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

Under XBRL, the entire IO-Q form will be created as a report within the system and then tagged. Management reviews and changes will be incorporated directly into this report, which is updated automatically. Once the document is fully reviewed, the financial statements are generated in XBRL from the system and are transmitted to the SEC's EDGAR system. The proofing, checking, and footnoting processes will have been largely eliminated.

Stantial reports that XBRL has brought additional benefits beyond a more efficient SEC filing process. "There's no doubt that integrating XBRL [into the financial reporting process] can save a tremendous amount of time and eliminate a lot of manual effort," he says. "We estimate that it will save us between 100 and 150 hours a quarter." While XBRL also has the potential to increase the consistency of information across an organization, Stantial says UTC's processes were already thorough. "But XBRL would enhance information in some organizations because of the checks and validation processes that are built into it."

Although UTC is one of the most advanced U.S. companies in terms of its use of XBRL, it has yet to integrate the technology into its internal audit function. This is perhaps an indication of how far XBRL still has to go in the United States--because the SEC currently does not allow XBRL documents to be submitted as a main filing, companies are still in the testing stage of the technology.

XBRL TECHNOLOGY ADVANCES

While there are incremental costs for companies integrating XBRL into their systems, initial implementation costs are low. Tagging software, for instance, is available for as little as US $1,000. David Blaszkowsky, director of the SEC's Office of Interactive Disclosure, confirms that "up-front costs [for the companies participating in the voluntary filing program] appear to be low and will fall further as market forces take over."

Although software is available, packages that allow organizations to get the best out of interactive data have been slow to appear. Even so, Blaszkowsky argues that the quality of infrastructure around XBRL has greatly improved in recent years and a vendor community is emerging. He expects the market to build better applications for users as a result of the SEC's announcement.

XBRL US, the national consortium for extensible markup language business reporting standards, agrees. In a statement following the SEC's announcement, the organization notes that the SEC decision will "provide the impetus for more software providers to build out their XBRL-enabled tools," starting in the general ledger and funneling through to external reporting. The organization foresees a growing market for XBRL-enabled benchmarking and business intelligence tools, ERP products, and financial management systems.

John White, director of the SEC's Division of Corporation Finance, adds that a variety of players are needed to make XBRL a success, from niche software providers to large companies. "The state of the art is quite good, and the associated costs for companies are not huge," he explains. "It is already feasible for companies to translate what they want to put on paper into interactive data. It's not a trivial technological matter to render XBRL documents as they are today, but I expect to see progress in the future."