An XBRL Implementation Plan (Draft)

I’m looking at incorporating XBRL at my employer.  We receive federal, state, and local grant funds and have specific reporting that we must do.  We currently use an Excel spreadsheet to maintain our grant records.  I’m hoping that we can move to an XBRL process that will eliminate some of the manual entry and make the whole process more efficient and accurate.

I’ve started a draft of an XBRL Implementation Plan.  So far, I’ve come up with a mission statement, the goals and vision of the plan, and the scope.  I’m still working on the system requirements, budget, timeline, and how we will measure success.

Mission Statement

To create an XBRL system that will allow CityBus to maintain Grants Reporting.  To utilize the Grants Management module of Fleet-Net, a multi-user, multi-tasking software product that allows all users to access and to update a single database.  The software provides the tools to coordinate the efforts of Maintenance, Purchasing, Finance, Payroll & Human Resources, and Operations & Statistics.

Goals and Vision

Our goal is to streamline current manual processes into more automated, electronic processes.  The goal is to not only become more efficient, but to become more accurate.  XBRL can provide definitions that are common and standard for grants and general ledger data and it can reduce the time needed to process grants and will automate current manual processes.  Fleet-Net offers governmental compliancy for fraud control, National Transit Database reporting, and Federal, State, and local laws and regulations.  We are looking to add the Grant Management module to our current system set up.

XBRL

XBRL will allow CityBus to streamline the use of spreadsheets.  It will provide standardization, validate data, and provide a centralized database for grant maintenance.  The State of Nevada already uses XBRL for their Grants Reporting.  According to the State Controller, Kim Wallin, CityBus can expect to see the following results (Wallin, 2009):

Accurate, standardized, and timely reports to Federal, State, and Private Grantor Agencies

Real-time or near real-time data to deliver to administrators, project managers, and grant owners

A streamlined and standardized Grant and Agreement Application preparation

Administrative and fiscal oversight to the Grants Reporting process

 

Grant Management

This module will allow CityBus to effectively comply with the terms and conditions of a grant by improving our operations and performance as well as minimizing the risk of non-compliance with Federal, State, and local agencies.  GM provides financial reports to withstand an audit and assists with staying on tasks.

Grant Compliance

Cost Management

Auditing

Standard Reporting and Inquiries
 

Scope

CityBus currently maintains an Excel spreadsheet that houses all grant information.  The spreadsheet is very large and errors occur regularly due to manual entry of data.  There is also a lack of controls over the data elements and structure.  Grant Reporting preparation is very time consuming due to the fact that so much of the process is manual.  CityBus currently uses several modules that Fleet-Net provides.  They include General Ledger, Accounts Payable, Accounts Receivable, Fixed Assets, Payroll Processing, Human Resources, Work Orders, Vehicle Maintenance, Road-Call Reporting, Purchase Order Processing, Inventory, Automated Dispatching, and Operator Timekeeping.  The departments that use these various modules include Maintenance, Operations, and Finance.

 

 

 

Research was done to provide the background knowledge that I will need to implement this plan.  I found many resources about XBRL and the SEC reporting requirements that helped with the details of XBRL and how it is beneficial to companies.  In my research, I found several articles and presentations about the State of Nevada and how they have incorporated XBRL into their Grants Reporting process.  They have also began a project for debt collections.  I’m excited to learn more about their process and see how I can follow their lead and implement an XBRL Grants Management program at CityBus.  Here are some of my resources and a brief summary of each.

 

Abraham, C., & Kull, J. (2008, November 19). AGA research study predicts bright future for XBRL use in state and local governments. accountingWEB. Retrieved from http://www.accountingweb.com/topic/aga-research-study-predicts-bright-future-xbrl-use-state-and-local-governments

           This article reports on the AGA’s research on the Oregon CAFR.  They created a taxonomy and tagged two statements from the Oregon CAFR: the Statement of Activities and the Statement of Net Assets.  The article reports that there were three significant findings:  1) A CAFR taxonomy would have to be at a high level since line items vary from state to state.  2) XBRL is a good choice for improving the handling, exchange, and reporting of public sector financial information.  3) There are a lot of opportunities to do more research and a greater opportunity to improve municipal reporting.

 

admin. (2011, November 14). List of free XBRL tools [Web log message].  FinanceSheets.com, Retrieved from http://www.financesheets.com/list-of-free-xbrl-tool/

           This web log lists free XBRL tools.  When considering using XBRL, it is important to have the right tools to make it work.  The tools allow you to design taxonomies, view, and review XBRL based financial statements and other XBRL documents.

