Forum Archive Index - March 2001

[ceejaynz@xtra.co.nz]

The following story has been sent to you by ceejaynz@xtra.co.nz who feels it 
may be of interest.


Senders email: ceejaynz@xtra.co.nzMessage: Useful article in the Herald this 
morning.
Thought it might be of general interest
Ceejay

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        16/03/01 - <i>Dialogue:</i> X factor set to shake up financial 
reporting Companies will soon be able to offer investors daily updates on their 
finances. MARK HUCKLESBY* looks at a technology that will change how firms 
report.

A revolution is coming in global financial reporting that could put New Zealand 
companies and financial institutions at the forefront of investment 
opportunities or leave them floundering behind the rest of the world.

It all depends on the X factor - how quickly companies and financial 
institutions in this country adopt a new computer language called XBRL, which 
is variously described as a "child" or "dialect" of XML (eXtensible Markup 
Language), a standard computer language used to exchange data across the 
internet.

 XBRL stands for eXtensible Business Reporting Language. It solves two 
significant problems that pervade all financial reporting.

The first is that to prepare financial statements for management, regulators 
and a website, a company would typically enter and reformat the information 
three times.

The more times data is re-keyed into different computer systems, the greater 
the risk of human error and the need to check and recheck data. 

With XBRL, financial information need be entered only once. This is because 
web-based technology now allows financial information to be "rendered" many 
times and it does not matter whether it ends up as a printed financial 
statement, a source document for a website or in a specialised reporting format 
for a bank or a regulator.

The beauty with XBRL is that it allows all those different systems to "speak" 
to one another and freely exchange financial information.

The second problem it solves is that extracting specified detailed information 
from a financial statement, even an electronic financial statement already 
posted to a website, is currently a manual process. 

For example, a company cannot at present tell a computer program to "Get the 
directors' fees for 1999 from all the companies listed on the NZSE" from an 
electronic source.

 If financial statements were prepared using XBRL, computer programs could 
easily extract that information from every statement listed in the selected 
domain, using a system known as "angley" brackets. To extract the above 
information would require <directors' fees> <NZSE40> <1999>. It's as simple as 
that!

In essence, the key to both XML and XBRL is the "tagging" or marking-up of the 
component elements according to a designated pattern. Virtually every major 
accounting software developer is now looking at how to provide tagging that is 
both efficient and effective so that the "dice and slice" functionality of XML 
and XBRL can be exploited to its fullest advantage. 

Perhaps the best thing about XBRL from a business perspective is that it is a 
freely available language. No one organisation has proprietary rights over it 
so anyone can employ the new "angley brackets" technology as long as he or she 
knows how. 

It is thought that a streamlined XBRL accounting process, including complete 
processing of transactions online from ordering to trial balance and financial 
statements, could save at least 85 per cent of the time at present taken in 
inputting and accessing data. And XBRL doesn't require any additional financial 
information beyond that at present required in company financial reports.

"XBRL frees us to do more analysis and less time downloading things, printing 
our paper and rechecking numbers," said Morgan Stanley financial analyst Elmer 
Huh. 

He said XBRL would be a major labour-saving tool in loan assessing, risk 
assessment, equity analysis and investment banking. 

Another benefit of XBRL would be immediate access to data revealing the 
financial health of an organisation.

According to Forbes magazine, this is already a reality for XBRL backer Cisco 
Systems, which claims to be the only company in the world where the chief 
executive (John Chambers) can snap his fingers, close the books and issue a 
company report within one hour. 

Cisco handles more than 80 per cent of more than four million customer requests 
for information via the internet and conducts 87 per cent of its customer 
business online without staff intervention.

Virtually all of Cisco's administration is now conducted over the internet from 
job applications to expense reports.

 Soon, book-keepers from both small companies and multinational corporations 
will be able to update revenue and earnings figures every day of the week and 
publish them on the internet for investors to see.

With all the advances in technology it seems quaintly ironic that the quarterly 
financial reporting system that has been in effect since 1934 plods on giving 
figures that are at least six weeks out of date. 

That is about to change. It is expected that markets in the US and Europe will 
move towards a general acceptance of XBRL-enabled financial statements within 
the next 18 to 24 months.

* Mark Hucklesby is a principal at Ernst & Young. Contact <a 
href="mailto:mark.hucklesby@nz.eyi.com";>mark.hucklesby@nz.eyi.com</a><br>

<b>Links</b>

<a href="http://www.xbrl.org"; target="new">eXtensible Business Reporting 
Language</a>
<a href="http://www.nzherald.co.nz/storydisplay.cfm?reportID=57543";>Herald 
Online feature: Dialogue on business</a>
                                                                                
        
 

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To view more stories please visit the NZ Herald Online at 
http://www.nzherald.co.nz



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