The Accountant's Guide to XBRL (3rd Edition)
Clinton E. White, Jr., DBA, MBA
Professor of Accounting & MIS
Univesity of Delaware |
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Chapter 1 contents:
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Chapter 1: The Accountant's Guide to XBRL
Overview
The Accountant’s Guide to XBRL is designed to help those with a background in accounting and finance understand the basics of XBRL:
the Extensible Business Reporting Language. Although a basic knowledge of accounting is necessary to understand this book, it is not
about debits and credits but about how to use XBRL in financial reporting. XBRL adds meaning and context to accounting, financial,
and other business performance data, making it understandable, reusable, and precisely interpretable by computer applications.
Although raw data are easily processed by computer applications, processing data with meaning and context represents a new and
higher level because data can be more effectively exchanged and transmitted as information across networks and formerly manual
processes can be automated.
Although XBRL is a technical computer language designed to standardize business and financial reporting, you do not need a degree
in Computer Science to understand it. The Accountant’s Guide to XBRL is written from a non-technical perspective. It reflects the way
the author teaches XBRL to senior accounting majors at the University of Delaware and to accounting educators and practitioners in
workshops and seminars.
This chapter introduces The Accountant’s Guide to XBRL. It starts with an overview of XBRL and its role in computerized financial
and business operations reporting and concludes with a preview of each chapter. New words and phrases are introduced and explained
throughout. Each is also defined in the Glossary at the end of each chapter. If you don’t understand a term in context, be sure to
refer to its formal definition in the glossary; all entries are in alphabetical order. XBRL is an emerging technology that is
impacting accounting, financial, and business reporting. Well educated accounting and finance professionals should have a familiarity
with the basics of XBRL. The Accountant’s Guide to XBRL is designed to provide you with those basics. With this knowledge, you will
have the foundation on which to investigate further and build an expertise in the area or simply be comfortable with the technology.
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XBRL
The Extensible Business Reporting Language is a "vocabulary," a special purpose language, of the Extensible Markup Language (XML).
XML is a toolkit for adding meaning to data and storing and processing it as information. "Extensible" means that as long as you
follow the rules, it can be extended or added to. "Markup" means surrounding pieces of data with tags that add meaning. "Language"
means a method of communication. Using the XML toolkit, a piece of data, such as the amount of accounts payable at a specific point
in time for a specific business, can be stored in an XML document as: 1234567890. In this form,
the piece of data, 1234567890, is surrounded by tags - a beginning tag and an ending tag , that
give it meaning and differentiate it from other pieces of data. The piece of data is no longer raw data. It is information
because it is contained within tags that give it "meaning," and it can be stored and communicated as such. XML provides the general
tools, rules, and syntax with which to build vocabularies for specific purposes, such as XBRL for financial and business operations
reporting. XBRL provides us with an additional set of tools, rules, and syntax with which to build business reporting applications,
such as US GAAP financial statements.
XBRL is an emerging technology under the auspices of XBRL International. XBRL International is a world-wide consortium of over
400 companies, organizations, and government entities dedicated to creating an open international standard for computerized
representation and reporting of financial and business operations information (see www.xbrl.org). XBRL is used to tag each piece of
data in a standard way so that it becomes a piece of business information that can be validated, stored, and processed by computerized
applications. It is an emerging technology in that there is now a core specification defining the XBRL vocabulary around which new
XBRL extensions are being developed, one of which is the US GAAP taxonomy.
The core specification, XBRL Specification 2.1 (November 7, 2005), defines the rules and syntax for XBRL documents and for XBRL
taxonomies. XBRL documents are referred to as "instance documents" because they are an instance of a class of documents defined by
this specification. XBRL taxonomies define tag names to represent accounting and financial terms used to report data in XBRL
instance documents. XBRL instance documents follow a standard format and contain pieces of data, each tagged with a name from an
XBRL taxonomy. Therefore, each piece of data in an XBRL instance document is identifiable as information being reported by a
specific entity, at a specific point in time, in a specific currency. The result is that the XBRL document and the data it
contains can be validated, stored, and processed by software applications. Of equal importance, the data it contains can be
efficiently analyzed, compared, and used for other purposes by software applications. The major benefit is the standardized
representation of accounting and financial information so that it can be reported in such a way that it can be validated, analyzed,
used for multiple purposes by multiple parties, and unambiguously understood. In addition, once tagged in XBRL format, the data
does not need to be re-entered multiple times and it can be communicated in its original form between software applications on
computer networks.
Markup is very important in computerized systems. Every piece of data that is processed by a software application is marked up in
some way to distinguish it from any other piece of data. Consider the Excel spreadsheet in Figure 1-1.
