The Securities and Exchange Commission (SEC) dictates that public companies have to present their financial statements in the eXtensible Business Reporting Language (XBRL) format as an exhibit to their regulatory filings. XBRL has more uses than just for reporting to the SEC. Public companies, as well as private companies and financial statement users, will find many compelling reasons to expand their use of XBRL data.
XBRL was first presented in 1999 and is based on a complex technical infrastructure. It delivers a universal standards-based technique to prepare, publish, exchange and analyze financial data across different accounting and operating systems.
Computers sift XBRL data “intelligently” through a tagging procedure, automating numerous elements of report preparation, data collection and due diligence. Businesses can employ XBRL for different kinds of business data, like internal and external financial reports, loan applications and tax returns.
This machine-readable reporting format makes financial statements more useful to researchers, regulators and investors. In time it can reduce costs, as it has the capacity to enhance the speed, accuracy and usability of financial disclosure.
With XBRL, companies can share financial reporting data directly with their lenders and auditors. This dramatically scales back the need to manually re-entering data into spreadsheets and other analytic software programs and then repackaging it into new formats. Automation then decreases data processing costs and lowers human error.
An additional perk is that XBRL allows automatic validation of financial data by accentuating discrepancies, deviations from industry norms and even transaction patterns indicative of fraudulent behavior. It also serves as a framework for sharing financial information that surpasses current language and reporting standards barriers. Rather than taking over for current operating or accounting systems, XBRL partners with existing systems.
Moreover, XBRL expedites the financial reporting process, enabling real-time disclosures and continuous auditing, and alleviating public companies’ heavy load of Sarbanes-Oxley compliance. In the interest of companies making acquisitions, XBRL can join systems that were previously incompatible, eradicating costly conversion to a common operating system.
Put XBRL to work for you
For companies looking to switch over, there are two ways to convert data to XBRL format. The first option is to buy off-the-shelf software and categorize line items themselves. The second method is to outsource XBRL projects. Aside from the initial setup costs, the company will face minimal costs going forward.
For more information about adopting the user-friendly XBRL reporting format, please call us at 949-860-9902 or click here to contact us. The switch may ultimately lower your compliance costs through improved efficiency.