An initiative spearheaded by the SEC (yes, the SEC!) to create an open data standard called XBRL (Extensible Business Reporting Language) for financial reporting is being adopted worldwide.
XBRL, or “interactive data” as the SEC often refers to it, is an open information format standard that enables automated, global sharing of business information as contained in company ledgers, income statements, cash flow, balance sheets, mutual fund risk and returns, as well as textual information included within footnotes and other requirements of business reporting.
It doesn’t change how the data is calculated but does make it much easier to share and transfer data because everyone is using the same format. Interestingly, China has been one of the early adopters because they simply had the forms all businesses fill out translate the data into XBRL.
Europe is creating all manner of new uses for it. It seems the US is a bit late to its own party (due in part to legal, technical, and infrastructure challenges.) However the SEC plans to phase XBRL in starting this year.
Here’s why it’s so powerful and useful. It’s easy for other computers to understand what the data being sent represents because the data is clearly tagged and everyone agrees on what the tags are. basically, this is a variant of XML.
So, if I want to send a price list to a customer, it might look like these w3schools XML examples)
This is quite easy for another computer to parse and use as needed. No guesswork is needed, everything is clearly labeled. Way better than plain HTML.
With XBRL, all the data is out there for anyone to use and understand quickly and easily. This can only lead to more transparency in financial reporting and analysis.