XBRL for Financial Statements will allow analysts and investors to easily view and compare companies' financial reports, by downloading them into a yet to be designed Web-based tool.  "This new reporting language adds to the value of financial statement information by enhancing the users' ability to extract and analyze data quickly and reliably," says Dennis Nally of PricewaterhouseCoopers.

How will XBRL do this?  XBRL establishes a variety of "tags" that information is attached to.  For instance, a nugget of information like "Total Revenue, 2000" will be attached to a specific tag.  This tag will be standard throughout all systems.

When an analyst wants to view a specific value or group of values from disparate financial reports, her computer will be able to find these tags in the digital files, and bring back the information.

To bring the process into offline terms, imagine an extremely dedicated auto mechanic (It's difficult, I know). This mechanic has a huge drawer full of files about every type of car in existence.  Each files has pages of separate colors that contain specific information about each car.  For instance, in every file, a red page tells the type of oil the car takes, a blue page tells the capacity of the trunk, a brown file tells the width of the front axle, etc.

If he wants to know the trunk capacity for an '87 Ford Escort, a '92 Buick Skylark, and a Model-T, he simply pulls the blue pages from his files.

XBRL tags are like the colored pages that this mechanic keeps.  Every category of information that would be found in a financial report is given a tag.  When a user wants a specific piece of information, the computer finds it by these tags.

Of course, a computer program is able to do much more than just find the information.  XBRL files will be read by a program and presented into an easy-to-read online format.  Users will be able to filter the information to see exactly what they want-they could view the financial report of one company, or compared information by.  For investors and analysts, this is an obvious improvement over physically matching up printouts, or creating their own computer systems.

But you've probably already asked the question:  Who decides what the tags are?  Who decides-to return to the previous example-how to quantify trunk space?  In cubic feet or in cubic centimeters?  Who decides whether to list trunk space at all?

Currently, XBRL has been developed only for financial reports.  Since the information that must be provided is mandated by the SEC, there is no real debate about what tags to use.  Companies will not be required to disclose any more information than they already do, and will have the benefit of being able to share this information more easily with shareholders and
others.

However, XBRL will eventually be used for much more than just financial reporting. The XBRL website (www.xbrl.com <http://www.xbrl.com>) lists other planned uses for the language, such as tax and regulatory filings and accounting and business reports.

If this is indeed the case, XBRL will have a profound impact on the accounting profession. To create XBRL for accounting reports, for instance, will require the development of de facto general ledger standards by industry-something this country has never had.

Yet, the XBRL steering committee, which hopes to roll out all of these standards within the next 18-24 months, affecting the careers of thousands of accounting professionals, is a surprisingly small and select group.

The XBRL project began as an attempt to discover how the accounting profession could use XML, a new computer language.  XML is a computer language that allows "structured documents", like tables and spreadsheets, to be stored and retrieved digitally.

An accountant from Tacoma, Washington, Charles Hoffman, saw that XML would be ideal for on-line publishing of financial reports-greatly increasing their value to a company's stakeholders.  Within a few months, the AICPA had set up a task force that eventually turned into the XBRL steering committee.

The XBRL steering committee is comprised of organizations that paid for the privilege.  Because XBRL will be offered free to the public, AICPA resolved to bring outside funding in through the steering committee.  This committee has four major groups involved:

• Large Accounting Firms (primarily Big Five firms) whose technology experts are writing the language
• Software Companies-(Microsoft, IBM, Oracle, among others) who will eventually develop the software that runs XBRL
• Wall Street-(EdgarONLINE, Morgan Stanley Dean Witter, and Standard & Poor's) who will use the information
• Accounting Membership Organizations-(accounting organizations in the U.S., Canada, the U.K, and Australia) whose members will eventually use XBRL

As the initiative has moved farther along, more partners have joined.  For example, with the release of XRBL for Financial Statements, 16 new companies have joined the steering committee, including Dow Jones & Company, and Fidelity Investments.

The involvement of so many software firms (at least twenty, including one called XBRL Solutions, Inc. founded recently by Mr. Hoffman himself), indicates that plans are already in the works for mass-packaged XBRL programs to assist companies in transitioning to this new language.

The XBRL initiative is moving swiftly.  Demand for XBRL standards in other countries is increasing rapidly, causing the Steering Committee to form XBRL.org, with the stated mission of developing "XBRL specification on a global scale according to the accounting principles of individual geographies and jurisdictions."

While financial statements were an easy and non-controversial task for the XBRL Steering Committee to tackle, controversy looms on the horizon as the committee prepares to release standards for accounting reports.  SmartPros will be there to explain how these seminal changes in the accounting profession will affect you.