Pros and ConsComparison

ByJustin BostOlivia Bischoff

Overview

What is it?

Terms to know

History

Advantages

Disadvantages / Concerns

North Carolina State University Study

Conclusion

What is it?

New computer language– Format– New form of “interactive data”

Revolutionary to financial reporting New requirement for SEC filings

– Phase In began as of June 2009

Terms to know

Taxonomy– Tag attached to data– Thousands and growing

Element– Data with taxonomies attached

Instance document– Made up of elements (i.e. financial reports)

History

Internet– File Transfer Protocol (ftp)

Email

– Hypertext Markup Language (html) View of internet

– Extensible Markup Language (xml) Interactive data

– Extensible Business Reporting Language (xbrl) Business specific interactive data

History

Charles Hoffman– Creator– CPA– Little technical knowledge

Client in 1998– Wanted to transfer product pricing

Prototype by October 1999

Advantages

Data only needs to be entered once by preparers– Then can be extracted and analyzed

automatically– Cost savings for users

Quick and easy data exchange over internet View/compare several companies and time

periods

Advantages

Can tag accounting and regulatory rules Aids principle-based accounting Standard taxonomies provide comparability Adds transparency to financial statements

Concerns Raised

84 Comment Letters: – Lengthy setup and training– Additional costs to preparers– Usefulness to investors– Availability of guidance on XBRL

North Carolina State University Study

Examined voluntary filings of 22 companies Errors found:

– Missing elements and amounts– Sign flips– Duplication of elements and amounts– Incorrect amounts– Incorrectly tagged items

North Carolina State University Study

Reasons for Errors: – Newness of tagging process – Improperly trained employees– Limitations of 2006 software

Conclusion– Low level of accuracy is a threat to preparer and

user acceptance– Audit assurance should be required

Conclusion

Advantages far outweigh the costs Auditor assurance should be required to

prevent material errors from reducing the benefits of XBRL