XBRL (eXtensible Business Reporting Language)
XBRL, or eXtensible Business Reporting Language, is a specialized markup language based on XML, designed specifically for the efficient reporting of business and financial information. Developed in the early 2000s, XBRL facilitates the tagging of financial data, which allows computers to read and interpret the information for various stakeholders, including shareholders and regulatory authorities. Central to XBRL's functionality are taxonomies, which are databases of financial terms that standardize reporting practices. The official taxonomy is maintained by XBRL US, but organizations can create their own proprietary taxonomies to meet specific needs. The process of tagging financial numbers within an “instance document” enables precise identification and reporting of data, such as distinguishing between net and gross income. Once tagged, documents are rendered into a user-friendly format, simplifying the analysis and presentation of financial information. XBRL has gained widespread adoption globally, with the U.S. Securities and Exchange Commission mandating its use for financial statement submissions, making it a vital tool in modern business reporting.
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XBRL (eXtensible Business Reporting Language)
The XBRL (eXtensible Business Reporting Language) is a markup language based on XML. XML was developed as a simpler alternative to SGML in the late twentieth century. XML was an extremely versatile markup language and was adapted to numerous specific purposes. XBRL is an XML variant adapted to business financial reporting.
XBRL functions through the use of taxonomies. A taxonomy is a database of financial terms recognized across devices. The official taxonomy of XBRL is maintained by XBRL US. However, companies can use specialized software tools to develop their own terms, creating a proprietary taxonomy. Financial numbers within an instance document—a common business document associated with XBRL—are tagged to align them with specific financial terms. This tells the computer how to read and interpret the numbers. Once the instance document is properly tagged, it is rendered. Rendering is the process by which a computer interprets the information in a document and presents it in a manner that humans can easily read.
XBRL is most commonly used for the reporting of business and financial information. The creation of a consistent markup language for financial reporting makes it simple to report financial news to shareholders, government agencies, and other regulatory authorities. The United States Security and Exchange Commission (SEC) requires that companies submit their financial reports utilizing XBRL.
Background
The eXtensible Business Reporting Language (XBRL) can be traced back to the development of the Standard Generalised Markup Language (SGML) in the 1970s. The language was developed by Ed Mosher, Charles Goldfarb, and Ray Lorie while the group worked at the computer engineering giant IBM. The language was designed to tag information within a document so that it could be rapidly read and interpreted by computers. SGML developed into HTML, a markup language that became popular for creating web pages in the 1980s. Though HTML is not a data storage format, it allows computers to rapidly interpret the formatting of text. This simplified the process of presenting data over the Internet.
SGML was considered too complex for use by the average person, and HTML was primarily suited for the display of information, not its storage. For this reason, a workgroup composed of programmers and computer engineers began developing another markup language during the 1990s. The workgroup trimmed away many of SGML’s most complicated or redundant features, leaving behind just its core functions. The simplified markup language, XML 1.0, was published in February 1998. The first iteration of XML was a quick success.
XML allowed programmers to set their own definitions for specific numbers and terms. It gave programmers more flexibility than many other markup languages, while still remaining simple enough for the average computer user to utilize it effectively. Many variants of XML were developed, most of which were specialized for completing specific tasks. For example, XML Signatures was designed to allow users to digitally sign documents and to verify and authenticate any signatures found within documents. XML Encryption provided expanded syntax for encrypted data, allowing XML to better interact with encrypted files. One of these variants, the eXtensible Business Reporting Language (XBRL), was developed during the early twenty-first century.
Overview
XBRL was first published in 2000 and has been revised several times. Its most recent iteration, XBRL 2.1, was published in 2003. It was formalized under XBRL International, creating a version of the markup language suitable for use in international business. Following that, XBRL was adopted by numerous countries across the world.
XBRL is based on XML, meaning that it functions similarly. Many of the tagging codes are the same, and the language functions with a similar syntax. However, XBRL includes an extended taxonomy, one intended specifically for use in finance. A taxonomy refers to a group of financial concepts in which each group is defined. Because of how XML functions, each computer using the script is required to have its own definition of terms. For this reason, in order for XBRL to work effectively, each computer utilizing the markup language is required to have a specific taxonomy. The non-profit organization XBLR US maintains the official taxonomy for the markup language, including more than 15,000 elements for common financial concepts.
XBRL is an extensible markup language, meaning that it can be expanded by users to fit their needs. If a business finds that none of the numerous existing taxonomy elements fits its needs, that business is free to develop its own proprietary taxonomy. However, in order for such a taxonomy to be utilized outside the business, it will need to be intentionally shared. Companies may need to purchase specialized tools in order to develop their own XBRL taxonomies.
Most XBRL usage takes place within instance documents, larger files that utilize XBRL tagging and taxonomies to form reports. These reports can be interpreted by any computer with access to the same XBRL taxonomy, making them extremely versatile. They are typically utilized for financial reports, such as earnings releases. Within an instance document, numbers are typically tagged, telling the computer exactly how to read each number. For example, net income might be tagged differently from gross income, causing the computer to read and display them differently even if the numbers are identical.
Once the tagging within an instance document is completed, the file is rendered by a computer. This is the process by which a computer reads the tagging and transmits the information into a format that is easier for the average computer user to read.
Many businesses require that their financial departments use XBRL. This convenient, uniform format makes their data easily accessible to a wide range of financial analysts, stockholders, and government agencies. The United States Securities and Exchange Commission requires that many companies submit their financial statements using XBRL.
Bibliography
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