Have you ever needed to compare the financial status of two or more companies, perhaps to do a financial statement analysis? I’ve needed to do this for classes, companies I was interested in for investing, and for academic research. Before XBRL, if I wanted to compare the revenues or the cost of sales (or any other element of the financial statements) of different companies, I had to either subscribe to an expensive private data service, or I had to go to the financial statements of every company and physically search for the items of interest. Often these items of interest were listed under different names on the financials of different companies. Now this information is freely available in a format that is searchable and comparable.
The US GAAP taxonomy is a dictionary of financial reporting labels coded in XBRL. As you probably know, XBRL stands for EXtendable Business Reporting Language and it’s based on XML, the same language used to make web pages.This open-source computer language allows companies to tag precisely the thousands of pieces of financial data included in typical financial statements and footnotes. Tags are computer-readable allowing users of financial statements to electronically search for, assemble, and process data so investors, analysts, journalists, and regulators can readily access and analyze it.
It probably takes a true accounting nerd to spend idle time thinking about the application of computer language to financial reporting. I guess I’m guilty. We truly do live in the information age. There is plenty of information available that should remain private (Hear that, Entertainment Tonight!), but financial information about public companies isn’t in that category. XBRL is used by regulators like FDIC, stock exchanges, and the SEC and is in the process of being adopted by even more agencies worldwide. Wow! Free information we can really USE!