XBRL Projects

The transition to XBRL financial reporting has brought about the development and implementation of hundreds of XBRL projects to establish constancy and efficiency in financial reporting and many other ways to help provide accuracy in reporting and create transparency in business processes.   (XBRL USA, 2011) To comply with required XBRL financial reporting around the world, projects are being developed and implemented to establish requirements, guidelines and processes for compliance. More than 130 projects currently exist internationally, with the majority of the projects located in Europe and Asia. Of the known XBRL projects listed by XBRL International, the top five entity types creating projects are: (World Wide XBRL Projects listing, 2009)

5) Consortium           3%

4) Public Sector        7%

3) Not for Profit        8%

2) Stock Exchange    14%

1) Government          59%

While researching XBRL projects being developed and implemented today, there are a few basic characteristics I’ve noticed as have others looking at this same topic. Here are few of the characteristics associated with XBRL projects according to What-When-How.com (2013)

• In the case of government-related projects, each country has common functions that make use of XBRL within that country. These common functions are regulators of stock exchanges and securities, banking regulators, business registrars, revenue reporting and tax-filing agencies, and national statistical agencies.  One regulator mandating XBRL can require thousands, tens of thousands, hundreds of thousands, or even millions of businesses to report using XBRL.
• The areas of the world where XBRL are taking off the fastest are Japan, Europe, China, and Australia.
• At least one nonprofit (the MIX) has implemented XBRL.
• The implementation to date that will exercise XBRL’s extendibility features the most is the U.S. SEC.
• Standard Business Reporting (SBR) implemented by the Netherlands, Australia, New Zealand, and Singapore is becoming a standardized approach for a government to make use of XBRL.
• (We) are not aware of any significant failed XBRL implementations.
• Stock exchanges and banking regulators are the two biggest groups to have implemented XBRL.
• The European Parliament is the largest governmental body that has expressed interest in XBRL.

Looking at the complexity of XBRL implementation and adoption of both IFRS and US GAAP taxonomies, two projects that caught my interest are the Israeli Annual and Periodic Reports General Purpose Financial Reporting project and the non-profit Microfinance Information Exchange, Inc. (MIX) mentioned above. Both of these projects interested me for two different reasons. The IL-IFRS-GP taxonomy was adopted to make it easier for Israeli companies to communicate their financial data in English, to enable them to attract a wider audience of investment firms; business venture and growth. The MIX has developed their own taxonomy based on the needs of the microfinance industry to support data analysis standards for finance and social performance information. Both of these taxonomies are being developed to provide greater accessibility to a wide range of stakeholders and develop new relationships that benefit the companies using XBRL.

The IL-IFRS-GP taxonomy project owned by the Israel Securities Authority (ISA) is the development of an XBRL taxonomy based on the IFRS-GP to “enable companies listed on the Tel Aviv Stock Exchange to file Israeli annual and periodic financial reports.” (XBRL.org, 2007) This taxonomy labels financial documents and reports in both Hebrew and English. This allows organizations reporting within the ISA to attract more international investors by being able to easily transmit their financial data in a common language. The English taxonomy labels are based on the IFRS taxonomy with the Hebrew taxonomy being translated by the Israel Accounting Standards Board and the labels being created by the ISA. The physical locations for the taxonomies are listed here. 

Companies utilizing this taxonomy will be able to attract a much larger investment base using English as a common language in addition to having a common language to set standards of data analysis within the ISA. They are developing a way to communicate with the rest of the world and not limiting their data sharing and communication to the regions that communicate only or primarily in the Hebrew language. They are also making it possible to retain their financial reports in their regional language while adopting the IFRS taxonomy.

The Microfinance Information Exchange, Inc. (MIX) is a non-profit organization located in Washington, DC, that “collects and disseminates industry, regional, and company financial and social performance data for the microfinance sector, while collaborating with industry leaders to establish and publicize best practices.” (Omidyar Network, 2013) Microfinance is a global industry operating under numerous regulations and reporting requirements assisting individuals and small business obtain financing when it would normally be impossible. The Microfiance industry not only addresses the issue of financial need it also considers the social impact the business or individual will have on their community and country. MIX addresses the issue of transparency, promotion of improving social impact at the industrial level (Omidyar Network, 2013) and has utilized its expertise in data collection and financial analysis to establish itself as a leading contributor for setting best practices and establishing industrial standards in accounting, financial analysis, data collection, and benchmarking processes. (Microfinance Information eXchange, Inc., 2010)

This non-profit organization’s project uses XBRL for their data collection which enables them to develop a standard reporting framework for microfinance data and financial reporting. MIX developed an XBRL taxonomy to help standardize the microfinance industry and provide more accurate accessible financial and social data to the mainstream markets. I found it very interesting that they are not only using the taxonomy for financial reporting but for reporting on social performance as well. The final working draft of the MIX Microfinance Taxonomy 1.0 (MIX PWD) was published on June 19, 2009. (Microfinance Information Exchange, 2010) The taxonomy has been validated and acknowledged by XBRL International. 

