Introduction
XBRL, or Extensible Business Reporting Language, is an open, global standard for exchanging business information. It is a variant of XML (Extensible Markup Language) and is used primarily for financial and business reporting.
Historical Context
XBRL emerged from the need for a standardized way of reporting business data that could be easily shared and analyzed across various platforms. It was developed in the late 1990s and officially became recognized by the XBRL International consortium in 2001.
Types/Categories
- Taxonomies: Define the specific data items (elements) that can appear in an XBRL document.
- Instance Documents: The actual data files that comply with the XBRL specification.
- Linkbases: Provide additional semantic data to instance documents, such as definitions and references.
Key Events
- 1998: Conception of XBRL by Charles Hoffman.
- 2001: Establishment of XBRL International.
- 2009: SEC mandates XBRL for financial reporting for public companies.
Detailed Explanations
How XBRL Works
XBRL uses XML-based language to tag financial data. These tags allow data to be processed and shared across different software applications seamlessly.
Example Structure:
1<company>
2 <name>ABC Corp</name>
3 <financials>
4 <revenue units="USD">1000000</revenue>
5 <netIncome units="USD">200000</netIncome>
6 </financials>
7</company>
Mathematical Formulas/Models
XBRL itself does not contain mathematical models, but it can house data that feed into various analytical models. For instance, it can standardize financial ratios calculations such as:
Importance
- Standardization: Provides a uniform way to report and compare financial data.
- Efficiency: Enhances data analysis and reduces manual data entry.
- Transparency: Improves the transparency of financial disclosures.
Applicability
Used extensively in financial sectors, particularly for:
- Financial Reporting
- Regulatory Filings
- Internal Management Reports
Examples
- SEC Filings: All U.S. public companies file their financial statements in XBRL format.
- European Banking Authority: Uses XBRL for regulatory reporting by banks.
Considerations
- Implementation Costs: Initial setup and training costs can be high.
- Data Security: Safeguarding the sensitive financial information being exchanged.
Related Terms
- XML: Extensible Markup Language, the base language XBRL is built on.
- GAAP: Generally Accepted Accounting Principles, often standardized using XBRL.
- IFRS: International Financial Reporting Standards, also using XBRL for uniformity.
Comparisons
- XBRL vs. XML: XBRL is a specialized form of XML, tailored for business reporting.
- XBRL vs. EDGAR: EDGAR is the SEC’s electronic filing system, which now uses XBRL for data submission.
Interesting Facts
- The idea for XBRL was initially presented on a napkin during a lunch meeting by Charles Hoffman, a CPA.
Inspirational Stories
Many businesses have streamlined their reporting process and seen improvements in accuracy and efficiency after adopting XBRL.
Famous Quotes
“XBRL is all about harnessing the power of data to improve transparency, accountability, and efficiency.” – Charles Hoffman
Proverbs and Clichés
- “Knowledge is power.” (aptly describing the benefit of standardized data)
- “The devil is in the details.” (important in financial reporting)
Expressions, Jargon, and Slang
- Tagging: Referring to the process of adding XBRL tags to financial data.
- Instance Document: The actual document containing the tagged data.
FAQs
What is XBRL used for?
How does XBRL benefit companies?
Who mandates the use of XBRL?
References
- XBRL International
- U.S. Securities and Exchange Commission
- Hoffman, C. (1998). Conceptual Foundations of XBRL.
Summary
XBRL, or Extensible Business Reporting Language, is a standardized way to exchange business information. Emerging from the late 1990s, it has transformed financial reporting by enhancing data accuracy, transparency, and efficiency. Despite the initial costs and considerations for data security, the long-term benefits make XBRL a valuable tool in the financial landscape.
