13 Dec 2002: International XBRL Taxonomy Improves Likelihood of Interoperability with Other Financial XML Standards

The release last month of an International Accounting Standards (IAC)-compliant version of the XBRL (for eXtensible Business Reporting Language) schema for business reporting appears to opened the door for increased interoperability with other schemas for managing market data and research. The new XBRL schema has been welcomed by working groups such as MDDL (Market Data Definition Language) and RIXML (Research Information eXtensible Markup Language), paving the way for a unified approach for managing three cornerstone information types using XML.

XBRL, founded in 1999, is driving standardization in financial reporting, making its standard adhere to generally accepted accounting principles (GAAP). Its protagonists reckon more than 80% of major U.S. public companies are now using the Internet to publish financial data. XBRL aims to streamline the interchange of this data using its XML-based standard.

The new XBRL taxonomy – included of version 2.0 of the schema – was published at last month’s meeting in Tokyo of XBRL Japan. The XBRL international steering committee agreed to issue an IAC-compliant primary accounting statements taxonomy, which would allow financial reporting information in IAC format automatically to be standardized in XBRL.

This kind of mapping would allow applications to derive more value from the underlying data. For example, using XBRL, descriptive information such as the rules governing a company’s revenue recognition policy could be quickly incorporated into an analytical application or document.

The new taxonomy will be subject to approval by the XBRL’s steering committee next year. However, the National Tax Agency of Japan and the U.K. Inland Revenue are already accepting XBRL-formatted filings. In addition, the Tokyo Stock Exchange has said it plans to accept XBRL-formatted contributions to its corporate disclosure network, starting mid-year 2003.

As XBRL moves toward an international standard for covering financial reporting, the prospects for its interoperability with other standards appear to improve. The XBRL working group has long had a policy of working with XML standards groups covering other information and messaging types. By moving toward a single unifying standard – rather than the local and national versions of XBRL that have been developed to date – XBRL has removed an obstacle from the initiative to achieve deeper integration with other standards.

MDDL, for example, while acknowledging some overlap with its schema, has been working with XBRL to ensure interoperability between the two. In particular, the two have discussed the possibility of defining an XBRL taxonomy for MDDL that would govern the interchange between common elements of the two schemas. The two areas overlap in aspects like derived data, where an indicator like earnings per share – a mainstay in financial performance reporting – is derived from two elements of market data, namely ‘earnings’ and ‘shares outstanding.’

That XBRL is gaining traction is illustrated by the initiative to use the schema for reporting in 21 Nasdaq stocks. That initiative – started in August – is being sponsored by Nasdaq, PricewaterhouseCoopers and Microsoft. It recently left the pilot stage.