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05-04-2015 12:41 PM

Great article. Big Star Wars supporter... Very excited about news coming from the US SEC last week to move XBRL across the new proposed "Pay for Performance" rule. Also interested in comments from SEC Commissioner Kara Stein that the SEC will be coming out shortly with iXBRL which will be a more effective way for investors to see XBRL data used for financial statement analysis of public companies. Hopefully we will also hear shortly from Congressman Issa regarding the MADOFF Bill that would XBRL across the capital markets to provide better transparency and accountability.

TechTalk Blog: XBRL and Star Wars' C-3PO

By Brad Monterio posted 05-04-2015 12:02 PM


In honor of Star Wars Day today (“May the 4th Be With You!”), I thought I would use today as a way to explain the global data standard called XBRL or eXtensible Business Reporting Language in plain language for business professionals.  Having worked with the XBRL standard for more than 15 years, I often come across non-technical professionals who look at me funny when I mention it.  Their eyes glaze over and I immediately know I’ve ventured into foreign territory.  The response to me – either spoken or in their empty stare - is often something along the lines of “X-B-what?”

One of the risks with technology-related data standards like XBRL is trying to explain them to a non-technical audience in terms they relate to rather than with jargon, acronyms and ‘tech-speak.’ This is essential if you expect the audience to grasp the concept and actually use that standard.

As a Star Wars© fan, I can’t tell you how many times I wish I had the powers of C-3PO (or Threepio) as a universal translator to explain XBRL to the business community.  “I’m fluent in over six million forms of communication,” as C-3PO reminded us, in some ways demonstrates the power of XBRL and what it can do for information that businesses create, gather, use and share. 

XBRL is a globally accepted standard for electronically or digitally sharing information across the internet and between computers.  Securities Commissions, Ministries of Finance, Tax Authorities and other government agencies in many countries now require the use of the XBRL standard when organizations report their information to them.  XBRL itself is not a software application itself – rather, it is a data format that is built into commercially available software.  XBRL is an open, freely-licensed data standard; no one pays to use the standard.

At a high level, XBRL helps someone using business information (e.g., an analyst or investor) easily gather data (e.g., financial data, sustainability data, ESG or CSR information) from multiple sources (e.g., directly from company web sites, stock exchanges, open data sources, data aggregators/feeds) using the Internet and analyze that information using XBRL-enabled software (i.e., software that can import and analyze XBRL formatted information).  They can then translate and compare the data (much like C-3PO would do with different communications formats) and make decisions based on that analysis.  So whether you are comparing total revenue in US Dollars or Japanese Yen, or child labor practices, XBRL assures you that the pieces of data you are comparing are in fact total revenue figures from the years and audited financials you selected or the metrics governing labor practices, respectively.

Sounds all too easy?  Well, there is a lot more going on behind the scenes to make it easier for you as a data user. The data you search for has been previously formatted using the XBRL data standard.  Because XBRL is a global standard, agreement has been reached (by governments, regulators, standard setters, corporate executives, analysts, investors and others around the world as part of the XBRL International consortium, on defining a common, unique XBRL term for each piece of financial and non-financial data.  The agreed-upon XBRL definitions are analogous to attaching a ‘bar code’ on each piece of information – it's as if C-3PO uses these codes instantly to translate information from one language to the next.  As seen with XBRL, bar codes are unique to each item and they stay with it throughout its life cycle.  It’s akin to keeping or preserving the context of that item – such as name, price, size, location, language, year of manufacture, specs or other contextual data - no matter where that item travels throughout the Galaxy, Wall Street or Main Street.

The same thing happens with XBRL formatted data; XBRL attaches context to each piece of information, such as the line item it represents in the financial statement (e.g., total revenue or greenhouse gas emission level), the year, currency, language, relevant reporting standard (e.g., U.S. GAAP, IFRS or a sustainability standard), formulas and others.

We often say that we “tag” information with XBRL when these standardized definitions (the equivalent of the bar codes) are attached to individual pieces of data.  Software finds this information quickly, easily and accurately over the Internet or inside a company’s information systems by honing in on the XBRL tags and using those as the hook to pull that information.  C-3PO is able to do this instantaneously, much like the XBRL enabled software tools available today.

So if you conduct a Web search for 2014 Total Revenue for a series of companies today, your search will seek out the XBRL tags that identify that data as Total Revenue and for the period 2014 for the companies you specified.

XBRL is required in many countries already for a number of reasons:

  • XBRL improves the accuracy and reliability of information by giving it structure and tagging it with an agreed-upon set of definitions;
  • XBRL makes it easier to access information – the XBRL tags or ‘bar codes’ are like homing beacons for software to find data quickly and accurately
  • XBRL streamlines processes to prepare, gather, share and analyze data – with software tools that can quickly locate data that we need, we spend less time finding information and more quality time analyzing it;
  • More reliable, accurate and accessible information improves transparency and thereby lowers risk (the more we know about something, the lower the risks);
  • Improved transparency and lower risk lead to better oversight, stronger decision making and ultimately, greater economic value.
With widespread paradigm shifts to build global platforms for easy exchange of reliable information (think what mp3 and wav formats did for music), financial and non-financial company information are only two small areas of a larger movement to standardize the information that is exchanged electronically.  XBRL is the data format standard being used in the business community to help make this shift.  Similar changes are taking place in healthcare, news and media, entertainment, transportation, manufacturing and much more.  The quest for the universal translator of business information – to build our own C-3PO – is well underway.

#financialinformation #XML #barcode #C3po #digital #CSR #software #IFRS #datastandardtax #reporting #securitiescommission #GAAP #XBRL #data #ESG #SEC #standard #nonfinancialinformation #taxonomy #globalstandard #StarWars
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