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The Guide & Workbook for Understanding XBRL (5th edition)


Clinton E. White, Jr., DBA, MBA
Professor of Accounting & MIS
Univesity of Delaware

Table of Contents

Preface

June 15, 2011 marks the date when all companies reporting to the SEC using U.S. GAAP must include financial statements in XBRL format along with their official SEC filing documents (e.g., 10-Qs and 10-Ks) and on their corporate Web sites. It also marks the date at which the largest SEC filers begin their third year of required XBRL reporting and will loose their limited liability status for their XBRL documents granted for companies in their first two years of using XBRL. What effect if any this will have remains to be seen. Authority for the development and maintenance of the U.S. GAAP XBRL taxonomy passed to the FASB in 2010. Both the FASB and the SEC closely monitor XBRL filings for proper use of the U.S. GAAP XBRL taxonomy and the accuracy and consistency of financial reporting; the 2011 taxonomy contains over 15,000 elements. As more insight to its use for financial reporting is gained, it will continue to evolve to cover more financial reporting concepts and improve the consistency and transparency of U.S. GAAP financial reporting.

XBRL is built on XML (the Extensible Markup Language). Since its release in 1998, XML, an open standard for marking up data (i.e., adding meaning to individual pieces of data by surrounding it with tags) has become the de facto standard for tagging data, transmitting it across computer networks, and storing it in databases. All current software can import, export, and process data in XML format. Since XBRL is built on XML, it is referred to as an XML “vocabulary” specifically designed for financial and business operations reporting. XBRL initiatives are in place all over the world. In the U.S., the SEC and the FDIC, which is part of the larger FFIEC (Federal Financial Institutions Examination Council), now require it for all mandated filings. The Companies House and Her Majesty’s Revenue & Customs in the U.K. now require all companies and charities to file their financial information and tax computations in XBRL format. A growing number of stock exchanges, regulatory bodies, and major banks around the world are also requiring member companies and customers to use XBRL for financial reporting.

As it becomes the standard for financial reporting, XBRL will deliver on its promise of helping companies to automate required reporting processes and helping investors, analysts, and users of all types to retrieve and use financial information for investment and other decision making purposes.

From a broader perspective, XML is one of the enabling technologies behind what is being referred to as “the semantic Web.” The semantic Web is a phrase that captures the basic principle that data in digital form can now be captured, transmitted on networks (including the Internet), and stored in databases, with meaning and context; making it “information” as opposed to simply data. Thus, when financial data is reported in XBRL format it becomes financial “information” and it is processed and stored with a standard meaning and in a standard format which improves its transparency and makes it more understandable and usable for its intended purpose.

We have reached the point where every well-educated accountant and financial professional should understand XBRL, how to navigate and use the XBRL taxonomies, and how to create XBRL instance documents. I have received invaluable input and feedback from a number of professors at Universities around the U.S. I want to especially thank Professor Brad Tuttle, University of South Carolina, Professor Uday Murthy, University of South Florida, Professor Andy Luzi, California State University at Fullerton, Professor Graham Gal, University of Massachusetts, and Professor Andreas Nicolaou, Bowling Green State University.

Who Should Read This Book
This book is for accounting academics and their students, practicing accountants, and anyone else involved with computerized financial and business operations reporting. If you fit into one of these categories, you will get the following from this book:
  • A basic understanding of XBRL
  • A basic understanding of how to build XBRL instance documents
  • An understanding of the structure and use of the XBRL US GAAP and IFRS taxonomies
  • A basic understanding of mapping line items and footnotes in traditional financial statements to elements that represent accounting and financial reporting concepts in the XBRL U.S. GAAP and IFRS taxonomies.
Organization of This Book

This Guide and Workbook is organized so that an accounting student or a financial professional can learn the basics of XBRL and create instance documents using the XBRL U.S. GAAP and IFRS taxonomies. The Chapters are designed to be read sequentially while the reader is actively participating by using a Web browser to access materials being discussed and by making entries on paper or in a text editor in response to the Test Yourself questions. The project section, Chapter 4, requires the reader to create XBRL instance documents.
  • Chapter 1: Introduction, The Guide & Workbook for Understanding XBRL
    This chapter briefly introduces XBRL and why we need it.
  • Chapter 2: XML Elements and XBRL Element names
    XBRL is built on the XML foundation. In this chapter, you are introduced to the basic rules for creating well-formed XML documents, the importance of elements and element names, and the role of XBRL taxonomies; which are essentially dictionaries of standard element names for accounting and financial reporting concepts.
  • Chapter 3: Creating XBRL Instance Documents
    XBRL has its own set of rules. In this chapter, you are introduced to the rules that XBRL instance documents must follow, the importance of namespaces, and the role of context and business facts.
  • Chapter 4: XBRL Instance Document Projects
    In this chapter, you will find four projects/exercises each requiring you to create an XBRL instance document (financial statement) for Bicycles OnLine, Inc.


