Federal bank regulators currently take 10 to 15 days to make public the quarterly financial data they collect from about 8,400 banks. They'd like to get that turnaround time down to a single day, and in June, the Federal Deposit Insurance Corp. initiated a $39 million project to make that happen.
The FDIC's proposed solution: XBRL, or eXtensible Business Reporting Language, which tags data so that it can be re-flowed into different formats without re-keying and thus without the risk of errors associated with re-keying. And now that the FDIC has discovered XBRL, analysts see it as only a matter of time before Corporate America begins to embrace this new mark-up language for financial reporting.
Is it inevitable that XBRL is adopted as the standard for business reporting? Inevitable may be a strong word, but given the increased pressure on companies to disclose financial data on accelerated timetables, XBRL has more than a good shot. "The FDIC award is pretty significant," says Rita Knox, an analyst at Gartner Inc. "I think that will do a lot to make people aware of what XBRL is."
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The FDIC is also not the only organization to work with XBRL. The Tokyo Stock Exchange has begun to accept company filings in XBRL, and the U.K. Inland Revenue is slated to begin doing so by yearend. A spokesman for the Securities and Exchange Commission says that it has looked at XBRL as well, but has come to no decision in terms of whether it will take filings in XBRL.
More important for XBRL's adoption, however, may be the work being done by financial software vendors. The companies that are already using XBRL, like Microsoft Corp. and Morgan Stanley & Co. Inc., built applications in-house in order to do so, but most U.S. corporations will want to buy software rather than build it. According to a survey of 21 financial software companies, including big ERP vendors like Oracle, PeopleSoft and SAP, two-thirds have introduced XBRL-enabled products or plan to do so by the end of 2004. The survey, conducted by the American Institute of Certified Public Accountants on behalf of the XBRL US Adoption Committee, showed that adoption plans were higher among the vendors that target the largest companies.
Oracle's E-Business Suite now provides XBRL capabilities through its Financial Statement Generator. Beginning in the fourth quarter, PeopleSoft will provide XBRL functionality in its core financial applications. SAP provided XBRL functionality in release 3.1B of SAP Strategic Enterprise Management. And Hyperion Solutions Corp. added XBRL functionality to the latest version of Hyperion Reports, which was released in July.
Paul Penler, a principal at Ernst & Young and the U.S. representative to the International Steering Committee, says the survey of software providers is encouraging. "A lot of companies are working on it. Obviously they're doing it because they view it as kind of the de facto standard for business reporting."
Penler adds, though, that the adoption of new technical standards traditionally takes time and points to the 10 years that it took for bar codes to permeate the grocery business. XBRL is "just three years out of the starting gate," Penler says. "We're four or five years away from this becoming a global standard."
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Susan Kelly
Susan Kelly is a business journalist who has written for Treasury & Risk, FierceCFO, Global Finance, Financial Week, Bridge News and The Bond Buyer.
