Friday, July 23, 2021

Nasdaq Puts XBRL to the Test

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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