If you haven’t heard of XBRL before, don’t worry, many others haven’t either. Unless you enjoy following the actions of the SEC and their worldwide counterparts, XBRL doesn’t exactly come up at your usual dinner party. However, if you’re responsible for financial reporting at a SEC registered company or are planning to register your company’s shares with the SEC, then you should be familiar with XBRL and it’s potential impact on your financial reporting processes.

For the uninitiated, XBRL is an acronym for eXtensible Business Reporting Language. XBRL is not a new technology, but is a standards-based way to communicate business and financial information. There are a number of resources on the web to help educate yourself and your staff on the topic, such as the AICPA’s XBRL site. Whether you’ve heard of XBRL or not, one thing is for sure: whether you’re the director of financial reporting, a corporate controller, or the CFO for your organization, what you need to know about XBRL is that it will require planning and forethought and will certainly involve change to your existing systems and financial close processes.

Currently, the SEC does not require registrants to submit filings in XBRL format, though they did issue a proposed rule [PDF] on May 30, 2008 and are currently soliciting public comments until August 1st. This proposal may soon change things for registrants and investors alike. For registrants, there are a number of ways to tackle the implementation of XBRL reporting; some may opt to outsource the effort to their financial printers, others may convert their data ‘manually’ with easy-to-use software tools for each reporting period, and others may implement software solutions directly into their general ledger or ERM packages. Regardless of how one gets there, it is apparent that it will involve support from your IT and financial experts, and will likely require Section 404 considerations relative to the internal controls within the organization.

It is worthwhile to note that most major financial markets are are moving in this direction, and XBRL is now mandated for financial filings in multiple jurisdictions worldwide. XBRL is moving ahead with or without us, and other US agencies such as the IRS and state taxing authorities are considering the merits of XBRL filings. Despite this, according to a June 2008 Compliance Week survey [subscription required] of 236 financial reporting executives, 55% have either just started researching XBRL or are not aware of the subject at all, and less than 20% of respondents have anybody on staff considered to be an XBRL expert.

The time is now to consider the effect of XBRL on your business and planning process. The short term effects of XBRL will likely be limited; just ask the early voluntary filers. However, it is clear from SEC speeches and proposals that XBRL is coming, and coming fast. Long-term benefits are likely to be realized by those businesses that are willing and able to embrace the technological change that XBRL will bring about, such as easier and faster access to competitive information and knowledge. If you haven’t already, I encourage you to learn more about XBRL and prepare for the forthcoming changes.

This entry was posted on Wednesday, July 30th, 2008 at 8:00 am and is filed under Audit, Reporting standards, Technology, Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.