 

Bills, H., & Hansen, J. (2008, October). Enabling grants reporting with XBRL: A case study [PDF document]. 18th XBRL international conference, Washington, DC. Retrieved from http://archive.xbrl.org/18th/sites/18thconference.xbrl.org/files/PublicSector-XBRLforImprovedGovernmentalReporting-Complete.pdf

           This PDF document takes a look at the Nevada Department of Agriculture’s use of XBRL for its Grants Management process.  The main purpose of using XBRL is to streamline the process to be more effective and efficient.  Currently, over 60 grants are manually maintained in spreadsheets.  It is estimated that they spend 1-2 hours per grant for report preparation.  They experience errors, re-entry of data, lack of standardization, incomplete or missing data.  By moving to XBRL they hope to see cost savings, efficiency, improved accuracy and reliability, paperless environment, enhanced business reporting and standardization, and transparency.  This will also allow them to be prepared for the “Federal Funding Accountability and Transparency Act”.

 

Brands, K. (2012, March). Get ready to catch the XBRL wave! Strategic Finance, 64-65.

           This article discusses the momentum in the United States since the SEC 2009 XBRL Reporting Mandate became effective.  It addresses those companies that are not required to report the SEC by mentioning that XBRL can be used for both external and internal reporting.  The article details resources and educational opportunities that are available to help one learn about XBRL, including the XBRL International Certification Program.

 

Brands, K. (2012, January). U.S. federal government XBRL reporting update. Strategic Finance, 56-57.

           This article addresses the three bills passed in 2011 by the U.S. federal government that specify the use of a standard business reporting (SBR) tool to achieve transparency and accountability for several federal programs’ reporting.  The article states that all three bills include identical provisions regarding the data standards to achieve the reporting requirements:  “to the extent nonproprietary standards, such as the eXtensible Business Reporting Language (XBRL).”

 

Brands, K. (2012, November). XBRL tools can help. Strategic Finance, 64-65.

           This article addresses the need for using XBRL tools to find and fix common errors.  The purpose of using XBRL is to improve accuracy, transparency, and comparability.  Those items cannot be done if there are extensive tagging errors.  The author gives examples of a few tools available to help with internal controls in the tagging process.

 

Gray, G., & Miller, D. (2009). XBRL: Solving real-world problems. International Journal of Disclosure and Governance, 6(3), 207-223. doi: 10.1057/jdg.2009.8

           This is a study that conducted four focus groups to develop an understanding of the issues and concerns faced by organizations related to accounting, financial reporting, and auditing.  Specific issues and questions regarding XBRL were forward to the XBRL community to address the issues, concerns, and questions.  The study found that the XBRL community feels that XBRL technology can fulfill the needs of financial reporting and be used for management and control of internal financial data and reporting processes.

 

Hanson, W. (2009, May 1). Xbrl ends spreadsheet hell. digitalcommunities, Retrieved from http://www.digitalcommunities.com/articles/XBRL-Ends-Spreadsheet-Hell.html

           This article is about the State of Nevada’s efforts to use XBRL for tracking grants.  It discusses their many Excel spreadsheets used to maintain their grant files.  It mentions the manual entry, the time requirement, and the staff involved to create, maintain, and prepare reports for their grants.  The goal is to have timely and accurate data, stronger internal controls, reduced costs, a standardized system of seamless data exchange, business processes and data elements.  The article discusses the State results of their pilot program and their satisfaction with the results.

 

Hoffman, C., & Watson, L. (2010). XBRL for dummies. Indianapolis, IN: Wiley Publishing, Inc.

           This book was written to help those with little to no prior knowledge of XBRL get a grasp of the components of XBRL and their definitions.  It explains what XBRL is, why it is, and how one can use it for reporting.  The book teaches one how to prepare financial statements with XBRL, use it for strategic planning, and more…plan for XBRL implementation, set action-oriented agendas, and identify subject-matter experts within the organization.  It also teaches one to choose from and adapt existing XBRL taxonomies to comply with US GAAP standards.

 

Jackson, J. (2009, May 29). Nevada uses XBRL to streamline data reuse. Government Computer News, Retrieved from http://gcn.com/articles/2009/06/01/datagov-sidebar-1-nevada.aspx

           This article discusses the State of Nevada’s efforts to use XBRL to streamline the grants maintenance process, along with other processes.  It also discusses web-based XForms that process XML where the employees populate the data fields.  The article refers to several federal programs that could benefit from the use of XBRL to track the billions of dollars that have been allotted to various programs.

