XBRL: an introduction
The purpose of this article is to communicate the business case for XBRL (eXtensible Business Reporting Language) and the current status of this initiative in the market place. This document explains business reasons as to why XBRL is important to your business and the current adoption status of this standard in the market.
The objective of XBRL is to facilitate the processing, interchange and publication of financial and business information. It’s an emerging Internet standard based on XML, governed by a non-profit international consortium.
XBRL is the new Internet standard specifically designed for business reporting and information exchange, it is a logical next step in the evolution of technology-driven improvements as it is based on a broader set of universal standards that the software industry has adopted, hence allowing a broader and more universal solution.
In credit determinations, XBRL can streamline processes in credit assessment and risk management, increasing the quality, timeliness and frequency of analysis and decreases costs.
How does XBRL work?
To facilitate the interchange of information, XBRL consists of an instance document, containing primarily the business facts being reported, and a collection of taxonomies, which define metadata about these facts, such as what the facts mean and how they relate to one another. XBRL uses XML schema, XLink, and XPointer standards.
For example, XBRL taxonomies exist for International Financial Reporting Standards IFRS and United States Generally Accepted Accounting Standards (US GAAP). They provide an extremely powerful way to model the semantics of a reporting framework and are highly extensible.
Information requirements
In today’s markets, consumers of business reports are demanding more accessible, reliable and timely information in order to make informed decisions, contributing decisively in decision quality—and competitive advantage.
Specifically in credit risk assessment a lot of information about the buyer not only financial information but also non financial information.
Thus credit risk assessors buy information (data and text reports) from Information Providers. They buy a lot of information-more than a Billion dollars per year. Credit insurers alone spend a few hundred million dollars per year.
Information Providers
Information Providers are set up to collect, organise, analyse and maintain information on millions of business entities worldwide. The collective number is in excess of 100 million. They are set up to obtain information from the individual business entities, trading partners, and public sources. Millions of updates flow into their data bases daily.
In today’s business environment, how much information managers have and how quickly is critical, diversified internal information environments are bad for business if they prevent fast, accurate, robust information gathering and consolidation for management analysis and decision making.
Up until now the exposure to third parties were proprietary data definitions and intricate proprietary-software layers. Proprietary information standards and software leave companies dependent on particular third-party vendors to adapt standards and service complex technology structures. With XBRL’s universal data definitions and the Web services universal transport standards Web services, decision makers gain more, better, faster information with the software they use today—and whatever software they will be using tomorrow.
In today’s context where computing power is shaping the way of true inter-operability, the new paradigm to better information access and use for consumption and production is Straight Through Reporting, using eXtensible Business Reporting Language (XBRL) and Web services Internet technology.
XBRL saves time and money
XBRL enables direct communication between all the different stakeholders in the credit assessment supply chain, creating an open universal standard, leveraging the current state of the art technology disparate business-information systems and software, XBRL Web services eliminates the need for manual preparation tasks, leaving more time for information use, especially analysis.
XBRL Web services can make risk assessment processes cheaper, easier, faster more comprehensive and, ultimately, capable of producing results that are up to date, even up to the minute.
XBRL: developed by 450 of the leading companies and government agencies
Within the credit risk assessment community a working group, called CRAS has been formed, and as its first activity has developed a credit insurance taxonomy, to support the credit insurance risk assessment workflow between credit insurers and information providers. These taxonomies are based on the current United Nations electronic commerce compliant messages and vocabularies developed for the credit insurance risk assessment process through GREFIS.org. The current state of this taxonomy is that it is currently been rolled out and in pilot phase of implementation in several companies.
The adoption of the eXtensible Business Reporting Language promises to help companies make faster and better decisions. Information encoded in XBRL is smarter; it is intelligent data that can be reused for a myriad of purposes.
Adoption of XBRL permits financial analysts, investors, accountants, government agencies, internal users and other interested parties to access, compare, and analyse data in ways that are not currently practical or even possible.
Approximately 450 of the world’s leading companies, associations, and government agencies are working together to develop XBRL, a standard that enables preparers of business reports to meet business reporting demands effectively and cost-efficiently.
Learn more about XBRL at www.xbrl.org.