What’s holding XBRL back?
Ventana Research believes metadata tagging holds great promise for the future of business intelligence and business process automation. So why is it taking so long for the Extensible Business Reporting Language (XBRL) to gain traction in the marketplace? We propose a number of issues that are holding XBRL back from reaching its potential. Ventana Research recommends that organizations unfamiliar with XBRL take advantage of new tagging tools to raise their understanding and perhaps practical use of this useful metadata taxonomy focused on financial analysis and transparency.
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XBRL sounds like a no-brainer: Tag all kinds of useful business information (e.g. financial reports) with Extensible Markup Language (XML) tags based on an agreed standard taxonomy and then leverage the heck out of it. XBRL tagged data can be exposed as a Web service so financial analysts can compare like with like, aiding business and market transparency so that internal or peer-to-peer benchmarking efforts can be made easier.
Larger corporations have the potential to re-architect and better automate their consolidation processes or intercompany accounting and expose lots of useful information locked away in proprietary systems for internal analysis. But despite all this, the evangelism of Microsoft, the NASDAQ and others, and the increasing interest from regulatory bodies around the world in mandating XBRL output for various types of statutory reporting, XBRL hasn’t taken off.
It’s not as if the ERP vendors haven’t done their bit. XBRL output has been available for some years now and not just for use by large organizations using expensive top-tier ERP systems. Microsoft Business Solutions Navision, a leading mid-tier ERP vendor, was one of the first to offer XBRL as an output format for financial reports. So for once we can’t blame ERP vendors for not keeping up with things, even though it is an effort for them to keep up with what is an evolving standard. Instead, there are at least three issues holding XBRL back:
1. What do you do with it? Even if you can produce XBRL format reports what can you usefully do with them?
2. Most of the useful information is not in ERP systems but in something else like Microsoft Office. Tools are needed to make the tagging effort less burdensome.
3. There’s no “big kahuna” reason forcing organizations to use XBRL so why bother?
Today there are not enough consumers of XBRL out there. That is applications and Web services, whether internal or external, that can take your XBRL tagged data and do something useful with it. Services like PR Newswire can accept earnings releases and financial statements from its members in XBRL format for distribution across its wire network or OneSource Applink an XBRL-tagged database of over 700,000 public companies. The next generation of XBRL killer apps for consolidating, mining, drilling around and creating transactions from XBRL data (for example by leveraging the XBRL GL taxonomy) don’t yet exist commercially. Undoubtedly work is going on to create these apps and XBRL tool and service vendors such as Software AG and UBMatrix for example have helped to custom-build similar applications, but we are not there yet. So continued evangelism by the XBRL community (see www.xbrl.org) is called for.
Tagging data is a drag to do manually. And we’re still a long way from the “Save As” or better still “Publish As XBRL To (Web Service)” nirvana. But there is some light at the end of the tunnel. New drag-and-tag applications like Rivet Software’s Dragon Tag have recently come to market to make much of the process of metadata tagging common information formats, such as Microsoft Excel spreadsheets easier, more accurate (due to built-in validation functions) and quicker. Tools like Dragon Tag will certainly help reduce the “burden” objection to XBRL tagging and make this tagging effort more justifiable for many non-ERP data sources.
The SEC has recently proposed rules for the voluntary filing of XBRL tagged data as exhibits to EDGAR filings. New XBRL taxonomies supporting US-GAAP reporting formats are also being rolled out, while the FSA and Inland Revenue in the UK and the APRA in Australia are among many non-US regulatory bodies with XBRL initiatives either implemented or in the pipeline. But even with all this activity, XBRL isn’t a business mandate. This might have been a different story if say Sarbanes-Oxley reporting had been based on an XBRL taxonomy or if XBRL could reach into the far-reaching procurement processes operated by organizations such as Wal-Mart in the USA or Tesco in the UK.
Ventana Research believes XBRL has the potential to transform a wide range of business processes especially in financial consolidation, general ledger transaction processing and best practice benchmarking and generate new kinds of metadata mining processes. There are encouraging signs that more XBRL-enabling technology is coming to market and that businesses all over the world will soon have more reasons to use it. XBRL tagging is less of a drag than it used to be and we recommend that all organizations that publish financial information begin experimenting with XBRL now, even if this information is only published for internal consumption.
Stewart McKie is European Analyst Director at Ventana Research.
Ventana Research is the preeminent research and advisory services firm helping our clients maximize stakeholder value with Performance Management throughout their organizations. Putting research in a business and IT context we provide insight and education on the best practices, methodologies and technologies that enable our clients to leverage assets to understand, optimize, and align strategies and processes to meet their goals and objectives.