XBRL: a technology standard to reduce time, cut costs, and enable better analysis for tax preparers - eXtensible Business Reporting Language

Tax Executive, The, Jan, 2001 by Louis Matherne, Zachary Coffin

Behind the Scene: The Connection Between XML and XBRL

A "message standard" is any standardized means of communicating between participants the data relevant to the processing of, and aggregation of, tax filings and reports. A message standard has two components: syntax -- the technical basis of the standard; and business content -- the data necessary to process the transaction.

"Syntax" is roughly analogous to the grammar of a spoken language. An example in the language of technology would be XML (eXtensible Markup Language), the new syntax that underpins the World Wide Web and enhances and extends HTML (HyperText; Markup Language).

"Business content" roughly corresponds to the vocabulary of a spoken language. An example might be the XBRL standard -- a template or "dictionary" of data tags assigned to the information contained in the tax report line items.

XML represents a profound technological development with potentially groundbreaking implications for the standardization of electronic messages. XML is the syntax or grammar necessary to streamline the automated tax filing process. Every major software developer has embraced XML, and it is rapidly gaining acceptance as a tool for integrating disparate systems. Businesses are embracing XML, as they did electronic data interchange (EDI) in the 1980s, to facilitate trading with their partners. XML technology is turning the Internet into a powerful medium of exchange, for business-to-business (B2B) and business-to-consumer (B2C) e-commerce, for education, for e-government, and much more.

But standardized grammar (XML) in itself is not enough. Just as necessary is an agreement on standardized terms for a function or, more broadly, within an industry.

XBRL, which is built around the XML technology and is freely-licensed, represents the vocabulary or business standard to facilitate the syntax. Companies will be able to use the XBRL standard to develop all types of business reporting, including:

* XBRL for Financial Statements

* XBRL for General Ledger

* XBRL for Journal Entry Reporting

* XBRL for Regulatory Filings

* XBRL for Credit Line Reporting

* XBRL for Economic Indicators

* XBRL for Risk Reporting

* XBRL for Mutual Fund Performance

* XBRL for Performance-related News Releases

* XBRL for Assurance Schedules

* XBRL for Authoritative Literature

* XBRL for "Business" Reporting (Balanced Scorecard, Benchmarking, and other performance reporting)

And, of course --

* XBRL for Tax Filings

XBRL surpasses HTML in utility because it describes data in such a way that a computer can understand its significance, not merely the presentation of the data. XBRL distinguishes the definition of content from the style of presentation of that content (presentation style is determined by a separate style sheet written in the XSL (eXtensible Style Language) standard. Through XBRL-based tools, once incompatible technologies now will be able, in effect, to "talk" to one another easily and effectively, without misinterpretation.

As an added benefit, XBRL is extensible: It allows for the creation of new "tags" to describe new and unforeseen message fields. This means that new, customized XBRL data tags can be created, as long as they adhere to the XBRL specification and the standard core of tags defined by the World Wide Web Consortium (which oversees the development of XML standards). XBRL's strength may be its ubiquity. Because XML is embedded in WWW technology, it should reach widespread use, even unknowingly by its users, very quickly as more and more businesses take advantage of the efficiencies of the Internet for business reporting purposes. Already, 95 percent of the Fortune 500 are using XML technology for e-commerce, and XBRL will work seamlessly with these initiatives to enable e-reporting.