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December 13, 2009

XBRL still a largely unknown factor

More than 50 percent of analysts remain unaware of XBRL (eXtensible Business Reporting Language), despite a growing number of jurisdictions mandating the use of the electronic tagging system, according to a survey by the CFA Institute.

XBRL provides identifying tags for individual items of data within financial reports. The tags enable automated processing of business information by computer software. XBRL is developed by an international nonprofit consortium of about 450 major companies, organisations and government agencies. It is an open standard, free of licence fees.

Proponents say XBRL will make it easier for companies to prepare, file and publish statutory information, and easier for investors to access this information.

Many governments around the world seem to agree. Companies listed in the US that use US GAAP and have a worldwide public float of more than $5 billion must file in XBRL from financial years ending after 15 June 2009. All US listed companies must file in XBRL from 15 June 2011.

Other examples include Japan, where XBRL has been widely used since 2008, and the UK, where the government plans to make the system mandatory for all company tax returns due after March next year.

However, critics have warned that XBRL it is not the panacea to all financial reporting ills.

JPMorgan Cazenove head of accounting and valuation research Peter Elwin told The Accountant earlier this year that investors may not have engaged with XBRL at all yet.

The latest CFA Institute member survey seems to back Elwin’s claim.

CFA Institute members are primarily investment professionals. Of the almost 1,500 respondents to the October survey, 55 percent were not aware of XBRL. This was down slightly from 59 percent in 2007.

Just 11 percent of respondents were aware of both XBRL and plans for its use in financial reporting in their jurisdiction, up slightly from 9 percent in 2007.

In the US, where XBRL is already mandatory for the largest listed companies, 48 percent were still unaware of XBRL. Just over half the respondents to the survey were from the US.

UK concerns

The UK Accounting Standards Board (ASB) remains mindful of government plans for XBRL as it consults on the future of UK GAAP.

The ASB recently proposed to replace UK GAAP with a three-tier reporting system comprised of IFRS for listed companies, Financial Reporting Standards for Smaller Entities for the very smallest companies and IFRS for SMEs for everything in between.

ASB chairman Ian Mackintosh told The Accountant the ASB has heard concerns that companies will need to file under XBRL before UK GAAP changes, then be forced to convert to another system.

The ASB has recognised it has a lot to discuss regarding XBRL, including identifying how tagging is done and who does the tagging.

Mackintosh said it is not clear to him who creates XBRL tags for UK GAAP.

“We just need a bit more clarity and understanding of what’s going on,” he said.

Carolyn Canham and Ana Gyorkos

XBRL: Awareness among CFA Institute members

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