In September the UK tax authorities and the registrar of companies announced a common approach to the filing of company accounts online. In a move which Companies House claims will reduce potential administrative burdens on business, it has pledged to accept company accounts in a data format known as Inline XBRL (iXBRL). This is the format in which all company tax returns (CTRs) – including the return form, company accounts and tax computations – must be submitted to HM Revenue & Customs (HMRC) from April 2011.

Companies House will introduce its iXBRL service for unaudited full accounts by summer 2010 and plans to continue developing its iXBRL capability for all the main types of accounts it receives. The HMRC’s iXBRL service for CTRs is due to come online next month, though initial take-up may be slow as commercial iXBRL-enabled software will not be widely available until spring 2010. However, Mark Holden, programme director of HMRC’s Carter Programme, which is responsible for improving HMRC’s online services, says: “The joint statement is an important step towards our goal of offering a joint filing facility for company accounts and CTRs, as recommended by Lord Carter’s review of HMRC’s online services.”

Computer readable

XBRL, extensible business reporting language, is a computer readable format for financial data. It works by putting a tag on each piece of electronic data – text or numbers – in a document. One stage on iXBRL makes XBRL readable by humans. It guarantees that the presentation of information looks the same for both the author and the person receiving it, whether viewed online or as a printout.

Agencies across the globe responsible for collecting and disseminating large amounts of financial information are excited by the prospect of XBRL, claiming it has major benefits for the preparation, analysis, re-presentation and communication of business information. Organisations like financial regulators and accounting standard setters say that XBRL – based on the proven technology XML – offers cost savings through efficiency, improved accuracy and reliability for all those involved in supplying or using financial data.

One player which has focused on the possibilities of XBRL for several years is the International Accounting Standards Committee (IASC) Foundation, the oversight body responsible for global financial reporting standards. It has been examining the role of XBRL in financial reporting since 2001 and has refocused its objectives to provide high quality International Financial Reporting Standards (IFRS) taxonomy at the same time and in the same 30 languages as IFRSs. In April the IASC Foundation published the final IFRS Taxonomy 2009 – a complete translation of IFRSs as of 1 January 2009 into XBRL. Given the size of modern accounting standards, that’s quite an achievement. A whole series of projects is under way across the world to ensure companies file reports and accounts in a common format which can be used by analysts, investors and shareholders.

Perhaps it is not surprising that along with the international body one of the leaders in the field is the US regulator, the Securities and Exchange Commission (SEC).

The US experience

The SEC, through the Office of Interactive Disclosure (OID), has to make financial disclosure by SEC registrant companies accessible and easy to use. So it has developed what it calls a rendering engine that enables investors to view interactive data filings that have been submitted. This project is about to take off. Starting with fiscal periods ending on or after 15 June 2009, the SEC’s rules require the largest public companies to submit their financial statements in XBRL. The scheme will be phased in for all public companies that file with the SEC, which has also issued rules requiring interactive data reporting by mutual funds and rating organisations. The rules require companies’ primary financial statements, notes, and financial statement schedules to be provided in XBRL, along with some company identifier information. The rules supplement, but do not replace or change, disclosure, using traditional electronic filing formats in ASCII or HTML. Companies will submit XBRL filings alongside their traditional ASCII- or HTML-formatted filings.

The SEC says interactive data can give investors faster access to the information they want and help companies prepare data more quickly and accurately. Investors using hard copy or even PDFs who want specific information have to wade through lengthy corporate reports, and even online documents are often in a plain-text format with limited search capacity.

Using interactive data, an investor can immediately pull out specific information and compare it to that from other companies, performance in past years, and industry averages. As more companies embrace interactive data, sophisticated analysis tools now used by financial professionals could become available to the average investor. Olivier Servais, director of XBRL Activities for the IASB/IASC Foundation, says it is important to realise these XBRL functionalities are generic, and adds that it is clear the current ones are only the tip of the iceberg. For instance, functionality could show the percentage of filers using a certain concept, or how many filers from a specific industry use a particular accounting policy. Servais says: “This could be a very powerful tool for accounting standard setters assuming accounting standards are connected to the taxonomy (which is the case for IFRS). With the first filings to the SEC (in the quarter after a standard is effective) standard setters can easily evaluate if and how filers are fulfilling their disclosure requirements.”

Financial analysis

While accountants are getting excited about XBRL, the information profession should ensure it maintains its interest. Steven Shove, vice president of OneSource Information Services, says: “It’s been some years since information has been available through open systems protocols in tag data format. XBRL allows financial and non-financial data to be displayed and manipulated in almost any way, which is why we use it in many of our bespoke applications. Info pros need to contribute to the provision of financial information in context – ensuring its completeness, accuracy and relevance. XBRL should be looked at again to determine what additional value information professionals can provide – for example in risk management, business planning or financial modelling.”

For financial professionals and publishers, analysing company data could become cheaper and easier. Interactive data may help filers to improve their reporting processes, consolidating enterprise financial information more quickly and reliably across operating units within different operating systems. The business of business information may never be the same again.

Peter Williams is editor of IWR