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

Benefits

In short, XBRL has four main benefits to the tax preparer community for use within their companies:

* Enhances electronic tax filing and provides

* Streamlines electronic tax filings

* Enables better analysis for greater tax minimization

* Enables real-time, customized reporting

Gartner Group has estimated that the cost reduction to companies that publish using XML is 30 to 50 percent simply in the area of reducing manual intervention. With XBRL, not only can one reduce the cost of producing ally single report, but the ability to file all reports simply is an enormous cost savings.

Because XBRL is vendor-neutral, it will save organizations money by integrating with existing systems and technologies. This also means that tax professionals will be empowered to sort through the information of their companies more quickly and effortlessly, to determine the best methods of preparation and reporting for tax minimization.

There are also economies of scale that arise in situations where participants can band together to share the fixed costs of technical standards development. Software suppliers are likely to develop a wider range of complementary products using common standards like XML and XBRL. The cost of repairs and updates is typically lower since the pool of technical expertise from which they call draw is larger. And the "learning-by-using" mechanism works across as wide a group of users as possible. This is the process by which users' specific experience and knowledge of the standard contribute to the development by the supplier of the standard's technical capabilities.

The cost savings from such straight-through processing are substantial. For example, in the securities industry in the United States, IBM estimates that two-thirds of all securities trades need to be amended, repaired, or cancelled. Microsoft estimates that 90 percent of all Internet transactions need to be re-keyed on the backend of e-commerce operations. XML standards help companies reduce re-keying information for e-commerce, and XBRL will do so for e-reporting.

Are There Any Drawbacks?

Like many technical advances, this new method of sharing financial data raises both opportunities and challenges. Some have questioned whether information that is so readily available might not give a false sense of comparability. For example, the sales figures for Ford and GM are not created in the same way, which means you cannot make apples-to-apples comparisons between them. Nevertheless, being able to gather the information quickly might lead some people to make such comparisons. The position of XBRL.org, the nonprofit consortium that is developing the standard, is that technology in itself will not make such issues go away. Instead, financial reporting professionals should understand the new capabilities of the Internet and take a role in shaping what XBRL becomes.

It is also important to make clear that XBRL will not require disclosure of any new information. XBRL simply makes providing information far more efficient and effective.