New in This Edition
  • New coverage of the XBRL U.S. GAAP 2011 and IFRS 2011 taxonomies
  • New coverage of SEC Level 1 through 4 footnote and disclosure tagging
  • New coverage of namespaces
  • New test yourself exercises
  • New mapping and instance document exercises

Table of Contents

Chapter 1: Introduction

The objective of The Guide & Workbook for Understanding XBRL is to help you understand the eXtensible Business Reporting Language and to help you create XBRL instance documents for U.S. GAAP and IFRS reporting. It is intended to be used by accounting students, practicing accountants, and others involved in the financial reporting process. It is designed to be used as part of an accounting class or as an independent study guide and workbook. If you are using The Guide & Workbook as supplemental material in an accounting course, your instructor may have specific guidance and assignment information. In any case, the following instructions will help you get the most out of your experience:
  • The Guide & Workbook is designed to be used while you are in front of a computer connected to the Internet. You should also have a current Web browser and a text editor. In all examples, the author uses Mozilla Firefox 4 and MS Notepad; the author recommends TextWrangler (Bare Bones Software) for Macs. Note that while any current browser should work, as explained in more detail in Chapter 2, some will give unexpected error message and processing results. As you read the material and work through the examples, point your Web browser to the indicated URLs, download the example files, and use a text editor to build XBRL documents.
  • In Chapters 2 and 3, you will find "Test yourself exercises" designed to reinforce your learning. Space is provided to accommodate your answers.
  • In Chapter 4, you will find exercises which require you to create XBRL documents for Bicycles OnLine, Inc. The exercises pull together the concepts covered in The Guide & Workbook and are designed to be completed as assignments or self-directed exercises.

XBRL is a set of rules and syntax for computerized financial reporting

XBRL (the eXtensible Business Reporting Language) is a set of rules and syntax for creating computer-readable documents to report financial and business operations information. Consider the consolidated balance sheet information in the MS Excel spreadsheet for Bicycles OnLine, Inc. in Figure 1.

Figure 1: Bicycles OnLine, Inc. Consolidated Balance Sheet Information
Bicycles Online Balance Sheets

Any computer with the same version of MS Office can process this file and we as humans can read and interpret the information. For example, if you were asked “what is the balance of Accounts payable for December 31, 2011, for Bicycles OnLine, Inc.” you would answer “$51,921,000.” We can do this because we can understand the context surrounding the number located in cell F8 by reading the contents of other cells. However, the Excel spreadsheet software simply “knows” that cell F8 contains a piece of data (51921) formatted as currency. In an Excel spreadsheet, as in most software applications, data is simply “data” – it has no meaning associated with it. We as humans ascribe meaning to it by reading and understanding the context surrounding the data.

XBRL is an XML (Extensible Markup Language) vocabulary for adding meaning and context to pieces of data associated with financial and business operations reporting so that it becomes “information” – it has meaning associated with it and can be interpreted in context by software applications as well as humans. This is done by surrounding each individual piece of data with a predefined tag representing a standard financial reporting concept. To report a balance in “current accounts payable,” we would tag the piece of data (simplified for illustration purposes) as follows:
<AccountsPayableCurrent>51921000</AccountsPayableCurrent>.

This is a simplified example and there is much more to XBRL than tags. However, when a piece of data is tagged with a standard term, a human or a computer application “knows” more about the piece of data and can process it with meaning and in context. As you will understand, XBRL consists of a dictionary of predefined tags for various types of financial and business reporting, a specific syntax for documents, a host of files defining relationships, and rules for extending it.

XBRL is not a programming language. It is a technical specification of an XML vocabulary for facilitating financial and business operations reporting through an open standard for the creation and processing of computer-readable documents. The Guide & Workbook will help you to understand what XBRL is, how it works, and how to create and validate XBRL financial statements and SEC filings.

