Making life easy for the CFO
Oh great, another acronym. Just what I was hoping for.
Hold on - this is a goodie. XBRL stands for eXtensible Business Reporting Language, which is basically a way of labelling financial information to allow it to be automatically processed by software. And it's very useful for finance departments.
Tell me more. . .
XBRL greatly increases the speed at which financial data can be handled, reduces the chance of error and allows information to be checked automatically.
XBRL allows each item of information within a financial document, such as net profit, to be linked to a tag that describes what that information is, and that can be read by a piece of software.
The tags allow XBRL compatible software to understand what each individual item of information is within a financial document, allowing software to automatically find, compare and analyse that information.
What are the benefits?
Applying XBRL tags can greatly simplify the process of financial reporting for organisations.
If an organisation needs to send its financial results to another organisation - for example to an accountant or a regulator - having XBRL-tagged financial data eliminates the need to send out paper documents and for that data to be rekeyed into a new system.
Every item of financial data is given an XBRL tag that can be read and understood by another computer, allowing the process of sending financial data between organisations to be automated.
One organisation would simply send its XBRL-tagged financial information to a second organisation over the internet or a dedicated data connection. The second organisation's financial recording software would then be able to read the XBRL tags and select, analyse and store the information that organisation needs - for example at an accountancy firm it would select and record the information needed to audit a firm's books.
This both reduces the chance of errors from the rekeying of financial data and the cost of financial data processing and filing.
Sounds good, what else?
Data collection also becomes a lot easier with XBRL tagging, with the tags simplifying the process of collating financial data from different departments within an organisation.
For example, when individual departments are submitting their accounts as XBRL-tagged data a compatible financial reporting system will be able to identify what each item of financial data is and collate that information, even if the different departments are using different accounting systems.
Software can also immediately validate the data, highlighting errors and gaps that can be immediately addressed.
A CFO could, for example, quickly and reliably generate internal management reports, financial statements for publication, tax and other regulatory filings, or credit reports for lenders.
Can XBRL help me make sense of the financials?
Absolutely, XBRL-tagged data can easily be fed into XBRL-compatible Business Intelligence software to gain a better understanding of an organisation's or department's financials.
BI software that can understand XBRL tags is able to pick individual items of data out of financial reports and mix them with other information to give insight into an organisation's performance...