 

Janvrin, D., & No, W. (2012). XBRL implementation: A field investigation to identify research opportunities. Journal of Information Systems, 26(1), 169-197. doi: 10.2308/isys-10252

           This journal article analyzed the implementation process of XBRL reporting.  They found four themes:  1) management support and involvement; 2) implementation approach; 3) organizational readiness or expertise; and 4) control over the XBRL reporting process.  Their study contributes to a more complete understanding of how companies implement XBRL by providing a basis for accounting researchers to identify current implementation issues and future research opportunities.

 

Monterio, B. (2011, February). XBRL and its impact on corporate tax departments. Strategic Finance, 56-61.

           This article discusses the impact of XBRL on corporate tax departments.  It gives several examples of current uses and the likelihood that it will make its way to the United States and the IRS.  It also discusses XBRL solutions that help with reporting and analysis.  It talks of the financial benefits of XBRL due to its ability to streamlining processes, analysis, reporting, reduce errors, reduce manually entry, etc.

Mueller, D. (2009, June 25). Public sector case study: State of Oregon CAFR project [PDF document].  19th XBRL international conference, Paris, France.  Retrieved from http://archive.xbrl.org/19th/sites/19thconference.xbrl.org/files/Microsoft%20PowerPoint%20-%20JustSystems%20Mueller%20XBRL%20Oregon%20Case%20Study%20.pdf

           This PDF document discusses the Oregon CAFR project.  It details the project plan from development of the taxonomy to publishing of the report.  It lists the vendors used in each step of the implementation process.  It lists the participants in the taxonomy development; included are representatives from the State of Oregon, AGA, GASB, and PricewaterhouseCooper.  There are details of the mapping process from Excel spreadsheets.  It discusses the instance file, schema, and taxonomy extensions.

Piechocki, M. (2010, December). Standard business reporting: Modern language of governments. Strategic Finance, 56-61.

           This article discusses Standard Business Reporting (SBR).  It addresses that in light of the economic crisis, the need for governments to show that their markets and business environments are safe, competitive, less burdensome, and supported by proactive regulatory programs that help business survive and grow through difficult times.  It discusses the reporting requirements to several different government agencies and bodies that contain similar or even identical information, but that may differ in terms of formats, structures, or transmission methods.  SBR benefits include a streamlines process of passing and aggregating data across internal departments, offices, and business units of a company; increased interoperability of financial applications; better interaction with banks for loan application and risk systems; and improved data quality.

 

Ramin, K. & Reiman, C. (2013). IFRS and XBRL: How to improve business reporting through technology and object tracking. John Wiley & Sons, Ltd.

           This is the text for FL 551.  It contains four sections that introduce IFRS, address the importance of IFRS to business, give the history, structure, and finance of the IFRS Foundation, covers the framework, preface, standards, and interpretations of IFRS.

 

Rosivach, A. (2012, January 31). Governments and private companies exploring benefits of XBRL. accountingWEB. Retrieved from http://www.accountingweb.com/topic/technology/governments-and-private-companies-exploring-benefits-xbrl

           This article discusses the idea that XBRL should not be limited to just publicly traded companies in the U.S.  It mentions several benefits of XBRL to organizations that are not listed with the SEC that include streamlining and automating information sharing; removing the “silo mentality” that could exist between sales/marketing, operations, and finance.  Information is easier to track, analyze, and share.  It discusses how accountants can champion XBRL bringing value to companies.  Developing trends in the use of data standards and XBRL are also discussed.

 

Sheridan, B. (2009, Jun 29). XBRL and government: A marriage made in…Nevada? [Web log message]. Retrieved from http://www.macpa.org/blog/2258/xbrl-and-government-a-marriage-made-in-nevada

This web log discusses the State of Nevada’s use of XBRL for grants maintenance and their pilot program for using XBRL in the state’s debt collection process.  The idea is to allow the staff to focus on debt collection instead of administrative tasks which could save the state up to $6000,000 in staffing costs over two years.

 

Wallin, K. (2009, June). Enabling state grants and stimulus reporting with XBRL [PDF document]. 19th XBRL international conference, Paris, France. Retrieved from archive.xbrl.org/19th/../Paris XBRL Grants Reporting.pdf‎

           This PDF document discusses the State of Nevada’s XBRL strategy which includes their grants experience and other XBRL activities; state grant reporting and new federal grants reporting requirements; and XBRL use in Stimulus reporting (ARRA).

 

Wallin, K. (2008, October). Vision becomes reality [PDF document]. 18th XBRL international conference, Washington, DC. Retrieved from http://archive.xbrl.org/18th/sites/18thconference.xbrl.org/files/PublicSector-Keynote-KimWallin.pdf

           This PDF document details the grants reporting process at the Nevada Department of Agriculture and how they want to use XBRL to reduce costs, increase efficiency, improve accuracy, strengthen internal controls, standardize systems, and improve transparency.  It details the components and technology for the grants maintenance program.

