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XBRL As the Escape From Spreadsheet Hell?

In a previous role, I was responsible for, among other things, creating business cases to justify future expenditures as well as for budgeting for forward fiscal years. My colleagues and I would consistently send spreadsheets back and forth with financial projections, expense forecasts, and other financial data. Usually, each user would take information from just portions of a received spreadsheet, drop it into another spreadsheet, do calculations, and e-mail the updated spreadsheet back. Eventually, version control and data integrity became issues.

We have seen cases in the financial services industry where reporting of assets, returns, fees, and positions occurs through the use of a spreadsheet-based system. Often, data entry occurs in multiple spreadsheets for the same information, and then that information is converted to some other form besides a spreadsheet for consumption. These cases, particularly where financial reporting goes to consumers outside of the company, are crying out for the use of XBRL.

XBRL logo

XBRL, or eXtensible Business Reporting Language, is a language for the electronic communication financial and business information. It is a type of XML language, a standard means of communicating information between users. By tagging information with commonly used business standards, such as EBITDA, users of financial information can send that information back and forth with each other without having to define and find where in the document the information is located.

The use of XBRL as a means of transmitting financial information provides several advantages:

  • The ability to define taxonomies

While certain standards such as GAAP are common, there are others which may be subject to individual definition. Having a common playbook of calculation standards, for example, will help to ensure that definitions are agreed upon beforehand and are stored in a common location which is easily referenced.

  • Reduction of data entry

By using XBRL to enter information, subsequent users of the information can come to a common repository where the data is stored and defined to get the information rather than needing to enter it into their own applications or spreadsheets.

  • Integrity of financial data

By agreeing to common definitions for both types of data and calculations as well as having a single place of entry for financial data, users have a greater likelihood of receiving acceptable data because the possibility of human error has been reduced.

  • Consumption by other financial applications

Applications ranging from EDGAR to Microsoft Excel and Access can utilize XBRL-tagged data. The same does not necessarily hold true for spreadsheets or other custom applications.

The Federal Financial Institutions Examination Council issued a report on the benefits of XBRL-based reporting. The listed benefits included:

  1. Cleaner data
  2. More accurate data
  3. Increased productivity, and
  4. Greater efficiency

If your company is stuck in spreadsheet hell, not only are your employees not as productive as they could be, but the data your clients rely upon may not be entirely accurate. Perhaps its time to look at shifting to a XBRL standard before you get left behind.