Why do we need it?
Everyone involved in financial and business operations reporting needs to understand the power of XBRL. The U.S. Securities and Exchange Commission (SEC) issued a rule titled “Interactive Data to Improve Financial Reporting” (SEC, January 2009) requiring all publicly traded companies to provide financial statements in XBRL format. It is being implemented in three phases. Phase 1 began in June 2009 with the 500 largest domestic and foreign companies, those with common equity float above $5 billion (U.S. dollars). They are now beginning their third year of providing XBRL financial statements with footnotes tagged in detail. Phase 2 began in June 2010 with the remaining accelerated filers, those with common equity float above $75 million (U.S. dollars). They are now beginning their second year of providing XBRL financial statements in which they must begin tagging their footnotes in detail, as opposed to blocks of text. Phase 3 began in June 2011 with all other companies filing under the rules of U.S. GAAP; referred to as non-accelerated filers. In their first year of filing in XBRL format, companies are allowed to tag their footnotes as blocks of text; referred to as Level 1 tagging. Levels 1 through 4 footnote tagging is explained in detail later.

The Interactive Data rule requires all publicly-traded companies to file their required SEC documents in the standard Word and HTML format and to “furnish” their financial statements with footnote disclosures in XBRL format; furnished financial statements are unaudited, supplemental information. The financial statements must be tagged in their entirety using tags from the U.S. GAAP taxonomy including footnote disclosures tagged as blocks of text in their first year of filing and in detail in subsequent years. For companies reporting under IFRS, the SEC is still reviewing the 2011 IFRS XBRL taxonomy; as explained in more detail later. The new SEC rule also requires all companies to provide their XBRL tagged financials on their corporate Web sites. Currently, the SEC does not require the XBRL tagged financials to be audited, but they do have to meet accuracy guidelines. In addition, the SEC has for now excluded other reports, such as the Management’s Discussion and Analysis, executive compensation, and other financial, statistical or narrative disclosures, from this rule but they continue to evaluate its feasibility. In addition, the U.S. FDIC (Federal Deposit Insurance Corporation) now requires all member banks to file quarterly “call reports” in XBRL format and in other parts of the world, including the UK, Belgium, Japan, Spain, Korea, Australia, the Netherlands, and Singapore, XBRL tagged financial statements are being required by banks, stock exchanges, and other regulatory agencies.

XBRL is gaining momentum for several reasons:
  • Reporting financial and business operations information using standard XBRL tags and a standard reporting format helps regulators and users of all types better understand what is being reported, which leads to more transparency, less ambiguity, and easier comparability.
  • Tagging data items using standard terms improves the efficiency and effectiveness of computerized processing for both report preparers and receivers. From a report preparer’s perspective, data items tagged with standard XBRL tags makes the reported data items more readily understandable and usable for many different purposes because they can be unambiguously interpreted, transmitted over networks, used by software applications, stored in databases, and more easily reused in both internal and external reports. In addition, standardized reports can be “validated” by software applications to make sure they follow the rules for specific reporting purposes; like applying for a loan, reporting to a business partner, or reporting to the SEC. From a receiver’s perspective, data tagged using standard XBRL tags and standard report formats can be automatically validated, more efficiently processed, more effectively analyzed, and more easily compared to other data items from the same or other reporting entities.
  • When XBRL tagging is built into business reporting processes, report users, including management, analysts, investors, regulators, and business partners, will benefit from more timely, complete, and understandable reports.
Starting with the XML foundation, The Guide & Workbook is designed to help you understand XBRL and how it works. In addition, by working through the Test yourself exercises and completing one or more of the projects/exercises in Chapter 4, you will gain experience in creating XBRL instance documents/financial reports for Bicycles OnLine, Inc.

Projects/exercises include the following:
  1. A balance sheet in XBRL format
  2. An income statement in XBRL format
  3. Financials with footnote disclosures in XBRL format
  4. An introduction to the IFRS XBRL taxonomy and a balance sheet exercise
By reading The Guide & Workbook, accessing the URLs, and working through the examples and exercises, you will understand the basics of XBRL and how to create simple XBRL financial statements. To become expert with XBRL will require more study and experience with its complexities.

Table of Contents

Chapter 2: XML Elements and XBRL Element Names

  • The basic rules for creating well-formed XML documents
  • XBRL element names are defined in XBRL taxonomies
  • Finding and using pre-defined XBRL element names


Chapter 3: Creating XBRL Instance Documents

  • The basic rules for creating XBRL instance documents
  • XBRL instance documents and namespaces
  • XBRL instance document context and items/business facts
  • Footnote disclosure items/facts in XBRL instance documents
  • Instance documents and validation


Chapter 4: XBRL Instance Document Projects

  • Projects scenario
  • Exercise 1: A balance sheet in XBRL format
  • Exercise 2: An income statement in XBRL format
  • Exercise 3: Financials with footnote disclosures in XBRL format
  • Exercise 4: Intro to IFRS and a balance sheet in XBRL format