More Expansion Plans for XBRL Reporting

XBRL technology may expand its reach in financial reporting even more in 2010, thanks to several efforts in Congress and the states to use XBRL as a means to reduce complexity in financial statements.

Corporate America has already been complying with a mandate from the Securities and Exchange Commission for nearly a year to “tag” financial data in XBRL, with some hiccups but generally no great cost or pain. Now voices in Congress want the SEC to start providing annual updates about how it is encouraging the use of XBRL and want other agencies to use XBRL to track the expenditure of government bailout funds. And at least one state, Nevada, wants to use XBRL for state-level reporting.

Most notably, one pending bill in Congress would direct all federal agencies to adopt a single interactive data standard (that is, XBRL) for all requests for government bailout funds and all required reports on how those funds are used. The standard would also apply for federal grant applications and reports.

Issa

The bill was originally drafted by U.S. Reps. Darrell Issa, R-Calif., and Ed Towns, D-N.Y., to keep tabs on how bailout money is being spent. The bill was then tucked into a larger Senate bill renewing the Federal Financial Assistance Management Improvement Act, a law intended to strengthen the government’s management of federal funds. Both chambers of Congress have approved their own versions of the bill; they still need to iron out minor differences and then send it to the president for his signature.

“The idea behind the Transparency Act is that anyone accepting government money should be accountable to taxpayers to be transparent about how that money is spent,” says Liv Watson, a founder and member of XBRL International and a board member of IRIS Business Services.

Currently, federal agencies collect financial data from companies in multiple formats, which means the information must be re-entered for each submission—and that makes it time-consuming, costly, and prone to human error, Watson says. XBRL would let agencies’ computers read the data themselves, so it could be collected from multiple sources and disseminated to the public quickly.

“This would drive us further toward the use of one information standard and … in the long run, it would reduce the compliance burden,” Watson says.

Watson also notes that many companies that would be subject to the new legislation are banks or public companies that have already been using XBRL for other types of reporting anyway. The Federal Deposit Insurance Corp., for example, has required U.S. banks to tag their quarterly “call reports” in XBRL since 2005.

XBRL also makes a guest appearance in the massive regulatory reform bill passed by the House last month. Section 7407 of the bill would require the SEC and other regulators to report annually to Congress for the next five years on how they are “encouraging the use and acceptance of interactive data” as part of efforts to reduce complexity in financial reporting. But the Senate must still pass its own version of a reform bill and the two must then be reconciled, so whether that provision will survive into law is still unclear.

Neal Hannon, a senior consultant on XBRL strategies with the Gilbane Group, says the idea of using XBRL to track government funds is “exactly in line with the objectives of XBRL: it would create a common method for reporting a set of data that can be collected and easily analyzed by computers.”

Still, while the idea is “a great one” on paper, Hannon says federal agencies will face tough work ahead to adopt XBRL reporting on a large scale. If they don’t have the funding to develop a robust taxonomy (a dictionary of XBRL tags to apply to data) and software to read and process XBRL documents, “it's all a wish and a prayer,” he says.

CHALLENGES FORESEEN

The following excerpt from the white paper on the Nevada State Business Portal (SBP )discusses the challenges of implementing SBP:

The benefits of implementing the SBP in the State system are manifold. However it is essential to recognize the challenges one can face during implementation of such a system. These challenges though not road blocks, but can be considered as major hurdles.

Studying & Documenting the Rules, Policies & Procedures

Getting the State Agency Systems Together

Source

Whitepaper on Nevada State Business Portal (2009).

Hannon says developing a taxonomy would be the principal challenge. Agencies will need to reach an agreement on what companies report, and how, “and what it’s going to look like,” he says. Then comes the software development, and the training so bureaucrats know what to do with it.

Other XBRL Projects

Congress isn’t the only place where XBRL is perking along. The SEC has required the largest 500 U.S. public companies to file their financial statements in XBRL since last summer. Another 1,200 large filers will start complying with the mandate this year, and all remaining U.S. and foreign registrants will follow suit in 2011. Another SEC rule that takes effect in 2011 will require mutual funds to tag the risk-return summary section of their prospectuses in XBRL.

And a separate project led by the XBRL U.S. consortium, the Depository Trust & Clearing Corp., and SWIFT is trying to develop a way to apply XBRL tagging to corporate actions such as mergers or restructurings. That taxonomy is expected to be published for public review during the second quarter.

Wallin

At the state level, Nevada is mulling how XBRL could help streamline and monitor several different areas of state oversight. State Controller Kim Wallin, an outspoken XBRL enthusiast, says the technology could help officials improve oversight of everything from awarding grants to collecting debts and cultivating economic development.

STEPS TOWARD BUILDING SBP

The following excerpt from the white paper on the Nevada State Business Portal (SBP) discusses the next steps needed to build SBP statewide:

Getting all State Agencies together to

commit to development of this portal

Adopting XBRL Standard for the

information exchange in the portal

Setting up a team of people, comprising of State Agency Representatives & an

implementation team which will be responsible for building the system.

The State Government must ensure that the system being built is compliant to the XBRL

specification 2.1, and that the vendor posses the required experience & expertise in building

XBRL based systems.

Source

Whitepaper on Nevada State Business Portal (2009).

“There are so many uses for it in government,” she says. “We don’t have money for new [software] systems and our old systems differ from agency to agency. XBRL allows us to link them all together and eventually, have some real-time reporting data.”

A pilot project currently underway uses XBRL to streamline grant reporting to the Department of Agriculture. “What was a manual, labor-intensive process that took two weeks before now takes less than a day,” says Wallin, who says plans are underway to expand that project to all state grant reporting.

Nevada is also piloting a project to use XBRL to streamline reporting in debt collection, which Wallin describes as another “horrible, labor-intensive process” that relied on information being re-keyed repeatedly into dozens of spreadsheets and then sent to multiple collection agencies.

“We don’t have a centralized accounts receivable database in the state,” she says. “The process is fraught with potential errors and is time consuming.”

Wallin has also published a white paper, co-authored with Watson and Shweta Gupta of IRIS Business Services, outlining a plan for a “State Business Portal” using XBRL that would serve as a one-stop shop for new businesses to apply for all licenses they might need to operate in the state. And Wallin says Nevada is also working on developing a taxonomy for reporting related to funds received under the American Recovery and Reinvestment Act.