Practical pointers to XBRL basics and beyond. By Jay Hammond

XBRL or eXtensible Business Reporting Language is gaining recognition within the financial world as well as beyond it. Unfortunately, while many more people have heard of XBRL, describing it further, not to mention demonstrating it, has proven a greater challenge to overcome.

XBRL is a variant of the eXtensible Markup Language (XML), adapted for financial reporting. There are two types of XBRL file: taxonomies and instance documents. Taxonomies define the structure, classification and relationships of the data presented in the instance documents.

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Comments

Keep your hair on!

bseddon | | Permalink

I don't understand such outright hostility to XBRL. It may come from a lack of information so it's great to see Accounting Web doing their bit.

Yes, "raw" XBRL probably is for larger companies and XBRL is likely to offer the biggest benefit to investors through the improved transparency it promises. Isn't it fantastic that our pension fund managers will be able to make better (well better informed) decisions when thinking about investing our cash?

However, the notion that small companies will be hit by an XBRL broadside come 2010 is, to me, not credible. XBRL is a middleware technology that is and will be invisible to end-users. When you entered your last CT600 on-line, you were creating an instance document. Did you notice? Of course you didn't. When, as an owner of a 20 person company, you download the PDF file for audit exempt companies from the Companies House web site, filled it in and submitted it, did you know that you are creating an XBRL instance document. Of course not.

The benefit of XBRL in these scenarios is to the HMRC and Companies House respectively. They hide XBRL behind user interfaces. You can argue about the quality of the interfaces provided by these organisations but their quality is not affected by XBRL.

As an aside, one of the challenges both HMRC and Companies House face when collecting accounts from companies (XBRL-based or otherwise) is wording in the Companies Act which is interpreted to mean that the accounts submitted have to be in the same form as the ones agreed by the board. Clearly bytes and sheets of paper are not the same form.

I have no doubt that by 2010 it will be possible for small companies to submit electronically their accounts that accompany their CT600 in much the same way that audit exempt accounts are submitted to Companies House today. Of course this service may only meet the needs of "ordinary" companies. But if your company is not ordinary, you probably have to employ accountants and incur significant cost anyway.

Finally, there maybe 3,000+ items in the IFRS GAAP taxonomy. But this taxonomy is just a codification of the IAS standards. So companies that are reporting in compliance with these standards today, have to know how they work and have to deal with this number of items (or know their sub-set) today.

With three year to go, there's plenty of time for the accountants that are likely to be affected to learn about the taxonomies. Looking at the raw schemas will, of course, be daunting but so would the HTML for this web page but there's not need to look at the information in such a raw form. Get to know the taxonomies by using one of the viewers, for example the one on the IASB web site. There maybe a lot of elements in any given schema but they are what any accountant would expect and organised the way any accountant would expect them to be organised. After all, these taxonomies really have been prepared by accountants for accountants.

XBRL isn't hard for small companies

plega | | Permalink

First, a disclaimer. My company (DecisionSoft) develops XBRL-based software so, naturally, I'm pro-XBRL.

But we are a small company, with fewer than 30 staff, and have ourselves already gone through the XBRL filing process. Our external accountants prepared the corporation tax comps using the Forbes software, and sent a printed version to me for approval - exactly the same process as the year before. Forbes generated the filing documents (with the tax comps in XBRL) and posted them online without anyone ever having to see the XBRL - I know I didn't. This is the same process that thousands of other small companies will go through in due course - and I really don't expect that they will ever know they are using XBRL, any more than payroll clerks filing their PAYE returns at the end of the year know they are using XML.

Just not workable - Part 2

Anonymous | | Permalink

And this for a draft standard for which the previous draft contained 1783 key elements; now at 3,486 key elements. Thisnumber will only get bigger as drafts are expanded to handle more business types.

Yet small businesses that can now produce Corpn Tax Returns and Annual Accounts in a day using tools like MS Excel will be expected - no required - to take the time and effort to understand XBRL, its structure and use. Then to troll through 3,500+ key elements looking for the 200-300 elements that they need.

This is a dream - no a nightmare!

I myself have over 20 years experience of software and its development and over 30 years in preparing accounts for large and small businesses. I understand programming, IT analysis, XML, XSL etc. so I am not new to reading such documents. Yet when I look at XBRL I am horrified by its complexity, bloat and its complete un-usability. It lacks any consideration for the MAJORITY of users that will need to compile and build XBRL documents.

Then in addition from all this effort and cost, I believe, small business will receive NO benefit at all, other than to satisfy the mandatory demands of Government Departments. I even doubt that the tax inspectors will know what they are looking at when it comes to using the annual accounts submitted in such a manner. For the quality of such accounts will be poor, given the absurdity of the XBRL draft standard as it stands.

What I would like to see is some realism in the XBRL standards that are focused on producing real benefits for the majority of future users. That is the small business.
Not XBRL standards derived by those with the most to gain from their imposition on a disparate user base, that at the moment does not have a voice.

Small business must wake up to this threat before the 2010 deadline in order to avoid a major catastrophe.

Just not workable! - Part 1

Anonymous | | Permalink

This article is yet another sales job for something which yields no benefit for those small businesses that will be compelled to use it from 2010 onwards!
And that is the majority of users, given the large number of small businesses when compared to large organisations.

Yes - large organisations and stock markets may like it; although the inconsistency of the data will produce a lot of dangerous and unstable business decisions

Yes - large accounting firms and consultancies will definitely love it, as for them it is seen as a brand new income stream

Yes - HMRC may like it as they can reduce manpower in 2010 and beyond when they make it mandatory for companies to submit accounts and Corpn Tax Returns in XBRL format.

But - for 95% of businesses (under 20 employees) this move by HMRC/Companies House to impose XBRL on them for Corporation Tax Returns and Annual Accounts will be a nightmare that will greatly increase the costs of these annual events.

What is more if you look at the development of the XBRL standard, it does not take long to realise that big business, large software houses and large accounting firms (those driving the development of the standards) have a vested interest in making the taxonomy and standards as complex as possible. So that they become the only people who understand it and thereby stand to create a lot of money out of the use of XBRL by small business when Government bodies make its use compulsory.

What is my proof for this - take the XBRL GAAP draft standard published 15 May 2004; using the smallest font size available still takes 700 pages to print the 5 XSD/XML files that specify this standard.
In an introductory document dated 13 June 2004; I quote -
" ... the UK GAAP taxonomy was aimed at a user base which was going to be looking for, say 200-300 key elements out of a generic taxonomy of 3,500..." – that’s less than 10%.