 

Wallin, K. (2011, November 11). XBRL in government [PDF document]. Georgia Society of CPA’s. Retrieved from http://controller.nv.gov/Xbrl/XBRL_in_Government_11142011.pdf

           This PDF document discusses the way that XBRL can improve Grants Reporting by delivering accurate, standardized and timely reports to Federal, State, and Private Grantor Agencies; delivering real-time or near real-time data to administrators, project managers, and grant owners; streamlining and standardizing Grant and Agreement Application preparation; and by providing administrative and fiscal oversight to the Grants Reporting process.  The idea is to reduce costs, improve timeliness and accuracy, improve internal controls, and standardize the process.

 

Wallin, K. (nd). The State Business Portal [PDF document]. State Controller of Nevada. Retrieved from http://controller.nv.gov/Xbrl/Business_Portal_White_Paper.pdf

           This PDF document discusses a State Business Portal application used to streamline the complete information workflow between different state agencies in a State.  To achieve this state-wide platform, XBRL will be used.  XBRL will allow data to be shared and analyzed from many different systems within the state in one location.  This will eliminate the need to make multiple submissions of the same data to different agencies.  The article discusses the Standard Business Reporting (SBR) process in Australia and the great results that they have experienced.

 

XBRL Espana. (2011, August 14). CEBS Why is XBRL recommended to be used? Retrieved from http://www.xbrlwiki.info/index.php?title=CEBS_Why_is_XBRL_recommended_to_be_used?

           This article is from the XBRL Espana website.  It describes why the European Banking Authority recommends the use of XBRL.  They list several benefits of XBRL including increased communication, increased transparency, increased flexibility, increased efficiency, automated processes, validation, harmonization, and standardization.

XBRL International. (2013). XBRL projects [demographic map]. Retrieved from http://www.xbrl.org/knowledge_centre/projects/map

           This map gives a visual representation of the XBRL Projects going on world-wide.  When hovering over a project’s tag, one can find out a brief description of the project, its status, a link to the project webpage, and other pertinent information.

           

XBRL International. (2013). EBA XBRL project.  Retrieved from http://www.xbrl.org/project/eba-xbrl-project

           This web page gives details of the European Banking Authority (EBA) XBRL Project.  It includes details such as a brief description of the project, the objectives, a link to the project, its purpose, its status, whether it is mandatory or optional reporting, the sponsoring organization, and the region of the project.           

 

XBRL International. (2013). XBRL and public sector financial reporting: Oregon CAFR project.  Retrieved from http://www.xbrl.org/project/xbrl-and-public-sector-financial-reporting-oregon-cafr-project

           This web page gives details of the Oregon CAFR Project.  It includes details such as a brief description of the project, the objectives, a link to the project, its purpose, its status, whether it is mandatory or optional reporting, the sponsoring organization, and the region of the project.

 

2013 US GAAP Financial Reporting Taxonomy

Background

US GAAP Financial Reporting Taxonomy was created for SEC registrants who file financial reports in accordance with US GAAP.  The taxonomy is both broad and deep in covering financial reporting concepts, “including all US GAAP and SEC financial statement disclosure requirements and many elements for commonly followed reporting practices” (XBRL US, Inc., 2008).  The taxonomy is maintained and updated and is available to the public on the XBRL US, Inc website (www.xbrl.us).  The taxonomy can be viewed and read by using software available to the public.

The XBRL US GAAP Taxonomy not only includes taxonomies to meet mandatory requirements of the core financial statements, notes, disclosures and schedules, it also includes taxonomies to cover such things like Management Discussion and Analysis (MD&A), Management’s Reports on Internal Control Over Financial Reporting, Accountant’s Report on Financial Statements, etc. (XBRL US, Inc., 2008).

Entry Point

Since there are so many different types of companies that report using the XBRL US GAAP Taxonomy, the taxonomy has what are called entry points.  “An entry point is an XBRL file that brings together a set of financial concepts that have common relationships.  For example, the “insurance” entry point (ins-stm-dis-all) brings together financial concepts that are commonly used by insurance companies and organizes statements, disclosures, documentation, and references” (XBRL US, Inc., 2008).  Regardless of the industry chosen, the entry point loads the same complete list of elements…the elements are just organized specific to that industry.