For detailed information on the implementation of MIX taxonomy please view the MIX XBRL Case Study located here: http://www.xbrl.org/CaseStudies/MIX%20XBRL%20Case%20Study%2003.03.10.pdf

Over the past three weeks I've learned that there are numerous uses for implementing an XBRL taxonomy, not just for meeting financial reporting standards, but for data collection, internationalization of financial reporting, communication and increasing accuracy, efficiency and transparency. These are only two of hundreds of projects being developed to standardize data collection and analysis. The issue is this…are all the projects utilizing the same or similar elements of XBRL categories? What happens when all of the custom XBRL projects are complete and some are based on IFRS while others are based on US GAAP while still others like MIX are based primarily on industry standards? Will they communicate across industries, regions, countries? Will we ever reach a time when we truly have a universal, international standard? I believe the work on these projects is at least a step in the right direction. I have a sense that there is a consistent goal and a similarity among all the XBRL taxonomies being developed that will allow them to cross industries, regions and countries for the primary purpose of data sharing and analysis and most importantly for communication.  

Resources

World Wide XBRL Projects listing. (2009, July 29). Retrieved from XBRL Blog Magazine: http://xbrlblog.com/world-wide-xbrl-projects-listing.html

Financial Explorer. (n.d.). Interactive Diagrams Easily visualize Change in Important Values. Retrieved from Financial Explorer: http://209.234.225.154/viewer/about/tour.asp

Microfinance Information Exchange. (2010). XBRL. Retrieved from MIX Microfinanace Information Exchange: http://www.themix.org/microfinance-reporting-standards/xbrl

Microfinance Information eXchange, Inc. (2010). Services. Retrieved from Microfinance Information eXchange: http://www.themix.org/services/overview

Omidyar Network. (2013). Microfinance Information Exchange. Retrieved from Portfolio: http://www.omidyar.com/portfolio/mix

what-when-how.com. (2013). Exploring Common Uses of XBRL. Retrieved from what-when-how.com: http://what-when-how.com/xbrl/exploring-the-common-uses-of-xbrl/

XBRL USA. (2011, July 24). The Power of XBRL Demostrated. Retrieved from XBRL USA (Blog): http://xbrlusa.wordpress.com/2011/07/24/the-power-of-xbrl-demonstrated/

XBRL USA. (2012, August 05). Another Free XBRL Toos Changing the Way We Consume Information. Retrieved from XBRL USA: http://xbrlusa.wordpress.com/2012/08/05/another-free-xbrl-tool-changing-the-way-we-consume-information/

XBRL.org. (2007, September 01). Isreali Annual and Periodic Reports General Purpose Financial Reporting. Retrieved from xbrl.org: http://www.xbrl.org/il/ifrs/gp/2007-09-01/il-ifrs-gp-2007-09-01-summary.htm

xbrl.us. (2007-2013). Tools & Data. Retrieved from xbrl.us: http://xbrl.us/research/Pages/default.aspx

IFRS and US GAAP Taxonomies: To converge or not to converge…that is the question.

The governing bodies the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have been working since 2002 to converge the two main accounting principles US GAAP and IFRS into one international standard by mid-2011. (Baker Tilly, 2013) The deadline has come and gone and the convergence has not been completed; however both organizations have been working independently to complete several short-term convergence projects. In May of 2011, when the planned convergence did not happen, the SEC published a paper outlining a way for the US Financial reporting system to incorporate IFRS into US GAAP over an extended period of time by way of the “endorsement method” where US GAAP would remain the standard setter. (PwC Open University, 2012)  

