XBRL Geared to Make Web 3.0 a Reality
June 5, 2008
by Mark Bolgiano
There’s been a lot of speculation about what the next wave of innovation on the Internet will bring. After Web 2.0 brought us Facebook, Wikipedia and YouTube, what will Web 3.0 look like? Many believe that it will have a lot to do with turning the Internet into a database.
Thanks to the vision and support of the AICPA and the accounting profession, a technology many of you have heard about in previous columns — XBRL (eXtensible Business Reporting Language) — brought that future a lot closer in recent weeks and months. After years of work, XBRL is moving from “promise” to “products.”
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Late April saw the release of a digital dictionary, or taxonomy, for GAAP accounting concepts and common reporting practices by XBRL US, an independent consortium of accounting, technology, information and corporate leaders, under a contract with the U. S. Securities and Exchange Commission (SEC).
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Within a few weeks, the SEC had met twice to discuss interactive data proposals: on May 14, to propose a rule that would phase in a requirement for all public company filings to include a tagged version of financials over the next three years and a week later, on May 21, the SEC met again to propose another rule applying to mutual fund disclosures over an 18-month period. Both proposals were unanimously passed and the full proposal for public company submission was last week.
During the Commission meetings, SEC staff reported on the readiness of the infrastructure necessary to support the rapid implementation of the new XBRL requirements. In addition to the taxonomy itself, a Preparers Guide and case studies were also developed by XBRL US. The taxonomy is free of charge for anyone to use or extend with company-specific tags and allows each value in your financial statements, including footnotes, to be individually tagged. Each piece of “tagged” information, such as earnings per share (EPS), net income or even content embedded in a pension footnote, becomes machine-readable.
So how does XBRL fit into the concept of Web 3.0? In a world in which corporate financials and business information is coded in XBRL, that information is “freed” from the confines of a simple financial statement and becomes much more extractable, searchable and accessible. XBRL will go a long way towards making Web 3.0 a reality.
What should public company preparers do to get started?
Preparers should spend the next few months getting up to speed on how to convert their own financials into XBRL format. According to the current rule proposal, the 500 largest public companies (those with worldwide public float over $5 billion) would have to begin filing in XBRL format in 2009. Other companies would then be phased in, again based on company size. This is a prime opportunity to attend Webinars and training sessions, read the Preparers Guide and start talking to other companies that have participated in the Voluntary Filing Program already. You can review tools and services available and access numerous resources at www.xbrl.us.
Public companies should get up to speed as quickly as possible. The world is changing at a dramatic pace — XBRL is just one important part of that change.
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Mark Bolgiano, joined XBRL US as President and CEO in December of 2006. Previously, he led the technology and online communications teams at the Council on Foundations as Vice President and Chief Information Officer. His views as expressed in this article do not necessarily reflect the views of the AICPA or the Corporate Finance Insider.
ADDITIONAL RESOURCES: See popular XBRL articles from recent Corporate Finance Insider issues.