The XBRL US GAAP Taxonomy Preparers Guide explains that the taxonomy cannot account for every reporting possibility in every type of industry.  Therefore, it suggests that if the specific industry is not an option, choose “the entry point that most closely reflects the financial statements” (XBRL US, Inc., 2008).  The guide continues to explain that “the Commercial and Industrial entry point, which includes financial reporting concepts for oil and gas, and utility entities, has the broadest coverage of the entry points and should be used as the default if preparers are unable to determine a more appropriate industry entry point” (XBRL US, Inc., 2008).

Elements

“Elements represent financial reporting concepts that are numeric, textual (strings of text, sentences or groups of sentences), and date-oriented” (XBRL US, Inc., 2008).  There are two components of the meaning of an element, attributes and relationships.  “Attributes are the properties that provide the defining characteristics of a stand-alone, independent element.  Relationships are the “external” characteristics that further define the element in terms of the other elements in the taxonomy” (XBRL US, Inc., 2008).  See below for the attributes of an element (XBRL US, Inc., 2008).

 

See below for an example of a relationship (XBRL US, Inc., 2008).

Viewing and Downloading 2013 US GAAP Financial Reporting Taxonomy

Anyone can view the taxonomy by visiting the Financial Accounting Standards Board’s (FASB) website at www.fasb.org.  The taxonomy can be viewed in its entirety or by entry point.  It can also be downloaded to Excel.  Below are some screen captures of the public view and the Excel view (FASB, 2013).

 

XBRL US GAAP Taxonomy in my workplace?

As I learn more and more about XBRL, I sit back and wonder if I’m actually getting this or just getting more confused.  There is so much to learn about XBRL and how it can be used in the workplace, even for those that are not required to report to the SEC.  I work for a public transportation company and I think that we could use XBRL to streamline the reports that we are required to do to several different agencies from Federal to State and Local.  It would be nice to be able to have the computer extract the needed information and report it where it is needed, instead of manually retyping all the data into each form for each report for each agency.  I look forward to the day when we can eliminate human error just due to a typo.

 

 

 

 

 

References

 

Financial Accounting Standards Board. (2013). Entire 2013 US GAAP Financial Reporting Taxonomy. Retrieved from http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1176160582432

 

Gray, G., & Miller, D. (2009). XBRL: Solving real-world problems. International Journal of Disclosure and Governance, 6(3), 207-223.

 

Janvrin, D., & Gyun No, W. (2012). XBRL Implementation: A Field Investigation to Identify Research Opportunities. Journal of Information Systems, 26(1), 169-197.

 

XBRL US, Inc. (2008). XBRL US GAAP Taxonomy Preparers Guide. Retrieved from http://xbrl.us/preparersguide/Pages/frontmatter.aspx

XBRL Projects

Each region of the world has prepared for and began using XBRL in one way or another.  Some areas have created “projects” to track their XBRL progress.  The XBRL International has a great source for finding these various projects at http://www.xbrl.org/knowledge_centre/projects/map.  There are approximately 130+ projects around the world in various stages from prototype to development to pilot to implemented.  According to the projects list and map maintained by XBRL International, the majority of the projects are located in Europe (~32 projects) and a mere 15 projects in the United States, mostly on the east coast.  The map allows you to scan the globe and receive quick information of each project.  You can also use the map’s information bubbles to look into each project with more detail.   

The two projects that I want to focus on today are the EBA XBRL Project and the Oregon CAFR Project.  We’re going to look at how XBRL is being used by each project.  We’ll learn what tools we would need to implement our own XBRL project.

 

EBA stands for the European Banking Authority.  They have joined efforts with the European Insurance and Occupational Pensions Authority (EIOPA) to form the Eurofiling project.  They have collaborated with XBRL Europe, stakeholders, schools, and individuals.  The group is comprised of volunteers, regardless of their affiliations.  According to their website, Eurofiling welcomes “employees of any supervisor, reporting entity or XBRL industry/organization, as well as academics or any other interested people” (Eurofiling Initiative, 2013).

 

In 2005, the Committee of European Banking Supervisors created COREP (Common Reporting) “to achieve a common solvency ratio reporting framework for credit institutions and investment firms under the EU capital requirements regime” (Eurofiling Initiative, 2013).  The COREP taxonomy was published in March 2006 and in late 2006 FINREP (Financial Reporting), the code-named reporting for IAS/IFRS, and COREP projects were implemented (Eurofiling Initiative, 2013).  The Eurofiling Initiative is responsible for getting the whole region using the same standards for reporting.

