Why Should I Even Consider Using XBRL For More Than I Am Required To?

In the last few months I wrote three columns in IMA‘s Strategic Finance magazine discussing three different approaches to XBRL implementation for regulatory compliance: the Bolt-on, Built-in and Deeply Embedded approach.  I received a number of questions from readers, and the title of this post reflects the one that was by far the most recurrent.  XBRL is being adopted worldwide for regulatory filings and dissemination of financial reports; isn’t advocating its use for different, much broader and more complex purposes a solution in search of a problem?

The value of XBRL is in the fact that it provides an optimized format to represent relevant categories of financial and accounting information – entries, documents, journals of various types, trial balances, and of course financial reports – in the same way across applications, business units, industries and jurisdictions. In turn, the value of this consistent format is that it enables the use of software procedures that can be created and shared relying on that single, consistent format as opposed to be software and application specific. The advantages are evident: not only data is decoupled from the application in which it was created or resides in and can be freely exchanged, but also and more importantly the same controls, business rules, analytics, visualization templates etc. can be applied to it consistently – again, across applications, business units, industries and jurisdictions. These benefits are obviously very relevant in the internal reporting and auditing space, for business intelligence purposes, and for other key internal processes.

If we look at SEC or other XBRL based regulatory compliance in isolation, the bolt-on approach – the conversion of financial reports and regulatory filings to XBRL once they have been created under whatever process is currently in place – may seem more appealing, but only if we choose to ignore the obvious connection with other processes and concerns that are critical and currently very cost and resource intensive. There are significant benefits and cost reductions that can be achieved by leveraging this existing and proven standardized format while planning its implementation for regulatory compliance.