In the UK, HM Revenue & Customs and Companies House have already received company filings using XBRL. Is Ireland is falling behind internationally and missing an opportunity to ease the red tape burden?
Business hates paperwork and the burden is growing. According to the Business Regulation Forum’s Report, published April 2007, Government regulations could be costing Irish business up to €500 million each year that could be avoided. Some of the red tape involves financial information and is therefore of direct concern to accountants.
Crucially the report is very light on specifics as to how business can avoid this cost. But can accountants provide a part of the solution?
It is unrealistic to think that bureaucracy is going to go away anytime soon. So what is really needed is some way to ease the burden by enabling business produce the information required faster, better and cheaper and avoiding a paper mountain. Transmitting the information in a secure electronic environment is desirable too.
Consider a company’s yearly directors’ report and accounts. Most are produced from a mix of systems and packages. Usually a variety of Excel spreadsheets are needed to draw up detailed notes. Then the result is word processed using another package such as Word to produce the final directors’ report and accounts. So there is much transfer and re-keying of data in the process – essentially time consuming and error prone busy work which does not add value to the process.
Separate processes and even more spreadsheets are then required to manipulate virtually the same information or subsets of that information for use in the tax return; CSO filings; CRO filings; grant-aid applications; reports to banks; reports to industry bodies; regulators and so forth.
Wouldn’t it be better if today’s technology allowed seamless transfer of data between packages without the need for costly (and sometimes error prone) interfaces? Better still that technology should also allow for easy transmission of data outside the organisation where that is a requirement.
There is a general recognition internationally that this can be done and many, including the chairman of the SEC in the US, believe technology such as XBRL has a major role to play in this regard. Moreover, the February 2007 Harvard Business Review included XBRL in its list of “Twenty Breakthrough Ideas for 2007”.
So what is XBRL?Simply put XBRL is aimed at bringing the advantages of the internet to financial information by making the information transmitted interactive.
XBRL makes financial information computer readable by providing an identifying tag for each individual item of data. So, each number within a company’s financial statements such as net profit has its own unique tag. Furthermore XBRL offers the capacity to tag many levels down including individual general ledger entries.
By reading these tags, computers can treat the XBRL enabled data “intelligently”: they can recognize the information in an XBRL document, select it, analyse it, store it, exchange it with other computers and present it automatically in a variety of ways for users. XBRL greatly increases the speed of handling of financial data, reduces the chance of error and permits automatic checking of information. Essentially it means that the blocks of text with related figures in financial statements can be converted into data that you and your computer can interact with.
Companies can use XBRL to save costs and streamline their processes for collecting and reporting financial information. Users of financial data, including investors, analysts, financial institutions and regulators, can receive, find, compare and analyse data much more rapidly and efficiently when it is in XBRL format.
Enabling financial information with XBRL is not of itself costly or beyond the reach of any business. Taxonomies (collections of XBRL tags for each item in financial statements) addressing the various GAAPs including US, UK, IFRS and Irish GAAP are available free of charge on the internet. In addition, there are also a number of software providers offering software to automatically tag and read tagged financial information at reasonable cost.
Locally, Active Business Reporting (http://www.abrl.eu/) a software developer established in September 2006 is developing financial reporting software that is XBRL enabled with the help of grant aid from the Dublin City Enterprise Board.
In April 2006, Business Reporting Ireland Limited a small not for profit organisation posted its financial statements enabled for XBRL on its website. It did so on a voluntary basis and incurred little cost in the process –
see www.xbrl-ie.org
For business generally, the cost comes from the investment required to enable existing financial systems to read and produce XBRL enabled financial information. This cost might be only a few hundred euro for a software package that allows spreadsheet information to be tagged to much chunkier amounts where there are legacy systems to be updated.
XBRL enabled financial information is easy to use. You don’t need to be a
computer wizard to send an e-mail or browse the web on-line, yet none of this internet information would be available to you except for the information tagging that is operating in the background courtesy of globally accepted computer languages such as HTML and XML. XBRL brings the same level of interactivity to the users of financial information that they already enjoy when using the internet for other purposes.
Just as accountants do not need to understand HTML and XML to use the internet, users of financial information do not need to know that XBRL is operating in the background to give them a full interactive experience with their financial data.
Although the Irish members of XBRL have been busy ensuring the XBRL infrastructure is available by drawing up the taxonomy of XBRL tags to address Irish GAAP accounts (the IASB has completed the same task for IFRS and likewise the FASB for US GAAP) no major user of financial information in Ireland, as yet, has adopted XBRL in relation to the financial information it deals with. In contrast, economies with which we now must compete for higher value added jobs and/or to attract their inward investment are embracing XBRL with some enthusiasm. See panel (page 39) for some details of the adoption of XBRL in a selection of countries.
What about Ireland?The panel on page 38 shows some areas, where, properly implemented, XBRL could help drive down the cost of doing business.
The cost savings and opportunity to reduce the burden of red tape on Irish business are there to be grasped. While Ireland has missed the early advantage that accrues to first adopters now is the time to start planning for XBRL in both government and corporate sectors to ensure that Ireland Inc. is not left behind in the implementation of this increasingly important technology.
For further information on XBRL see: www.xbrl-ie.org
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XBRL was an interesting experiment but it doesn't seem to be getting much support from business so is it really likely that it will succeed in bringing about change or improvements? Progress has been slow.