 

 

Comprehensive Annual Financial Report (CAFR) was created by the State of Oregon to promote transparency and innovation.  The state is not required to report using XBRL at this time; however, they took the initiative to get on board and lead the pack of governmental units.  It was created by the Department of Administrative, it is audited by the Secretary of State Audits Division, and it is published for the Governor and citizens of the State of Oregon and for public consumption.  The goal was “to build an XBRL taxonomy for government accounting standards used by state and local governments for financial reporting and then express the state’s CAFR using XBRL” (Hoffman & Watson, 2010).  In 2010, there were about 88,000 state and local government units using it (Hoffman & Watson, 2010).

 

The Oregon State Controller, John Radford, was quoted saying the following when considering the need for XBRL:

 

“Our XBRL investments in an efficient global marketplace today will help sow the seeds for lower interest cost tomorrow.  For government financial statement preparers, the marginal cost to convert existing financial reports in XBRL will increase market efficiency and that’s a good thing.  Our experience in Oregon is that the actual cost is slightly more than converting existing files from spreadsheets and word processors to XBRL.  As market players convert to XBRL, state and local governments should be ready.”

 

The CAFR project is now the leader in the US for government reporting.  If you take a look at the state’s website at www.oregon.gov you can find a whole section on transparency.  They have dedicated the resources to make the state’s government transparent for its people.  They have chosen to be proactive with reporting and serve as a role model for all government entities.

 

 

Thinking about starting your own XBRL project at your employer?  As the world uses XBRL more and more, there is XBRL software popping up all around us.  The one that I’m going to look into is Dragon View XBRL from Rivet Software.  According to the Rivet Software website, the Dragon View program “helps ensure compliance with the SEC XBRL reporting requirement” (Rivet Software, 2013).  The site explains that Dragon View can “ensure XBRL filings comply with the [SEC] mandate, from viewing basic instance properties and verifying presentations and calculations, to confirming complete XBRL packages”; offer you “confidence and peace of mind that the XBRL filing tags are accurate and consistent across the entire filing”; and offer conformity by allowing the users to “pinpoint extensions and their related details” (Rivet Software, 2013).  Dragon View was created to allow users to work more efficiently and reduce issues.  Here’s a list of some of the software’s features (Rivet Software, 2013):

§  Identify instance/taxonomy versions and other properties

§  Ensure XBRL Tagging is accurate and consistent with raw data and rendered data

§  Export to Excel, HTML, or listing of full facts “working papers”

§  Analyze extensions used in the specific company taxonomy

§  Quick-search the standard taxonomy elements for possible recommendations

§  Filter and sort all XBRL facts in a specific filing to pinpoint what’s most important to the review

§  Assure the note tagging granularity is at the proper level

§  Verify the labels and label linkbase match the source

§  View the calculation hierarchy and automatically check summations in the calculation linkbase

§  Compare all presentation links and line item text via the rendered view, reviewer view, or data grid view

After this week’s research and after getting a better understand of XBRL and how it can make our lives more efficient…I’m thinking that an XBRL project at my employer may be around the corner for me!

 

 

 

 

 

References

 

Abraham, C., & Kull, J. (2008, November 19). AGA research study predicts bright future for XBRL use in state and local governments. accountingWEB. Retrieved from http://www.accountingweb.com/topic/aga-research-study-predicts-bright-future-xbrl-use-state-and-local-governments

 

admin. (2011, November 14). List of free XBRL tools. FinanceSheets.com, Retrieved from http://www.financesheets.com/list-of-free-xbrl-tool/

 

Beers, A. & Savage, M. (2010, January 7). The sec mandated xbrl. Corporate Finance Insider, Retrieved from http://www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2010/CorpFin/SEC_XBRL.jsp

 

European Banking Authority, EIOPA, & XBRL Europe (2013). About us. Retrieved from http://www.eurofiling.info/about_us/about_us.shtml

 

Hoffman, C., & Watson, L. (2010). XBRL For Dummies. Indianapolis, IN: Wiley Publishing, Inc.

 

Mueller, D. (2009, June 25). Public Sector Case Study: State of Oregon CAFR Project. Retrieved from http://archive.xbrl.org/19th/sites/19thconference.xbrl.org/files/Microsoft PowerPoint - JustSystems Mueller XBRL

 

Ramin, K. & Reiman, C. (2013). IFRS and XBRL: How to improve Business Reporting through Technology and Object Tracking. John Wiley & Sons, Ltd.

 

Rivet Software. (2013). Dragon View. Retrieved from http://rivetsoftware.com/solutions/quality-control/dragonview/

 

State of Indiana. (2012). 2012 CAFR. Retrieved from http://www.in.gov/auditor/2530.htm

 

State of Oregon. (2012). Oregon Transparency: get to know state government. Retrieved from http://www.oregon.gov/transparency/Pages/index.aspx

 

XBRL Espana. (2011, August 14). CEBS Why is XBRL recommended to be used? Retrieved from http://www.xbrlwiki.info/index.php?title=CEBS_Why_is_XBRL_recommended_to_be_used?

