Nasdaq Puts XBRL to the Test

Could the new corporate reporting platform help monitor companies' accounting practices?
The adoption of the recently developed Extensible Business Reporting Language (XBRL) got a significant boost Tuesday, with the Nasdaq Stock Market, Microsoft and PricewaterhouseCoopers teaming up to show off the new platform for corporate reporting over the Internet.

The three organizations have joined together on a pilot program to showcase the XML-based platform's ability to provide companies with a new means to communicate financial information and deliver it to investors with enhanced capability for analysis.

With increasing public concern regarding accounting irregularities, government and industry alike are looking for ways to keep a closer monitor on accounting, and XBRL may play a significant role.

"Now that the government wants to gain more understanding of corporate financials and try to do intelligence around different trends and seeing if any company is doing something out of the ordinary, XML is pretty much the only way to do it." said Ron Schmelzer, senior analyst with ZapThink. "Without XML you would have to search through text formats, which would be a very labor-intensive process."

The pilot program, designed by PwC and stored on Nasdaq hardware, provides access to XBRL data through Microsoft Office. It is available to the public here.

Based on Extensible Markup Language, or XML, XBRL is an open specification which uses XML-based data tags to describe financial statements for both public and private companies.

Because XBRL uses tags based on standardized accounting industry definitions to describe and identify each item of financial information, statement and other documents prepared using the format are easily searchable and programs can extract every piece of information.

According to Schmelzer, if everyone would comply with XBRL, intelligence gathering surrounding multiple financial documents would be greatly simplified.

Nasdaq's pilot program will provide investors with remote access to financial data from the financial reports of 21 Nasdaq-listed companies starting with a company's most recent financials and going back five years, and is accessible through an interface of Microsoft Excel.

The data will be formatted in XBRL aims to showcase XBRL's ability to allow for easy comparisons of the financials of companies within a particular industry.

"The fact that Nasdaq supports it is great," said Schmelzer. "It sounds like Nasdaq's support is a way for them to make sure that their constituent members are meeting the requirements for the listing, as well as helping people who are using Nasdaq better sense of understanding of how the companies listed are performing."

XBRL was founded by the American Institute of Certified Public Accountants (AICPA) to benefit the entire business reporting supply chain, including CPAs, by improving access to financial information and decreasing costs associated with the distribution of financial information.

"It will make (financial) information much easier to retrieve, and that will then make it much easier for all parties, whether it be analysts, regulators, or lay investors, to track specific information on companies," said J. Louis Matherne, Director of Business Assurance & Advisory Services for the AICPA, and acting director of XBRL International. "Whether information is on a company Web Site, the Nasdaq Site, or in the SEC site, if it is tagged with XBRL that information will be easier to find, easier to aggregate, be easier to analyze, and easier to track, irrespective of what your purpose is."

While the advantages seem clear, the public may have to wait awhile for the major benefits of the platform to materialize. Schmelzer notes that while many of the large companies have begun adding XBRL tags to their information, it may be multiple years before the country's 10,000-plus public companies adopt the platform.






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