and regulators, there is a strong feeling that XBRL has not taken off as it should, particularly among corporate users. David Phillips, senior corporate reporting partner at Price-waterhouseCoopers in London, says many people are baffled by the relatively slow uptake of XBRL among companies. "Given the explosion in information based around the Internet, you would really expect market forces to have taken a stronger hold by now," he says. "But the fact is that companies are not yet accepting the benefits of XBRL, and investors are not calling for it in great numbers."

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"It's true to say that companies have been busy with a lot of other things," such as U.S. Sarbanes-Oxley Act of 2002 compliance and implementing International Financial Reporting Standards (IFRS), Rodgers adds. "Generally companies understand the idea but do not believe that they will see huge benefits from using XBRL immediately."

Adoption has been even slower in the United States. Outside the few companies taking part in the SEC's voluntary program, XBRL has been largely ignored. "A lot of companies just have a general resistance to anything new," says John Stantial, assistant controller of United Technologies Corp. (UTC), a global provider of high technology products based in Hartford, Conn., one of the companies participating in the SEC's voluntary program. "But many companies have also erroneously assumed that implementing XBRL will be like undertaking another Sarbanes-Oxley."

Part of the problem, Stantial points out, is that XBRL has been perceived as an expensive process for companies that only benefits external users. Advocates of XBRL, though, argue that interactive data can bring valuable benefits to internal systems, particularly in areas such as systems integration. Because the aim of XBRL is to standardize the description of business information, there are obvious benefits in sharing and migrating data across ledgers, systems, and--in the case of mergers and acquisitions--organizations, as well as in incorporating changes and reviews into the reporting process seamlessly and accurately. XBRL also greatly improves the transparency and accuracy of internal information.

Until now, companies have concentrated predominantly on "bolting on" XBRL tags at the end of the financial reporting supply chain. The real benefits of XBRL internally, though, are felt once it is integrated into financial reporting systems. Tagging raw data is more time consuming and expensive, but means that XBRL could also be used to automate internal controls and analyze information. Tagging at the general ledger level would mean that internal auditors could instantly pull information from disparate systems while maintaining the data in its correct business context. XBRL has the potential to save many hours that are currently spent identifying, extracting, and collating information from legacy systems and different parts of the business, as well as greatly improving the accuracy and consistency of data. In other words, XBRL bypasses many of the financial information supply chain problems companies experience, increases confidence in the audit trail, and opens up the possibility of near-real-time data access.