Business Intelligence Blog from arcplan

Demystifying the XBRL Financial Reporting Standard


What is it?
XBRL is short for eXtensible Business Reporting Language, a technical standard for exchanging  business Information -- more specifically standard financial reports. Technically, XBRL is XML and some people call XML the digital duct tape of the future; it is and will be everywhere. XML is data surrounded by descriptive elements (tags) that define the context of the data and what it means. Since XML is based on standards, many computer programs can read and interpret XML in a standard way.  Business users utilize XML every day. All modern day spreadsheets, presentations, and Word documents are technically XML data surrounded by tags. Even the internet is based on a tagged-based standard called HTML.

Why Do It?
It's the law, at least according to the Securities and Exchange Commission (SEC). Large companies had to start producing their financial statements with XBRL in mid-2009. All public companies -- and all companies that want to be public -- will be producing XBRL financial statements by the end of 2011. During 2011, mutual fund companies will need to produce their prospectus as an XBRL file.

Where Do You Submit It?
Public companies submit their XBRL filings to EDGAR Online. It's a rather  draconian place to visit on the internet and the experience is not easy. A better way to file XBRL financial reporting would be on your own website. A stipulation of the SEC regulation is that companies make their XBRL filing available publicly (i.e. on your website). The investor relations section would be an ideal location to house this information.

Who Benefits?
The primary beneficiaries are organizations that wish to capitalize on the incredible amount of transparency XBRL creates. It makes financial data significantly easier to compare and analyze the financials of your competitors. Of course, auditors and accounting consultants will generate significant revenue from XBRL-related work related to creating XBRL filings and interpreting the results.

How Is It Created?
Your finance and accounting department most likely needs to work with an outside consultant to map the organization's current reporting schemas to the XBRL standard schemas. Most components at a high level that make up standard financial reports are common from company to company, but there is some interpretation involved in mapping your organization to the XBRL standards.

Opaque or Transparent: Which Is Better?
The traditional (opaque) financial reporting and analysis process was designed to be easy for people to read and understand. In practice, however, this traditional process has evolved over many years  and has created silos of information that make analysis of financial reports difficult and fairly laborious. Printed financial reports require a highly skilled and educated set of analysts to properly leverage the information. This process is manual, time consuming, prone to error, marginally repeatable, and tedious for all involved.

XBRL brings a new level of transparency to the financial reporting process.  XBRL reports don’t look like traditional financial reports simply because XBRL reports were designed to be read by computers and be analyzed in a quick and automated fashion.  Content can be indexed and searched efficiently. Simply put, XBRL allows you to do more analysis with less resources.  Additionally, the level of analysis by company, industry, and sector is be greatly enhanced with automation.

Why is arcplan Talking About XBRL?
arcplan Enterprise is one of the few products in existence that can read and analyze standard XBRL content. arcplan Enterprise is a world-class business intelligence platform that can instantly connect and understand multiple XBRL data sources and allow end users to very quickly perform analysis or reconstitute XBRL content back into standard reports. Standard financial reports are made up of quantitative values and text, and arcplan Enterprise is one of only a few products that can access contextual as well as analytical content and make it available for analysis quickly and cost effectively.

Look for a future article on how and why to incorporate XBRL into your Business Intelligence strategy.

Dwight deVera

About Dwight deVera

I'm Senior VP responsible for Solutions Delivery at arcplan in North America. I also present on a lot of arcplan webinars, so you can sign up to hear me - the events listing on our website is located here: You can also follow me on Twitter: @dwightdevera.
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