One Step Towards Deeply Embedded XBRL
I came across this post in the SAP Community Network Blogs. It is about a proof of concept on using SAP software – ERP Central Component (ECC) – to generate XBRL reports, and in particular SEC filings in the example, by mapping journal entries to the SEC US-GAAP taxonomy, as opposed to mapping the financial statements to the SEC US-GAAP taxonomy after they have been finalized.
I want to point out in particular the conclusions from the post:
“We have gone from a GL journal entry to the published financial statements using the minimum steps required and leveraging the existing SAP production installations. This virtual financial reporting value chain takes a lot of manpower and even more hours to accomplish today, but this example shows a clear opportunity to streamline and make it a more efficient process thus creating added value for all.”
Of course, this proof of concept is not really about using deeply embedded XBRL, since it is based on a proprietary software and XBRL is only the final output. It is, though, about applying the idea behind deeply embedded XBRL – standardize and optimize the process of creation/assembly of end reports from the underlying detailed data rather than just standardizing the resulting end reports, because it is the process and the inefficiencies related to it that cost money to businesses, not the report in itself.
Once the concept outlined in the conclusions quoted above is understood and accepted, moving towards a real deeply embedded XBRL implementation, and more broadly towards leveraging the real value of XBRL internally to the enterprise, is easy:
- Use XBRL Global Ledger (XBRL GL) to standardize the underlying detailed data (journal entries or trial balance in this case, but you can go deeper down to even more granular data as needed) and the mappings to end reporting XBRL taxonomies (such as the US-GAAP taxonomy, or the IFRS taxonomy) as opposed to using the proprietary format of SAP or any other accounting software/ERP application. This makes it possible to integrate data from any data repository in use within he corporate information system and to avoid being bound to one specific application. It also makes it easy to broaden the scope of the internal use of XBRL to other processes that relate to data aggregation, reporting, auditing and monitoring.
- The step described in point 1 already goes a long, long way towards achieving the benefits of XBRL within a business. It is however possible to go one step further, by interposing a standard chart of accounts (SCOA) between the corporate chart of accounts and the end XBRL reporting layer. If the mappings to the XBRL taxonomy of interest are created with a SCOA as the starting point, they become reusable by any business just by mapping the corporate COA to the SCOA – an account-to-account mapping that is way easier than an account-to-XBRL-reporting-concept mapping. This means that a community of users can create and share these mappings in a standardized, reusable format, minimizing - actually I believe that the current buzzword is “crowdsourcing” – the cost and the effort related to deploying XBRL internally.
That community already exists, it is called WikiAccounts – check it out here.
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Foreword to “XBRL Global Ledger Distilled”
As mentioned here the book “XBRL Global Ledger Distilled” has been recently published in China. Below is the foreword that the author, Jia XinQuan, kindly asked me to write.
The Extensible Business Reporting Language (XBRL) is rapidly becoming the global standard for the representation of business and financial data. The vast majority of its visible implementations to date relate to regulatory reporting, and there is a common misconception that this is the only process that XBRL is designed to support.
In reality XBRL is a Business Reporting Supply Chain (BRSC) standardization effort, and as such it encompasses both internal and external reporting processes. It is designed for the end-to-end standardization and integration of data: from the first entry in accounting software, through the various levels of summarization for internal reporting purposes, to its final roll-up in multiple end reports for internal and external use, including, but not limited to, compliance reporting. The use of XBRL to standardize internal information, to streamline the internal processes that aggregate and analyze it and to standardize the rules of aggregation between granular internal data and internal and external end reports is the space of XBRL Global Ledger (XBRL GL).
One of the analogies most frequently used to describe the power of XBRL is the barcode, which revolutionized the distribution supply chain by enabling greater efficiencies and extremely significant cost savings, mostly related to the automation of previously manual activities. The barcode is a machine readable, standardized code that uniquely identifies goods and materials and describes some of their features; in the same way, XBRL allows to attach machine readable “meaning” relevant in the business and financial data domain to pieces of information, thus enabling the same kind of transition from manual to automated processes related to data aggregation, analysis and reporting.
Well, I assume that if you were in charge, say, of a specific distribution supply chain you would not apply the barcode to your merchandise only in the moment in which it is unloaded from the truck to get to the grocery store shelves – your own processes would not benefit from it at all, and the only beneficiary would be the grocery store itself. The earlier in the supply chain you start barcoding, the more significant and pervasive are the process benefits that you achieve within your own organization.
In the same way, seeing XBRL only as the format to which financial statements must be converted to comply with a regulatory mandate means ignoring the great opportunities that it enables. The earlier you tag your business and financial data in the business reporting supply chain, the more significant the benefits achieved will be. XBRL GL is the enabler of “early barcoding” within the BRSC – and the benefits seen so far from XBRL adoption in the external compliance space are only the tip of the iceberg. The real value and the most significant process efficiencies lie in the internal use of XBRL, including, but in no way limited to, the generation of XBRL reports in a standardized, more efficient way.
