Digitization is leading to a connected, modern world where companies need to quickly adapt to the ever-increasing expectations of people – enabled and shaped by technology – the technology of XBRL.
XBRL is the abbreviation for the term "Extensible Business Reporting Language." This XML-based "language" (structured data) is used to automate and streamline the reporting flow of information from provider to recipient and iXBRL is a format that can be read by machines as well as humans.
In April 1998, Charles Hoffman, at that time a CPA at Knight Vale and Gregory in Tacoma, Washington, was investigating XML for electronic reporting of financial information. Hoffman began developing prototypes of financial statements and audit schedules using XML. He briefed Wayne Harding, chair of the AICPA High Tech Task Force, on the potential of using XML in financial reporting in July 1998. That was the birth of XBRL.
An annual report produced using the XBRL format is machine-readable. How does it work specifically? Using a taxonomy which is based on international and recognized standards, report information is marked with "predefined" tags and other attributes that must correspond to the report content, making it uniquely assignable. Once all relevant report information has been appropriately tagged, it is "packaged" as an instance document and checked for accuracy using validation software. As soon as no corrections are pending, the XBRL package is transmitted to the relevant authority and thus made freely available to the public and all interested parties. The XBRL standard defines a number of different formats for XBRL reports, including inline XBRL (iXBRL), XBRL-XML, XBRL-CSV, and XBRL-JSON.
XBRL is a powerful tool for transparent, cost-conscious, and compliant reporting. The format meets international reporting standards and reduces manual processing as well as creation time for corporate reports. In addition, XBRL speeds up analysis time and facilitates the exchange and processing of information. In a fraction of a second, annual reports from different companies in different industries can be compared and analyzed. Increased transparency, consistency, reliability and quality as well as increased integrity in the preparation of corporate reports are further advantages. Finally, implementing XBRL lowers the cost of reporting, including data collection, aggregation and correction.
A thorough understanding, a high level of quality, and good time management make for an optimal XBRL experience. It is very technical, and it requires fundamental accounting skills. In addition, it takes time to implant as well as the support of a third-party vendor (reporting software).
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