Financial reporting through ‘the internet language’ XBRL is slowly accelerating.

The Enron-scandal has made at least one thing clear. From now on is it for companies no longer acceptable to provide stakeholders with financial reports that lack transparency or have unreliable figures. Stakeholders are demanding transparent financial reports. The supervisory bodies put more pressure on companies and auditors by demanding more detail information. The question that emerged is how can one satisfy the different stakeholders – analysts, investors, banks and environmental organizations. All these stakeholders are interested in different figures. Some stakeholders want to see the information on the Internet, while others want to fill out their spreadsheets online. A third group still wants their annual report in hardcopy.

A lot of companies currently provide their financial results in hardcopy and/or by putting their information in PDF-format or HTML on their Web-site. Investment analysts have access to their financial information, but cannot work online. In order to add calculations they have to make a new spreadsheet. The online importation of figures is just not possible. However, with the help of Extensible Business Reporting Language (XBRL) all this is made possible. XBRL is not a new method of accounting, but a way of saving financial data electronically and in uniform. This makes it possible to present an income statement in different ways. XBRL is based on XML, the successor of HTML.

The separation of information and the way in which its being reported forms together with the taxonomy the basis of XBRL. A taxonomy is a kind of dictionary in which all elements on what is being reported are described and defined. It is possible to provide out of a single central data, source several kinds of information to several users. By making use of different filters is the user able to provide different companies with several financial results in accordance with the US GAAP, the Dutch GAAP or the prospective European Standard IAS. The figures of a company become transparent and flexible to manage and this is cost saving, because the compilation of financial data can be done simpler and faster. The assessment of financial results is at this moment very time consuming. For instance the Bank of America is able to grant or disapprove a credit application in 1 day instead of 11 days by using XBRL.

Despite all these advantages, companies are rather reticent about the implementation of XBRL. According to Ruud Vergoossen, technical director of Royal NIVRA this is almost the same problem that the introduction of fax has encountered and it has no value if only one person make use of it. Walther Hamscher, director of XBRL International is trying to promote and get XBRL accepted throughout the world. According to Walther Hamscher it would be more effective if supervisory authorities tell companies to provide all their financial information in XBRL. XBRL is relatively unknown and this forms a restraint for companies to implement it. Managers see XBRL as something technical, whereas according to Jan Pasmooij, manager ICT Knowledge Center at the Royal NIVRA, “it is an effective tool to present financial information in a better and simpler way”. Jan Pasmooij proceeds by saying that it is rather difficult to find the right person to speak within companies. In the beginning he had talked with the wrong persons about XBRL, not to the decision making persons. The currently unstable economic situation in the USA hasn’t been very helpful in promoting XBRL either. According to Walther Hamscher companies are not eager to make investments at this moment”,

XBRL International has coordinated the development of XBRL since 1998. All the big accountancy firms are members of XBRL International, but also a great majority of banks and companies are members as well. The software companies such as Microsoft and the data-suppliers Reuters and Moody are also members. In order to get XBRL broadly accepted, there need to be talked between the members of XBRL International, the national authorities and the supervisory bodies within different countries. Walther Hamscher spoke during his visit to the Netherlands with the Dutch Tax Department and other governmental institutions with the hope to get XBRL quickly accepted. XBRL is the only standard that is being developed and Microsoft is the first leading company that has been implementing XBRL. Microsoft presented their last quarterly report completely in XBRL. At this moment Microsoft is the only American software-company that is developing XBRL software packages for launching into the market. So far there isn’t a single Dutch company member of XBRL International. If this is up to Walther Hamscher and his colleagues this scenario will change very soon. Two months ago an XBRL working group was founded in the Netherlands that has the participation of Royal NIVRA, the big accountancy firms, the Tax Department, the Central Department of Statistics, and some software companies. This working group will inform governors/ managers on XBRL, but the widely acceptation of XBRL cannot rely only on this group. The end users and the companies are the ones that will have to pull the cart. The royal NIVRA intends to play the role of a facilitator in promoting XBRL in the Netherlands.

English translation of an article / interview (short version) published in HET FINANCIEELE DAGBLAD (most important financial paper in the Netherlands) on May 28, 2002