Posts Tagged "articles"
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
Leveraging 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.
XBRL Implementation Strategies: The Bolt-on Approach, Strategic Finance, May 2009
My XBRL column in the May 2009 issue of IMA’s Strategic Finance discusses in more detail one of the three XBRL implementation strategies outlined in the March 2009 column: the bolt-on approach. In brief:
- With the bolt-on approach filings and reports are created following the existing process and converted to XBRL once finalized, either in-house or by a third party;
- This approach is a fast and relatively inexpensive way to react to the SEC - or any other – XBRL mandate, and it is also the only approach promoted and supported by the vast majority of XBRL consultants and vendors;
- On the other end, it has limitations that have to be taken into account in its evaluation:
- It turns XBRL into just an additional format to print the report once it is created, and it does nothing to make the advantages that XBRL offers in terms of greater efficiencies and lower costs in the process of creating the reports available to the company;
- It poses change management issues: if a change in a particular report occurs, it will typically have to be implemented twice, once in the generation of the report, and once in the conversion to XBRL;
- Evolving reporting requirements, either new – such as the convergence of US GAAP with IFRS - or already embedded in the SEC rule – the “year 2″ additional tagging requirements – will soon challenge its efficiency and even its viability.
Check the complete article at the IMA website (members only). Alternative approaches – Built-in and Deeply Embedded - which enable to achieve the primary goal of compliance but also offer significant benefits for the filer, will be discussed in two upcoming columns.
XBRL: What’s In It For Internal Auditors?
Earlier this month, The Institute of Internal Auditors (IIA) Research Foundation published my white paper XBRL: What’s In It for Internal Auditors, which I had the privilege to write with the invaluable review and advice of a number of individuals quoted in the paper.
This paper was initially conceived to address the results of an XBRL awareness survey among chief internal audit executives worldwide conducted by The IIA at the end of 2008. The survey showed only a partial awareness of XBRL by internal audit professionals. In addition, auditors were minimally involved in the actual process of generating XBRL filings even in those companies that are already using XBRL, either in voluntary or mandatory projects.
One of the objectives of the white paper is to fill this awareness gap by providing a comprehensive overview of what XBRL is, how it is being used in various programs across the world, and how it will have to be used to meet the SEC’s interactive data mandate, which starts in the second half of this year.
However, this is only one part of the story. Obviously, internal auditors need to be able to contribute to, and provide professional assurance on, the process of generating XBRL filings as they do with any other corporate reporting process. Still, XBRL’s value proposition in internal auditing processes goes far beyond being an additional format to which to convert financial reports. The white paper highlights the uses of XBRL that go beyond regulatory compliance, demonstrating how it enables the enhancement of critical processes in the internal space: data integration, reporting assembly, application of validation rules, controls, and visualization templates in a consistent way across the whole corporate information system.
Simply put, internal auditors should consider XBRL — and I am not referring here just to the US GAAP XBRL taxonomy used to report to the SEC, but to the standard as a whole in its various flavors as described in the paper — as a key tool to perform their functions more efficiently, rather than simply an additional reporting burden that requires their professional attention. XBRL enables moving from widespread manual, error-prone processes to automated and standardized ones in key data-related activities. It is something that businesses can leverage internally as a key technology and not just see as an additional compliance burden.
This concept is relevant not only for internal auditing, but for internal corporate processes in general. It can help executives making crucial decisions today on how to comply with the SEC’s interactive data mandate over the course of the next several years.
The white paper also examines different approaches to XBRL adoption, where XBRL can be either bolt-on at the highest financial report generation level, built-in deeper into the reporting layer of the corporate information system, or deeply embedded at ledgers level.
If a company sees XBRL as just another format in which financial statements have to be submitted for compliance, its management is likely to consider only the easiest options to create its filings: either create them under the existing process and convert to the new format at the end, or outsource as much of the process as possible. These choices not only represent a missed opportunity on the “internal” benefits that XBRL enables, but will actually be put to test by evolving reporting requirements. Additional reporting concerns like IFRS convergence and the “Year 2″ requirements already set in the SEC mandate, which extend the depth at which information will have to be tagged in notes and schedules, are reason enough to consider all of the options available and their implications very carefully.
In short, even if you are not an internal auditor, I think it may be worthwhile for you to get the white paper from The IIA website.
Originally posted on March 30, 2009 on the Hitachi Data Interactive Blog
How To Make Your Data Interactive – Strategic Finance, XBRL Column, March 2009
My March 2009 XBRL column in IMA’s Strategic Finance magazine discusses the possible strategies available for companies to comply with the US SEC XBRL mandate, and in general with XBRL filing requirements all over the world.
In brief:
Thousands of companies are now facing choices in terms of how to add XBRL report-creation capabilities to their systems: What does adoption of XBRL entail? How do I convert my SEC filings to the Interactive Data format? What are the possible approaches to XBRL-enabling my corporate processes and systems that I should be aware of, and what are the related costs and benefits?
For companies considering their response to the immediate requirements of the mandate, there are several solutions. Some appear simple and straightforward, like the conversion of the reports to XBRL after they are generated in a traditional format, such as Microsoft Word or Excel. The conversion can be outsourced, or it can be performed internally using an XBRL mapping and instance creation application.
But these “bolt-on” solutions, that also happen to be the most publicized and commonly suggested, merely serve as a patch on a more complex problem. Other approaches might involve more work at first, but they can decrease the cost of complying with the mandate as well as the costs of other existing consolidation, management reporting, and compliance processes.
The same features that make XBRL the technology of choice in regulatory filings and compliance can be leveraged by companies for even greater benefits related to systems integration, data consolidation, internal reporting, and auditing. Many executives may see these as longer-term concerns that are not worth addressing when the immediate priority is compliance with the SEC mandate, but the decisions made today about how to react to the mandate are crucial. It is a fact that a “bolt-on” response to the SEC year-1 requirements will not be efficiently scalable to year-2 requirements and beyond. And with IFRS convergence just around the corner, now is the perfect time to consider standardizing your internal reporting supply chain.
The complete article is available at the IMA website (IMA members only).
Also, Iphix is organizing two workshops where I will discuss these same topics, the options available and the tools and resources required to decide the best ways to get the most benefit from Interactive Data. Stay tuned for more information and dates!
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