The Hindu Business Line : Make `apples-to-apples' financial comparisons using XBRL tags

I'VE NEVER turned over a fig leaf yet that didn't have a price tag on the other side, said Saul Bellow. But this week's piece is about letting accounts turn a new leaf with different tags.

Let me begin with what not many accountants may remember — an unobtrusive report on Infosys about a month ago that it voluntarily furnished eXtensible Business Reporting Language (XBRL) data to the US Securities and Exchange Commission (SEC) electronically in a 6-K exhibit. "Infosys is participating in SEC's new Voluntary Program for Reporting Financial Information on EDGAR (Electronic Data Gathering, Analysis and Retrieval System) using XBRL," the company had said in its communiqué dated May 3.

And it had explained further: "XBRL is an XML (Extensible Markup Language) based information format for business reporting that provides a methodology for companies to tag (or `mark-up') financial documents. As data is standardised in the XBRL format, it can be used to make `apples-to-apples' financial comparisons."

About a week later, there was the news that Satyam became India's first Direct Participant member at the XBRL International Consortium.

The company spoke of providing leadership in the area of financial reporting, which is a part of all major compliance and regulatory requirements.

"Microsoft became the first tech company to report its financial results in XBRL in 2002, and other vendors are taking up the XBRL torch," informs Clint Boulton in a recent article titled XBRL Chugs Along Despite Scant Users posted on www.internetnews.com. Earlier this year, Xinhua Finance began offering XBRL in China, and Hitachi has introduced a tool that lets users port XBRL financial information directly into Microsoft Excel, writes Boulton.

That XBRL is independent of any hardware platform, software operating system, programming language or accounting standard, as noted in a recent PricewaterhouseCoopers report titled XBRL: Improving Business Reporting Through Standardisation, is what I gather from Alan Radding's June article titled High Finance Learns a New Language on www.adtmag.com.

From www.sec.gov one learns that the SEC had considered developing an application, such as a standard style sheet, so that users would be able to view XBRL data in a human readable format on our Web site. "This application would have converted XBRL files into a document that would have the appearance of traditional financial information, such as a balance-sheet or income statement," notes the Commission, and reports the view of commenters against the use of style sheets.

"We plan to continue to analyse rendering and other capabilities and we may add these features in the future. Users will continue to be able to view the official filing in ASCII or HTML format, as they can today," adds the SEC in its `Final Regulatory Flexibility Analysis', indicating openness in adopting technology developments. The Commission has estimated that the aggregate cost to registrants that choose to participate in the voluntary program will be between $1,009,980 and $1,683,300 in the first year.

PCAOB on XBRL

Though the voluntary program of the SEC does not require companies to obtain auditor attestations to XBRL data, the PCAOB (Public Company Accounting Oversight Board) issued on May 25 `staff questions and answers' to provide guidance for professional accountants engaged in reporting on whether the XBRL data accurately reflects the corresponding information shown in the official filings. (On May 16, the Board had issued a Q&A on `Auditing Internal Control Over Financial Reporting', also worth a read on www.pcaob.org.)

The first question is basic, `What is XBRL?' The Board's answer reads: "XBRL is an open standard for electronic communication of business and financial data. The XBRL standard provides a format for tagging that data so users can extract, exchange, analyse, and present the information."

Further on, the Board goes into a few technical aspects: "XBRL information is commonly distributed in the form of XBRL instance documents. These documents are electronic files consisting of financial data along with their corresponding XBRL tags... XBRL instance documents must be created using a common set of standards that all parties can understand and use.

"In XBRL, this is accomplished through taxonomies and specifications. An XBRL taxonomy (or tag list) provides a data structure and vocabulary for interpreting financial information, such as all of the items comprising `net income.'"

Another question is on whether the auditor should have adequate knowledge of the subject matter. And the answer can unnerve many CAs: "The auditor must have sufficient knowledge of... XBRL taxonomies and specifications."

Going one step further is yet another query that brings in the independence angle thus: "May the auditor assist a company with the creation or tagging of its XBRL-related documents and still perform an examination regarding those documents?" The Board has listed a few procedures that the auditor may adopt when checking XBRL data.

The first is that the auditor should test whether the data elements (that is, text and line item names and associated values, dates and other labels) in the XBRL-related documents reflect the same information as the corresponding official EDGAR filing (that is, the HTML or ASCII version). Second, "Verify that the data elements in the corresponding official EDGAR filing have not been changed, deleted, or summarised in the XBRL-related documents." Third, check if the documents comply with the appropriate XBRL specification and EDGAR-supported XBRL taxonomies. Fourth, check if any company extensions of the taxonomy are consistent with the SEC's specifications. Fifth, test whether data elements in the documents are matched with appropriate tags in accordance with the applicable taxonomy. And sixth, very important, "Obtain a representation letter from management that includes a statement that the XBRL-Related Documents comply with SEC requirements."

Show me a person who doesn't like to laugh and I'll show you a person with a toe tag, is a quote attributed to Julia Roberts who is also supposed to have said, "To act with my clothes on is a performance; to act with my clothes off is a documentary." Time has perhaps come to clothe accounts too with tags all over, and get them ready to entertain those who have got tired of drab documentaries.

AccountSpeak@TheHindu.co.in

D. Murali

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