XBRL (Extensible Business Reporting Language) is an offshoot of XML (Extensible Markup Language), the emerging favorite for transaction processing over the Web.  Its language is a cousin to HTML (HyperText Markup Language), the common idiom for presenting text online and one that you may have worked with.

Let's forget the alphabet soup for the moment and zero in on why a CPA will find XBRL useful.

Consider first how many different accounting software packages your various clients use. It's bad enough that you must learn enough about each one to assess their control strengths and weaknesses, or that you must figure what combination of reports gives you the answers you need. On top of that, you often can't use that information without re-keying it (re-entering it by hand) into your own write-up system, or using a data export process that seldom works as advertised.

What's the upshot of this situation? Staff time spent re-keying client data; calls to the system administrator when the export macro bombs because of a wayward comma in a delimited file; supervisory headaches when the junior accountant mixes up the entry for cash and fixed assets. Even programs like F9 or FRx that read balances directly from accounting program into a spreadsheet don't solve the problem entirely, since many programs (QuickBooks to name one!) don't work with them.  This confusion, miscommunication and software glitches can consume many hours of staff and professional time that can and should be used for other more important matters.
 
In addition to write-up efficiencies, XBRL will soon help CPAs and their clients to:

• Speed up business loans by transmitting financial statements, aging and cash flow reports from the applicant's computer directly to the bank's.
• Download SEC filings into your financial analysis tool of choice, without a significant amount of cut and paste.
• Make it easier for the small business owner of multiple companies to see their macro financial picture.
• Pull in data from a payroll service provider from their Web-based site into the client's in-house omputer.
• Save big bucks converting data files when upgrading computer programs, by doing all exports and imports via XBRL.

How will it work? XBRL proponents say it will solve the communication problem by setting up a standard translation mechanism between incompatible programs. It involves a two-part solution: taxonomy and a schema. These are "techie" terms for a common vocabulary and a presentation hierarchy. The taxonomy tells us the elements of a financial statement, and the schema tells us the order in which it goes.

For example, here's how XBRL renders a two-year balance of a single account:

<group entity="Hometown Enterprises Inc.">
<group type="CurrentAssets.CashandCashEquivalents">
<item period="2000">$65,000 </item>
<item period="1999">$59,000 </item>
</group>

The key thing here is that the content of any one line is always surrounded by a tag telling us what is being described. More complex statements all build on this approach, allowing for consolidations, multiple periods, and budget information.

Most of us will file the details of schema and taxonomy deep into our gray cells along with all we never knew about trigonometry and Latin. And unless someone is punishing us for being bad, no one will make us read an XBRL statement, which is basically incomprehensible to humans. Its intended audience is a computer, which will read tags and contents in a fashion similar to rows and columns on a spreadsheet.

What does this mean for us as accountants? Accounting software vendors will do the heavy lifting, with many already writing the programming hooks that will allow import and export of XBRL formats. Expect commercial applications within the next year. If all that is been claimed comes true, XBRL will allow us to live in a world where computers and software that once could not communicate will now be able to do so.  This will allow for great efficiencies and allow CPAs and their clients to transfer information more rapidly and with fewer errors and headaches. 

This article has been provided by Thomas Cullem, CPA, President of Computer-Ease Consultants Inc. and member of the National Network of Accountant's Preferred Provider Network.  For more information about this subject or to speak with Tom regarding accounting software packages and support that his firm offers call him at (516) 334-6643 or contact him via e-mail at compeaseinc@aol.com.