The Importance of XBRL in Accounting
The overall objective of introducing XBRL
(Extensible Business Reporting Language) is to produce a
global standard for the automation of business
intelligence. Within the next five years, virtually all
publicly traded companies worldwide will be required to
use XBRL for their financial reporting to their
respective regulatory bodies.
In the United States, the Securities and Exchange
Commission (SEC) has stated that by 2011 all public
companies must report their earnings using XBRL. While
it is absolutely necessary for public companies to
understand and implement XBRL, it is important for all
businesses to gain at least a basic understanding of
XBRL so that they are not left behind as its use
advances.
What is XBRL?
The concept behind XBRL is
actually very simple. Each individual piece of data
within a block of financial information is given an
identifying tag which is readable by a computer. For
example, a company’s operating costs, contained within a
block of other information, will have its own individual
tag. This tagging of data enables financial information
from any source to be processed automatically, rather
than manually, using computer software, thus providing
significant cost savings.
But the benefits go further. Information treated in this
way can easily and quickly be stored, analyzed,
selected, and exchanged electronically. XBRL is very
flexible and is not an enforced accounting standard for
all financial reporting. Indeed, it enables the reading
and manipulation of data for any industry or business in
whichever format it is presented, regardless of
language.
XBRL is managed and overseen by a
non-profit
organization (XBRL International) and is free of
royalty fees. It is truly a global language for everyone
involved in the financial information business.
If your Austin accountant doesn't know
what XBRL is...get another accountant