Extensible business reporting language (XBRL) is a financial reporting system that allows a company to "tag" each piece of financial information as it is input into the company's books of account. Information is tagged in the database according to a standardized tagging system (taxonomy). Users are then able to find and extract information about companies.
In the United States, use of XBRL will be mandatory for all public company filings with the Securities Exchange Commission. In Canada, the Ontario Securities Commission is discussing whether to make the use of XBRL mandatory for public companies.
The following is an excerpt from the XBRL Canada website (www.xbrl.ca):
XBRL Canada is a not-for-profit consortium of leading Canadian companies and organizations, whose role is to create and maintain XBRL taxonomies based on Canadian reporting standards, to increase the awareness, knowledge and understanding of XBRL and its uses in Canada and to stimulate and promote the adoption of XBRL in Canada. XBRL Canada is a jurisdiction of XBRL International.
Initially, XBRL Canada created two taxonomies designed to enable preparation of
XBRL based financial statements that conformed to Canadian Generally Accepted
Accounting Principles (GAAP) prior to the adoption of IFRS. The first is referred to as the
Primary Financial Statements (PFS) taxonomy, and covers the Balance Sheet, Income Statement and Statement of Cash Flow. The second, the Notes taxonomy, is for the preparation of the Notes to the Financial Statements. Both taxonomies have been "acknowledged" by XBRL International and are available on this website for free download.
Subsequently, XBRL Canada created a single Canadian GAAP taxonomy, for preparation of the primary financial statements and the notes. This taxonomy is a combination of the previous two taxonomies, with some updates to reflect new standards. While Canadian publically accountable companies will be using IFRS beginning in 2011, non-publically accountable companies will largely be using the Canadian GAAP accounting standards reflected in Part 11 of the CICA Accounting Handbook. The new combined taxonomy can be used to prepare XBRL financial statements in accordance with the standards for non-publically accountable companies.
Discuss the following.
(a) What is XBRL? Provide an overview of how the XBRL system works and how information "tagged" using XBRL might be utilized by users such as investors.
(b) What are the pros and cons of mandating the use of XBRL for public filings with securities commissions?