 

XBRL International. (2013). XBRL Projects [demographic map]. Retrieved from http://www.xbrl.org/knowledge_centre/projects/map

 

XBRL International. (2013). EBA XBRL Project. Retrieved from http://www.xbrl.org/project/eba-xbrl-project

XBRL International. (2013). XBRL and Public Sector Financial Reporting: Oregon CAFR Project. Retrieved from http://www.xbrl.org/project/xbrl-and-public-sector-financial-reporting-oregon-cafr-project

IFRS Taxonomy, US GAAP Taxonomy, and XBRL

The big push in the XBRL world is to come up with one, unified, taxonomy that can be used globally.  Having a single taxonomy is important since transparency is the most important thing here.  But to fully achieve transparency, the taxonomy has to be able to work with all types of businesses.  As I discussed in my last post, the two leading taxonomies are being created by IFRS and US GAAP.  Let’s explore the two taxonomies a little more.  IFRS and US GAAP have been trying to converge for years…but is it working?  Do we need more than one taxonomy?

The US Securities and Exchange Commission required all public companies to report financial statements using XBRL starting in 2009, making it a “global leader in its use of XBRL to achieve regulatory compliance” (Brands, December 2012).  The requirements were phased in over three years.  In 2011, the final phase of the requirement that affects small-cap and Foreign Private Issuers (FPIs) went into effect (Brands, 2011).  Since most of the world has already accepted the IFRS XBRL taxonomy (xIFRS), the FPI’s have chosen to use it.  The problem is that they are not meeting the requirements of the SEC.  “The first xIFRS taxonomy was issued in late March 2011, barely a quarter before the FPI’s filing requirement date” and “two years after the first US GAAP Financial Reporting Taxonomy (UGT)” (Brands, 2011).  The SEC was concerned that it “didn’t have enough time to review and approve the xIFRS taxonomy, a step required by the mandate” (Brands, 2011).  It was also discovered that the taxonomy was inadequate in the number of concepts and that it didn’t account for “common IFRS financial reporting practice concepts such as sales and aggregated sales and marketing expense” (Brands, 2011).  For 2011, the SEC issued a ‘No Action’ letter since it had not accepted xIFRS.

 
Now, I’m no expert (obviously, that’s why this is called An XBRL Experience)…but the following facts just blew my mind and I’m questioning why the US is trying so hard to converge with IFRS.  “The 2011 UGT includes about 15,000 financial reporting elements with several industry entry points, such as the Commercial and Industrial Taxonomy that applies to most companies.  The 2011 xIFRS taxonomy weighs in at about 2,500 concepts” (Brands, 2011).   You may ask why there is such a great difference in the number of concepts.  Well, the xIFRS initially only addressed IFRS disclosure requirements.  According to Kristine Brands, “common financial reporting concepts and local, jurisdictional, and industry-/company-specific reporting requirements weren’t included” (Brands, 2011).  When the number of concepts is limited like this, to meet disclosure requirements a company must add extensions.  Adding extensions defeats the purpose of XBRL reporting that was supposed to make financial reporting easier to compare.  It is hard to compare components that have been “added” to the reporting by individual companies versus a uniformed concept that could be included in the reporting.  The IFRS has modified their focus to include common financial concepts.

In July 2012, the adoption of IFRS by the U.S. made the news, yet again.  This time it was with regards to the final report by the SEC on the Work Plan to incorporate IRFRS in the US.  “The report suspended the project indefinitely, causing a major setback to the global accounting community’s objective to adopt one single set of high-quality accounting standards” (Brands, September 2012).  Even though the US acceptance of IFRS project is delayed, the International Accounting Standards Board (IASB) is continuing to make progress to improve “the robustness of the IFRS XBRL taxonomy” (Brands, September 2012).  They have added approximately 1,200 tags, taking the total to approximately 3,770 (Brands, September 2012).  One reason that the IFRS is receiving so much resistance by the SEC is because xIFRS “filings are mostly for tax and banking/insurance regulation reporting, not for statutory financial reporting of publicly listed companies as in the SEC’s 2009 XBRL reporting mandate” (Brands, September 2012).

