January 24, 2005
(Reuters)
The day when stock investors scan corporate results with computer software to make immediate buy-and-sell decisions may be close at hand.
After agonizingly slow progress, a computer language of business reporting called XBRL appears to be on the verge of wider adoption, its backers say. XBRL could have major implications on the speed at which hedge fund managers and other investors make trading decisions, making accounting shenanigans more readily apparent and potentially increasing stock price volatility.
XBRL, which stands for Extensible Business Reporting Language, consists of thousands of "tags" that correspond to items on financial reports, including balance sheets and income statements, making corporate filings understandable by a computer.
The technology has won support from major accounting firms and investor relations groups and has even gained a preliminary nod from the U.S. Securities and Exchange Commission, which has proposed a voluntary program for XBRL. (Reuters Group PLC is also a backer of XBRL.)
Yet after five years of pushing, only a handful of companies have committed to publishing their results in XBRL. One reason may be a lack of easy-to-use tools for creating the language.
On Thursday, PR Newswire, a major distribution agency for corporate news releases in the U.S., will try to address that issue, announcing a plan to offer its clients a tool to turn press releases written with Microsoft Office into XBRL in a matter of hours. It will also send links to XBRL documents along with the press releases it sends.
BusinessWire, another major press release publisher, has also made strides with XBRL, turning to a partnership with Edgar Online, a Web site for SEC filings.
PR Newswire Chief Operating Officer Dave Armon said his clients are eager to explore XBRL. "A lot of the companies are looking for a way to break out and show that they're more transparent or willing to try new things," he said.
Investor relations departments, which handle financial reporting, still tend to be slower adopters of technology. They have also been occupied with other initiatives, such as complying with Sarbanes-Oxley regulations, before taking on XBRL.
"This whole business reporting landscape is something that hasn't been touched technology-wise for decades," said Rob Blake, former XBRL manager for Microsoft Corp., which has been one of its biggest backers. "All of us knew this wasn't going to happen overnight."
Blake, now vice president of marketing for Rivet Software, the Denver-based software company partnering with PR Newswire, said he expects XBRL to be increasingly adopted over the next 12 to 18 months.
Last September, the SEC proposed a voluntary plan to allow companies to submit financial filings using XBRL beginning with the 2004 calendar year-end reporting season.
The commission sought feedback on the proposal through Nov. 1. However, an SEC source said, "approval of the plan is not imminent." A delay in approval would cast doubt on whether the original timeline for having the program in place for the 2004 annual report filing season will be met. For companies that close their books on Dec. 31, the deadline for filing an annual report, or Form 10-K, is mid-March.
The SEC has said it hopes the new format will help users search the filings database, extract and analyze data, perform financial comparisons within industries and speed up the commission's review of filings. The new tagged data format also allows for the automatic exchange of financial information across various software platforms, including Web services, the SEC said in its September announcement.
Using a tagged financial filing, an analyst could easily transfer the data to a Microsoft Excel spreadsheet, for example, rather than having to read the data in text form or retype the information, according to XBRL advocates Microsoft, Morgan Stanley, PR Newswire and Reuters, which have joined to promote the new technology.
KPMG International recommends that its clients adopt the new format, saying it benefits not just regulators but the reporting companies as well. In a 2004 report, the Big Four accounting firm said XBRL is becoming relatively simple and its use will save companies time and money at the end of each reporting period.
In addition to KPMG, Ernst & Young LLP, PricewaterhouseCoopers LLP and Deloitte & Touche LLP submitted comments to the SEC in support of the voluntary XBRL filing plan.
The commission first began accepting filings regarding insider stock transactions in XML, from which XBRL is derived, in 2003.