Intelligent Enterprise

If all companies published and analyzed financial reports in extensible business reporting language (XBRL), the emerging standard wouldn’t offer the competitive advantage that it presents today. According to a report issued this week, early adopters who integrate XBRL data with performance management applications can expect to more easily:

• Leverage benchmarking for competitive analysis
• Identify internal areas for improvement
• Simulate mergers and acquisitions and other financial impacts
• Unify reporting in a single environment to increase data accuracy

Released at this week’s 14th International XBRL Conference in Philadelphia, the report, published by Perception Partners and Cartesis, encourages performance-management-minded executives to view XBRL as an opportunity for better analysis rather than a publishing burden.

As I explain in this 101-primer, XBRL is an XML-based standard for financial reporting that covers more than 2,000 financial data points such as cost, assets, net profit and other values. Because XBRL is computer readable, it supports fast, automated analysis not only by regulators, but also by companies looking at specific competitors and across industries.

Plenty of performance management vendors have added tools for publishing and analyzing XBRL-based financial reports (including Cartesis, Business Objects, Cognos and InformationBuilders, to name just a few), but the SEC has yet to require XBRL-based reporting. Thus, you can take advantage of all the benefits of standardized competitive analysis (using third-party data from publishers such as Edgar Online) without incurring the pain and cost of implementing new publishing procedures.

Speaking at this week’s conference, SEC Chairman Christopher Cox complained that too few companies have embraced XBRL, but he added that he’s “greatly encouraged by the progress that's been made over the past year in providing XBRL toolsets — whether for taxonomy development, instance creation, validation, rendering or analysis.”

The SEC this week unveiled a Financial Report Viewer that serves up 10Qs and 10Ks that are voluntarily being submitted in the format. I’ve read paranoid theories about the dangers of XBRL-based reporting from a regulatory perspective, but railing against standardized reporting strikes me as akin to seeing a communist plot in the fluoridation of public drinking water.

The people who should be paranoid are those who aren’t taking a good, close look at their markets and at their competitors using what the SEC appropriately calls “interactive data.” The minute the SEC issues a mandate, everyone will have to get wise to the standard, and that will just level the playing field. Now’s the time to take advantage!