So what is the story on the convergence between IFRSs and US GAAP?  Their history begins in 2002 when the two standards boards began working together to create “a common set of high quality standards” (IFRS Foundation, 2013).  Their goal is to remove the differences between the two sets of standards.  They have achieved many things and are moving forward to reach their ultimate goal.  One way that they are work together is to develop common standards where the FASB (Financial Accounting Standards Board) and the IASB issue standards to their respective standards counterparts (US GAAP and IFRS).  Eventually, “the two sets of standards are expected to both improve in quality and become increasingly similar if not the same” (Financial Accounting Standards Board, 2012).

In July 2012, the SEC released a final report on the IFRSs.  The SEC spent almost two years analyzing the issues of the US incorporating IFRSs into the financial reporting requirements.  In response, the IFRS “issued a statement indicating their commitment to give careful consideration to the report’s observations” (Byatt, 2012).  The response was commented on by Michel Prada, Chairman of the Trustees {of IFRS Foundation} (Byatt, 2012):

"In their February 2010 statement on global accounting standards, the SEC Commissioners’ reaffirmed their strong commitment to a single set of global standards and the recognition that IFRSs were best placed to serve that role for US markets. The statement directed SEC staff to develop and execute a work plan to support this process and the final SEC Staff Report on IFRS was published in July 2012.

The IFRS Foundation staff analysis released today complements the findings of the SEC Staff Report with academic research as well as the experiences of other jurisdictions that have already completed their own transitions to IFRSs. Accordingly, the analysis should also be of use to other jurisdictions that are evaluating whether and how to adopt IFRSs.

While acknowledging the challenges, the analysis conducted by the IFRS Foundation staff shows that there are no insurmountable obstacles for adoption of IFRSs by the United States, and that the US is well placed to achieve a successful transition to IFRSs, thus completing the objective repeatedly confirmed by the G20 leaders."

In the meantime, while we wait to see if the US will adopt the IFRS XBRL taxonomy…the FASB is moving forward with the US GAAP Financial Reporting Taxonomy.  The 2013 version was made available on December 21, 2012 (Eyden, 2012).  The Financial Accounting Foundation (FAF) is responsible for maintenance of the taxonomy.  Working with the FASB, they keep the taxonomy up-to-date with changes in US GAAP…”identifying best practices in taxonomy extensions, and technical enhancements” (Eyden 2012).

Is it possible to have two taxonomies?  While yes, it is physically possible to have two taxonomies…the real question is do we (as a global market) want two taxonomies?  I mean, if the whole goal here is to be able to compare companies ‘apples-to-apples’…then don’t all companies need to be reporting the same stuff in the same manner?  In my opinion, the problem isn’t that a universal language for reporting can’t exist…it’s that the IFRS and US GAAP have too many differences in what the basic standards are which leads to differences in financial reporting which means that setting one standard is difficult.

 

References

Brands, K. (2010, October). The Buzz about XBRL and Interactive Data. Strategic Finance Magazine, 64-65.

Brands, K. (2011, October). A Tale of Two Taxonomies. Strategic Finance Magazine, 56-57.

Brands, K. (2012, September). Update on the IFRS XBRL Taxonomy – 2012. Strategic Finance Magazine, 64-65.

Brands, K. (2012, December). The SEC and Interactive Data. Strategic Finance Magazine, 56-57.

Byatt, M., & Welsh, C. (2012, October 23). Trustees publish IFRS Foundation Staff Analysis of SEC Final Staff Report on IFRS. Retrieved from http://www.ifrs.org/Alerts/PressRelease/Pages/IFRS-Foundation-Staff-Analysis-of-SEC-Final-Staff-Report-on-IFRS.aspx

Eyden, T. (2012, December 24). US GAAP Financial Reporting Taxonomy Now Available. Retrieved from http://www.accountingweb.com/article/us-gaap-financial-reporting-taxonomy-now-available/220562

Financial Accounting Standards Board. (2012, April 5). International Convergence of Accounting Standards - Overview. Retrieved from http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1176156245663

IFRS Foundation. (2013, February). Convergence between IFRSs and US GAAP. Retrieved from http://www.ifrs.org/Use-around-the-world/Global-convergence/Convergence-with-US-GAAP/Pages/Convergence-with-US-GAAP.aspx

Kaiser, J. (2012, December 19). A Spotlight on the FASB’s and IASB’s Projects. Setting the standard, DOI: www.pwc.com/us/jointprojects

Pryde, C. (2012, 0419). The Use of Technology to Better Target Benefits and Eliminate Waste, Fraud, and Abuse. Prepared Testimony to the Subcommittee on Human Resources, Washington, D.C.

Ramin, K. & Reiman, C. (2013). IFRS and XBRL: How to improve Business Reporting through Technology and Object Tracking. John Wiley & Sons, Ltd.