To this date the US GAAP has remained the standard setter when it comes to creating a taxonomy for XBRL reporting standards. As of 2012 the US GAAP Financial Reporting Taxonomy (UGT) had more than 17,000 financial reporting elements available at no charge through a Web-based browser called Yeti. (Whitehouse, 2012) As of April 2011 the SEC has not approved the IFRS taxonomy because of numerous issues with the taxonomy including the limited number of concepts and the fee-based subscription required to access the IFRS content.  (Bands, 2011) Move forward a year and the IASB has continued to work on making improvements to the IFRS taxonomy, though still lagging behind UGT. At this time the IFRS taxonomy has more than 3,770 computer-based tags mostly used for the banking and insurance reporting, not for use in public financial reporting and still lacks industry specific tags. To address this issue, the IFRS foundation began work on the Industry Practice project to identify and create concepts and practices specific to financial institutions, insurance and extractive industries as a start. (Brands, 2012)

Though the convergence has come to a screeching halt, tremendous progress has been made in trying to find a way to make analyzing data more efficient and comparable by developing a single language business language for financial reporting. The UGT and IFRS taxonomy convergence project has made for great strides in narrowing the differences between US GAAP and IFRS and created more flexibility among financial professionals as indicated by Ruth Picker. (Arons, 2012) However, with more than 100 countries and the European Union using the IFRS and the US SEC requiring publicly traded companies to use IFRS for their financial reports one taxonomy will be needed to be able to truly analyze comparable financial data without tremendous effort to translate or compare local and regional taxonomies. It may be that the “condorsement” of US GAAP and IFRS will continue to push for a unified taxonomy incorporating UGT and other local and regional taxonomies as IFRS standards are endorsed and typical elements are incorporated throughout all taxonomies. XBRL US, a national consortium for XML business reporting has created the XBRL Challenge, a contest to help discover the top open source analytical tools for mining XBRL-formatted corporate financial data from the SEC database. (XBRL US, Inc., 2013) This type of initiative and the attention that this contest brings magnifies the need for a unified taxonomy. If the tools and applications created for this contest to be used with the SEC EDGAR database, imagine what analysis could be possible with utilizing just one taxonomy?

Works Cited and References

Arons, S. (2012, March 12). Convergence of IFRS and US GAAP Is Not Dead, just Dormant. Retrieved from CFO Insight: http://www.cfo-insight.com/reporting-forecasting/accounting/convergence-of-ifrs-and-us-gaap-is-not-dead-just-dormant/

Baker Tilly. (2013). Convergence of US GAAP adn IFRS: Where do things stand? Retrieved from Baker Tilly International: http://www.bakertilly.com/Convergence-of-US-GAAP-and-IFRS

Bands, K. (2011, October). A Tale of Two XBRL Taxonomies. XBRL, pp. 56-57.

Brands, K. (2012, September). Update on the IFRS XBRL Taxonomy - 2012. XBRL, pp. 64-65.

Dodds, E. (2012, May 15). 2012 XBRL challenge panel. Retrieved from Slideshare: Present Yourself: http://www.slideshare.net/eddodds/2012-xbrl-challenge-panel

Piechocki, M. (2009, March 31). Comparison Framework for EDINET, IFRS, and US GAAP XBRL Taxonomies 0.05 (Public Working Draft). Retrieved from xbrl.org: http://www.xbrl.org/TCF-PWD-2009-03-31.html

Pologeorgis, N. (2013, January 21). The Impact of the U.S. GAAP and IFRS Convergence on thier Consistuents. Retrieved from Yahoo!Finanace: http://finance.yahoo.com/news/impact-u-gaap-ifrs-convergence-224854279.html

PwC Open University. (2012). IFRS and US GAAP: similarities and differences. Retrieved from pwc.com: http://www.pwc.com/us/en/issues/ifrs-reporting/publications/ifrs-and-us-gaap-similarities-and-differences.jhtml

White, C. E. (n.d.). The Accountatn's Guide to XBRL (6th Edition). Retrieved from SkipWhite.com: http://www.skipwhite.com/Chapter16thEd.html

Whitehouse, T. (2012, October 23). SEC No Closer to IFRS TAxonomy Approval for XBRL. Retrieved from Compliance Week: http://www.complianceweek.com/sec-no-closer-to-ifrs-taxonomy-approval-for-xbrl/article/264997/

XBRL US, Inc. (2013). XBRL Challenge. Retrieved from xbrl.us: http://xbrl.us/research/pages/challenge.aspx

IFRS vs US GAAP

International Financial Reporting Standards was developed by the International Accounting Standards Board in 2003 to provide a global framework for financial and legal standards. According to Ramin and Reiman, authors of IFRS and XBRL, IFRS would become a “set of high-quality, understandable, enforceable and globally accepted financial reporting standards” (2013, p. 15).  Having one set of globally accepted standards is becoming increasingly important as the financial world grows ever more complex and integrated. During an IFRS panel discussion on January 23, 2013, the dominant theme across the panel was the need to adopt a globally accepted, consistent set of high-quality standards based on accounting principles, to enable companies to provide vital information to all stakeholders involved that does not require reconciliation or translation into local standards.