Figure 1-1: An Excel spreadsheet - 3M Company, Inc.’s current assets and liabilities
Anyone familiar with accounting or finance recognizes this as a spreadsheet reporting 3M Company, Inc.’s current assets and liabilities,
in millions of dollars, as of December 31, 2007. In a spreadsheet software application, each piece of data is separated from every
other piece of data and marked up by its physical location in Excel format. Cell A6 contains the text string "Cash and Cash Equivalents,
at Carrying Value" and cell B6 contains the number "1896" formatted for currency, and so on. With this data in this spreadsheet, we
could jump to another cell and write a formula to calculate 3M Company’s current ratio or we could email the entire spreadsheet to
someone else connected to our network or the Internet. Those we send it to could, if they also had the same version of Excel, open it
and see the same spreadsheet. We could not, however, query the Excel spreadsheet to find a value for "Cash and Cash Equivalents, at
Carrying Value." Likewise, we could not have a separate software application read a value in a cell and understand what it represents.
A basic problem with proprietary software like an Excel spreadsheet is that data are marked up by their physical location or by a
proprietary method that makes sense for the software application itself. XML and its special purpose languages enable the marking up
of data in a universal, non-proprietary fashion so they can be unambiguously interpreted and processed by any XML-enabled software
application. Markup that adds meaning to data is referred to as meta-data. XBRL is an XML vocabulary for adding standardized meaning
to data for accounting and financial reporting so they can be unambiguously reported, stored, and communicated over computer networks.
We could query an XBRL instance document with the information found in the spreadsheet in Figure 1-1 and find a value for "Cash and
cash equivalents" because the value is surrounded by standardized meta-data.
Why is it important to markup accounting, financial, and business operations data with meta-data so they are specified precisely in
a standard format? For better computer processing!
In today’s interconnected world of computerized applications, processing, analyzing, reporting, and understanding data are critical
for business success. Accounting is "an information system that measures, processes, and communicates financial information about
an identifiable economic entity" (Needles and Powers, Financial Accounting, 2004, pg. 4). Most accounting employs computerized
applications. XBRL is a tool box to make computerized accounting and financial and business reporting in general more effective
and efficient.
Accounting adds value to decision making through reporting financial and business operations information. XBRL instance documents
contain "facts" reported by a specific entity, at a specific point in time, in a specific currency, and under identifiable accounting
guidelines, such as U.S. GAAP or IFRS. Each fact reported in an XBRL instance document can be identified, addressed individually,
analyzed in relation to other facts, and reused for other purposes. These are distinct business advantages because of the large
amount and variety of accounting, financial, and operations reporting that business entities must do and because of the interpretability
of the items and facts reported.
Consider, for example, a publicly-traded company’s annual reporting of operations, including the annual 10-K report to the SEC
(U.S. Securities and Exchange Commission) in HTML (Hypertext Markup Language) and PDF (Portable Document Format), the glossy printed
annual report for shareholders, and its Web page for Internet consumption. Typically, each of these reports is created individually,
even though each is based on the same basic items of information in one form or another, including the company’s financial statements
with and without detailed footnotes, its management discussion and analysis, its auditor’s report, and its discussion of operations.
The detailed items of information that make up these reports can be tagged with XBRL and stored in instance documents. They can then
be processed by software applications for filings with the SEC, the printed annual report, and the Web page without time-consuming,
error-prone human intervention.
In addition, when the SEC receives a company’s 10-K in HTML and PDF (the current required filing formats), it is a block of text
marked up for presentation purposes (i.e., both HTML and PDF are presentation format standards), making automated analysis difficult
at best. The same is true for users of the company’s Web page. Try searching for "Net income" for a specific time period in either
an SEC filing in the EDGAR (Electronic Data Gathering and Retrieval) database or a company’s Web page. You will find the words "Net
income" and, with additional visual searching, the value you are looking for. If you then want to use that value in a spreadsheet,
or any other software application, you have to read the value and type it in and go from there.
With an XBRL instance document as your source document, on the other hand, you could write a few lines of code to perform the same
search and find and copy all of the values reporting "Net income," each tagged with its specific time period and currency. You could
reuse each individually or in total along with relevant footnotes in any other application without human intervention. You could even
compare them to similar values found in other XBRL instance documents of other companies. If all companies reported 10-K information
in XBRL instance document format, the efficiency and effectiveness of the analyses that the SEC, as well as all users of the EDGAR
database, could do would be improved exponentially. XBRL instance documents are a tool to support transparency of accounting and
financial information.
