In the 11 years since I began working with the financial data standard that eventually became XBRL (eXtensible business reporting language), I've traveled a road filled with challenges, obstacles, and diversions. But the global XBRL community has stayed the course and persevered.
XBRL is a global, freely available, open data standard format that's used for the electronic transmission of financial and nonfinancial information within organizations and to external users. It's a language that bridges the gap between business systems.
And nowadays, it's everywhere.
XBRL's Expanding Sphere of Influence
In numerous countries, including the United States, China, Japan, India, the United Kingdom, and Germany, XBRL has either been mandated by one or more regulatory or government agencies for various types of external reporting (for example, tax or primary financials) or is currently in use for voluntary programs. Dozens more countries are considering XBRL for various purposes.
Several million companies, both privately held and listed, are already using XBRL to meet regulatory mandates, including tax and financial statement filings. Governments are increasingly integrating XBRL across their agencies to streamline reporting and information-gathering processes for businesses and the public, reducing compliance burdens.
XBRL is being used, or planned for use, with many asset classes, including mutual funds, asset-backed securities, and derivatives. Bonds and annuities may be next.
It's also being used (voluntarily at the moment) or considered in areas such as proxy practices; corporate social responsibility reporting; environmental, social and governance (ESG) practices; and integrated reporting (the reporting of combined financial and nonfinancial information).
Myths and Misperceptions
Throughout XBRL's journey to global usage, myths about the standard have cropped up along the way. Here are 10 misperceptions that may be blocking your company's ability to get the most from this crucial management tool.
1. XBRL is just one more compliance burden imposed on my organization.
While it's true that many companies now must comply with XBRL requirements for external reporting, all types of organizations can gain significant efficiencies by using the standard, including:
* Streamlined information gathering, analysis, and reporting (internal and external)
* More accurate, clean, reliable, reusable data
* Reduced information processing costs
* More informed management decision-making
* Improved communication within the organization about performance and fundamentals
* Better-integrated cross-functional teams and improved collaboration (because XBRL breaks down information silos)
* Improved transparency and, as a result, better risk management
* A reduction in the time that managers spend on gathering historical information -- which means that more time is available for value-added tasks such as forecasting, planning, and performance measurement
* Enhanced ability to "tell your story" to analysts and bankers.
2. XBRL is only for publicly listed and/ or large companies.
XBRL provides significant benefits for, and is currently being used by, both listed and privately held companies. Privately held firms far outnumber listed organizations around the world, and governments are focusing on delivering the benefits of XBRL for all enterprises.
Millions of small to medium businesses across Europe, Australia, and parts of Asia must meet XBRL tax filing requirements. The increasing use of XBRL by government agencies for purposes such as business licensing and grants directly impacts smaller companies. Charities and not-for-profit organizations also have XBRL requirements in some countries (for example, the United Kingdom) for taxation purposes.
3. XBRL is only for financial reporting.
While the initial focus was on the use of XBRL for financial reporting -- both internally to management and externally to regulatory agencies, analysts, and investors -- XBRL today is increasingly used for nonfinancial reporting.
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