The European Union (EU) adopted the requirement of IFRS for all publicly traded entities in 2005 and today 150 countries currently require the application of IFRS in their financial reporting. (Ramin & Reiman, 2013) The SEC adopted the use of IFRS for non-domestic entities and continues to encourage the convergence of US GAAP with IFRS by require a phase-in requirement of all domestic publically traded entities to adopt the use IFRS for their financial reports complete by 2014. (Securities and Exhange Commission, 2010) However, the reconciliation to US GAAP can be very technical and complicated for some categories such as derivatives, leases and inventory and requirements for disclosures vary greatly between the two standards and with US legislation. (Ramin & Reiman, 2013)

US GAAP is a rule based set of standards that consists of more than 17,000 pages where IFRS is a true standards based with around 3,500 pages. The IFRS for SME: Illustrative Financial Statements and Disclosure Checklist is only 65 pages long and provides complete guidance for completing a required financial reports. This standard requires only a single set of comprehensive income and retained earnings report, simplifying the reporting process. (International Accounting Standards Board, 2009) This illustrates the differences in the two reporting standards. The reconciliation process enables a subset of stakeholders the ability to compare information, however the differences in the two standards still prove problematic for taxation, legislation, disclosures, internal controls systems and contracts requiring the use and codification of US GAAP reports. (Ramin & Reiman, 2013) Because of the significant differences in the two systems could potentially require  companies will have to use dual systems for both US GAAP and IFRS to maintain compliance with certain stakeholders, contracts and the IRS while complying with the SEC and global stakeholders. (Gray & Fogarty, 2010)

Adapting and converging the two standards will take time and will be aided by the use of technology. Implementing a universal taxonomy would provide stability while customization would provide global adaptability. The programming language adapted from XML, eXtensible Business Reporting Language (XBRL) could provide the vehicle for this consistency. XBRL would allow the adoption of IFRS taxonomy and customization for local taxonomies and USXBRL for US GAAP to provide stakeholders the ability to sort and analyze data from multiple standards. The SEC is requiring all publically traded companies to adopt XBRL for their financial statement tagging by the end of October 2014 to facilitate the convergence of US GAAP and IFRS as part of their Roadmap. (Brand, 2012) XBRL also facilitates accuracy and consistency, reducing time and data entry error, streamlines and automates data sharing and encourages data sharing through social analytics. (Rosivach, 2012) Ultimately, the use of XBRL will be vital in the convergence of US GAAP and IFRS. 

Works Cited

Brand, K. (2012, February 17). U.S. Federal Government XBRL Reporting Update. Retrieved from Regis University CPS Blog: http://cps.regis.edu/blog/u-s-federal-government-xbrl-reporting-update/

Gray, L., & Fogarty, M. (2010, February 09). Is IFRS Good for America? Retrieved from Eisner Amper Accountants and Advisors: http://www.eisneramper.com/IFRS-International-Financial-Reporting-0210.aspx

International Accounting Standards Board. (2009). IFRS for SME: Illustrative Financial Statements and Presentation and Disclosure Checklist. London: IASCF.

Ramin, K., & Reiman, C. (2013). IFRS and XBRL: How to improve Business Reporting through Technology and Object Tracking. John Wiley & Sons, Ltd.

Rosivach, A. (2012, January 31). Governments and Private Companies Exploring Benefits of XBRL. Retrieved from Accounting Web: http://www.accountingweb.com/topic/technology/governments-and-private-companies-exploring-benefits-xbrl

Securities and Exhange Commission. (2010). Commission Statement in Support of Convergence and Global Accounting Standards. RELEASE NOS. 33-9109; 34-61578 .http://www.sec.gov/rules/other/2010/33-9109.pdf

References

http://www.icaew.com/en/library/subject-gateways/accounting-standards/knowledge-guide-to-international-accounting-standards

http://www.financialexecutives.org/eweb/upload/fei/ferf_acad_RikkiGeorge.pdf

http://www.ifrs.org/Pages/default.aspx

http://www.accountingweb.com/topic/technology/governments-and-private-companies-exploring-http://www.accountingweb.com/topic/technology/new-xbrl-and-proposed-2012-us-gaap-financial-reporting-taxonomy-releasedbenefits-xbrl