The SEC began a pilot program in 2005, referred to as their "interactive data initiative," to encourage companies to voluntarily file
XBRL financial statements as supplemental documents. After analyzing the participant company filings for 2005 and 2006, they issued
contracts worth many millions of dollars to upgrade their 20-year old databases to handle XBRL instance documents. As of this writing,
the SEC has issued a proposal to phase in XBRL reporting over the next three years. The U.S. Federal Deposit Insurance Corporation
(FDIC) has required since October 2005 that member banks submit quarterly "Call Reports" in XBRL format directly to a Central Data
Repository established by the U.S. Federal Financial Institutions Examination Council (FFIEC). The FDIC reports dramatic improvements
in the accuracy of the data that its 8,300 member banks submit and the ability to analyze the information in the reports in days
rather than months.
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Chapter 1 contents:
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A Preview of The Accountant’s Guide to XBRL
Since XBRL is a vocabulary of XML, you must understand some of the basics of the XML foundation before jumping into XBRL. XML is
not like other computer languages with which you may be familiar. XML is a set of rules and syntax, a meta-language used to create
other languages. Chapter 2 describes the rules for XML documents and the Universal Business Language (UBL) a new XML vocabulary
for creating business documents. XML documents and their behavior when processed are the foundation of the formal XML specification.
XML documents contain data surrounded by tags that add meaning to them. Data are tagged with XML "elements" and "attributes."
Properly formatted XML documents can be processed by any XML-enabled software application. In the examples and exercises in this
book, we will use the MS Internet Explorer as our XML processor. The XML documents that you create in the end-of-chapter exercises
will be used in other exercises in later chapters.
Continuing with the XML foundation, Chapter 3 discusses the XML Schema language and two companion languages, Namespaces and XLink.
XML documents contain data, while XML languages are used to validate and process XML documents. The XML Schema language is a very
technical computer language used to define XML elements and attributes and the structure of XML documents. The formal UBL and XBRL
specifications are written in the XML Schema language, as are all UBL and XBRL taxonomies. A basic knowledge of the principles,
not the technical details, of the XML Schema language is helpful for understanding XML vocabularies such as UBL and XBRL. Two
additional supporting languages, XML Namespaces and XLink, are also covered from a non-technical perspective.
Building on the XML foundation, Chapter 4 describes XBRL instance documents and taxonomies. You can think of XML as the foundation
toolkit and UBL and XBRL as the business document and reporting toolkits. The XBRL Specification 2.1 (November 7, 2005) defines the
rules and structure that XBRL documents must follow and a language for building XBRL taxonomies, which are dictionaries of elements
and relationships for specific reporting purposes, such as the XBRL US GAAP v1.0 taxonomy (April 28, 2008). Like all XML documents,
XBRL documents contain data surrounded by tags that add meaning. XBRL tags have very specific accounting and financial reporting
meanings (i.e., each tag represents a well-defined accounting/financial reporting concept) as defined in XBRL taxonomies (e.g., the
XBRL US GAAP v1.0 taxonomy). And each XBRL document is linked to at least one XBRL taxonomy that supports the document’s specific
reporting purpose.
XBRL documents contain data representing business facts reported for a particular purpose, such as sending a financial statement
to your bank or filing a 10-K with the SEC. Although XBRL documents are human-readable, they are meant to be processed by software
applications. Chapter 5 explains how to transform XBRL documents into human-readable output using the Extensible Stylesheet Language
for Transformations (XSLT). XSLT is a relatively simple language for transforming XML documents for other purposes, such as
presentation as a Web page. Chapter 5 presents the basics of the XSLT language and uses it to build the code to transform UBL and
XBRL instance documents into Web pages for human consumption.
Chapter 6 discusses the current state of XBRL in financial and business operations reporting, some of the tools available for
instance document creation and validation, and the potential impact of XBRL and several related technologies on accounting, auditing,
and financial reporting. The chapter introduces the new SEC filing program and other significant XBRL adoption programs around the
world. It also introduces a few of the tools available for XBRL document and taxonomy creation and validation. It finishes with
several predictions about the future of XBRL.
The Appendix introduces a relatively new member of the XBRL family of technologies, XBRL GL (April 17, 2007), known as the "journal
taxonomy." XBRL GL, "Global Ledger," was first introduced in November, 2005 and version 2.1 is currently an XBRL International
"recommended" taxonomy (i.e., it has been tested and is ready for use). It is an evolving specification that is independent of any
chart of accounts or reporting standard to support drill-up and drill-down for financial and performance measurement reporting,
mandatory audit trails, and tax reporting. It is expected to have a major impact in the future.