China has taken a lead position in global XBRL adoption since the release in October 2010 of the Chinese Accounting Standards XBRL taxonomy promoted by the Ministry of Finance, and the level of interest in expanding its use for internal purposes is very high – as is very high the potential for breakthrough advances in the application of this technology.
The publication of XBRL GL Distilled is a milestone on the way towards the complete realization of the benefits of data standardization in business reporting and towards the full adoption of the “business data barcode” in one of the most influential economies in the world – which has the capability of setting best practices that will greatly benefit the global community as a whole.
Gianluca Garbellotto
Chair, XBRL Global Ledger Working Group
XBRL Global Ledger Just Got More Global
The book XBRL GL Distilled, authored by Jia XinQuan, was recently published in China by Economic Science Press, a further confirmation of the growing global interest around what is widely considered as the necessary next step in XBRL adoption.
- XBRL GL Distilled cover
A great additional offspring from this work is the set of Chinese XBRL GL labels, which soon will be added to the existing English and Japanese labels. Many thanks to Jia XinQuan and the Chinese XBRL Jurisdiction for this great contribution.
Italian and Spanish labels are also in the pipeline. How Global is that?
Read MoreLeveraging XBRL for Value in Organizations
ISACA and the International Federation of Accountants (IFAC)’s Professional Accountants in Business (PAIB) Committee have jointly developed a paper, Leveraging XBRL for Value in Organizations, to provide guidance on how to leverage the value of XBRL through effective implementation – and I had the privilege of being asked to contribute with a review.
The paper can be downloaded free of charge from the ISACA and IFAC web sites.
Read MoreNot Your Usual XBRL Case Study
The Maryland Association of CPAs (MACPA) and Altova recently published a remarkable case study focused on exploring the actual internal process benefits available for small businesses with the use of XBRL, and to showcase those benefits to MACPA members and to other non-profit organizations.
Basically, MACPA used Altova’s Mapforce (part of the Altova Missionkit suite) to convert its internal accounting data to the XBRL Global Ledger (XBRL GL) format. The data was then used to automatically populate their Key Performance Indicator (KPI) system. They also used Altova XMLSpy to extend the US GAAP XBRL Taxonomy (UGT) and adapt to meet the reporting needs of a non-profit organization. Finally, they mapped their XBRL GL data to the extended UGT, again using Altova Mapforce for the purpose, and created the final XBRL reports. You can find the full document here.
This case study is remarkable for a number of reasons.
Scope. The case study shows that XBRL is not only about the Securities and Exchange Commission (SEC) mandate in the United States or other similar global compliance initiatives – it is very much about achieving internal process efficiencies and cost savings for businesses. Financial reporting is one very important output of those processes, but not certainly their essence. Check out the comments from Tom Hood IV, the college intern that MACPA engaged to perform most of the technical activities described in the case study, in the YouTube video that illustrates the project. You will hear him describe the process benefits achieved and their practical consequences – the elimination of several manual activities and of the spreadsheets used to support them.
Tooling.The case study demonstrates that XBRL does not necessarily need to be embedded in accounting software, ERP applications and consolidation/reporting packages. It would be great if this was the case, and when it is the case it would be great if that support was not conceived as a “print to XBRL” function at the end of very application specific reporting processes, as opposed to providing richer deeply embedded XBRL capabilities. But the existence of tools like Altova MissionKit enables the creation of a “standardization layer” sitting on top of any application and data repository within a corporate information system. This translates into complete control over the characteristics of your XBRL implementation, its clear separation from the process constraints imposed by proprietary applications and its consistency across different components of the corporate information system. In other words, it sets the stage for the achievement of the real internal benefits enabled by XBRL for global companies, small businesses and non-profit organizations alike.
XBRL implementations “can” be easy.Here is a quote from the case study by Tom Hood, MACPA’s CEO and Executive Director: “If we can implement XBRL as a state-based non-profit association working with a college intern, you can do it too – implementing XBRL in-house is easy with the right tools.” XBRL GL is the seamless bridge between source accountinginformation and end reporting supported by XBRL taxonomies, the UGT in this case. Altova Missionkit was already used to implement XBRL GL long before XBRL support was added to its capabilities - and things got a lot easier after this happened of course. It does look like the MACPA made all the right moves, and those moves paid off.
This is the real promise of XBRL. Small businesses and non-profit organizations can achieve advanced internal and external reporting and business intelligence capabilities quickly and for a fraction of the cost. Larger companies can make their existing IT infrastructures more efficient and eliminate manual and resource intensive data-related processes.
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