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A Note on Teaching
The Accountant’s Guide to XBRL is designed as a textbook on XBRL for those with an accounting or finance background. It is based on
the way the author teaches XBRL in five weeks in his Accounting Information Systems class at the University of Delaware. Week one
includes coverage of Chapters 1 and 2 and requires students to create two basic XML documents using the UBL vocabulary. The author
uses a lab setting in which students create a simple XML document as presented in Chapter two. Students then complete as a homework
assignment one of the end-of-chapter exercises. Week two includes coverage of Chapter 3 along with a simple in-class exercise as
presented in the chapter. Students then complete as a homework assignment one of the end-of-chapter exercises; building a UBL
document schema. Week three includes coverage of Chapter 4 and requires the creation of two XBRL documents - a simple one in class
followed by a more complex one as homework using one of the end-of-chapter exercises. Week four includes coverage of Chapter 5 and
requires the creation of at least two XSLT documents - one to transform a simple UBL document to a Web page in class and another
as homework to transform an XBRL instance document into a financial statement using one of the end-of-chapter exercises. Week five
includes coverage of Chapter 6 and the Appendix and requires the creation of a basic XBRL GL instance document using one of the
end-of-chapter exercises. Instructors can register for detailed lesson plans, PowerPoint slides, instructor’s notes, and exercise
solutions.
For those with less than five weeks to devote to XBRL, there are several recommended alternatives. A four week introduction to
XBRL would simply not include week number five. A three week introduction to XBRL would include weeks one, two, and three but not
weeks four and five. A two week introduction to XBRL would include coverage of Chapters 1, 2, and 4 as follows: Week one - cover
Chapters 1 and 2 and assign the creation of at least one XML document; Week two - cover Chapter 4 and assign the creation of at
least one XBRL instance document. Material skipped in Chapter 3, such as XML schemas and Namespaces, would need to be covered
briefly in order to make sense of some of the material in Chapter 4.
For software, you can use MS Notepad, or any other "text editor" (i.e., not a Word processor), to create XML, UBL, and XBRL
documents and the Internet Explorer, or any other current browser, to process them. The basics of using Notepad, which can be
found under Accessories on a Windows computer, are explained at the end of Chapter 2. A more sophisticated text editor for the
Windows environment is the free Programmer’s File Editor, available from various archive sites, including
http://www.lancs.ac.uk/staff/steveb/cpaap/pfe/default.htm. A more sophisticated text editor for the Macintosh OSX environment is
TextMate, a commercial package with a 30-day free trial version available from http://macromates.com/.
I hope you enjoy the Third edition of The Accountant’s Guide to XBRL and find it to be a useful tool for learning about this
emerging technology that is changing the face of accounting, financial, and business operations reporting. It will be important
in your future as a professional!
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Glossary of new terms introduced in Chapter 1
EDGAR (The Electronic Data Gathering and Retrieval database): The public database in which all submissions to the SEC are stored.
FDIC (The U.S. Federal Deposit Insurance Corporation): The regulatory authority to which all federally insured banks in the U.S.
must report.
FFIEC (The U.S. Federal Financial Institutions Examination Council): A U.S. regulatory authority consisting of the FDIC, the
Federal Reserve Board, and the Controller of the Currency.
Instance documents: An XBRL document. It is referred to as an "instance" document because it is an instance of the class of
documents described in the XBRL Specification 2.1.
Meta-data: Data about data. It means data describing data by adding meaning to it.
SEC (The U.S. Securities and Exchange Commission): The regulatory authority to which all publicly-traded companies must report
financial performance. The annual 10K report is a complete, audited report of financial and performance information required
from all publicly-traded companies.
XBRL (Extensible Business Reporting Language): A toolbox for creating accounting, finance, and business reports.
XBRL Specification 2.1: The most recent XBRL specification. It was issued on December 31, 2003 and reissued with errata corrections
on November 7, 2005. It is a formal specification of the rules and syntax that XBRL instance documents and taxonomies must follow
to be valid.
XBRL taxonomies: Lists of elements and relationships for specific reporting purposes, such as reporting financial information under
U.S. GAAP. Each tag used in an XBRL instance document must be defined as an element in an XBRL taxonomy.
XML (Extensible Markup Language): A toolbox, including a meta-language, a language for creating other languages, that forms the
foundation for all XML vocabularies, such as XBRL. Following the rules of the XML language, data are surrounded with tags that add
meaning and allow them to be processed as information.
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Downloadable files & References
Downloadable files:
Available at: http://www.skipwhite.com/Guide2008/Chapter1/3MAssetsAndLiabs.xlsx
* 3MAssetsAndLiabs.xlsx (Figure 1-1)
References:
Needles, Belverd E. and Marian Powers, Financial Accounting, Houghton Mifflin Company (NY) 2004
Programmer’s File Editor, http://www.lancs.ac.uk/staff/steveb/cpaap/pfe/default.htm.
SEC (U.S. Securities & Exchange Commission), http://www.sec.gov/.
TextMate, http://macromates.com/.
XBRL International, www.xbrl.org.
XBRL US, http://xbrl.us/Pages/default.aspx.
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