Beginning our XBRL journey

Well AMI one can say so. But if you take a bit more detailed view on how business information is being processed nowadays you will see disparate internal reporting systems, "spreadsheet hell" problems, different (often even to the point of conflicting) reporting requirements from public institutions and many more issues that companies face today. How could potentially all those different entities including software vendors and intermediary organisations like auditors efficiently exchange business information if there are multiple formats? Well they cannot. That is why XBRL was created - to enable efficient and precise transfer and processing of business information. If you are interested in how it evolved please check the history of XBRL. The slide below illustrates the change that XBRL is introducing:

Now you are probably wondering how XBRL is going to do that? Well that should be simple to explain. The missing link relates to technology. Business experts who developed XBRL decided that the solution lays in introduction of a standard communication method and that there should be two components available to enable processing of business information: the language in which information is being exchanged and the message itself. Now AMI I would like to ask you to take a look at the diagram below:
Business information should be understandable to two disparate systems shown on the picture. In XBRL world this is achieved through a common definition of business reporting concepts (or elements) like for instance a value of Fixed Assets. Both systems have to use the same technical definition of Fixed Assets (knowing your proficiency in accounting AMI you can already think of characteristics like "Fixed Assets are reported at a particular point of time" or that "they have a debit accounting nature"). All the technical definition of what Fixed Assets are and how should they be understood by programs, systems and computers is stored in the XBRL taxonomy.

Ok AMI so we have the definition of Fixed Assets but your accounting knowledge tells you that Fixed Assets can be calculated differently under the US GAAP rules or under the IFRS principles. Well that is true and in the XBRL world you will find a variety of taxonomies according to different reporting standards. Nevertheless there is still one common denominator for all taxonomies - they are created according to a single technical, language commonly understandable by programs - XBRL.

Having the taxonomy defined we can already put the real business data into work. This is achieved through creation of XBRL reports called the XBRL instance documents. In this document we can define what is the business entity reporting, what is the reporting period, what currency is being used and last but by no means least what are the values of specific business reporting concepts. Becuase XBRL instance documents refer to the specific XBRL taxonomy a program or system that processes this data can "understand" what is its nature and apply selected algorithms.

I hope that now you should already have a basic understanding of the underlying principle of XBRL and the way this standard works. If you would like to learn more AMI please check the advanced section below and our resources.

More advanced XBRL topics

I really like your attitude AMI :) So let's start with a bigger picture framework of the XBRL standard. Now you should know AMI that XBRL is not a concept developed without relation to existing works. Actually the standard builds on top of a reliable, well known and widely adopted standard for general description of data called XML (eXtensible Markup Language). XML allows for semantical, meaningful description of the nature of data (in techie world this is called definition of metadata). Based on that XBRL allows for semantical definition of business-oriented metadata. I know, I know this sounds extremely techie but please take a look at the diagram below:
The foundational technical component is the XML specification developed by the W3C consortium, describing general syntax of the XML language. Using this language, the XBRL International consortium developed the XBRL specification, which defines the building blocks of business reporting syntax. Next any regulator, XBRL jurisdiction or any business entity can use the XBRL syntax free of charge to define the XBRL taxonomy which we already understand as catalogue of business concepts according to a specific reporting or accounting standard. Lastly reporting entities use the taxonomy to create the XBRL instance documents. The XBRL specification describes technical syntax for both, XBRL taxonomies and XBRL instance documents.


Having the bigger picture presented we can dive into learning what is really defined in the XBRL taxonomy? Well there are several things and explaining all technical aspects would probably take us a book but let me present a few key components of the XBRL taxonomies.

First the taxonomy allows for definition of all loose business concepts in a container called schema. In the schema file we define major characteristics of the concepts including its name, debit or credit nature, natural reporting period (at a point of time or for a period), data type (a string, date or monetary item) and a few more techie ones. However loosely defined concepts even with such characteristics are still not sufficient for a semantically-rich definition. Therefore the taxonomy has also layers connecting the concepts and showing some relations between them and between other technical resources. In XBRL taxonomies we can find five most common layers (called linkbases): presentation, calculation, definition, label, reference and a few more advanced including formulas and generic linkbase. Well AMI you wanted to rock so here you are :) You can probably guess what does the presentation linkbase do: it shows hierarchical relations between concepts (for instance Fixed Assets belongs to the Assets family). The calculation linkbase allows for definition of simple (addition or subtraction) mathematical relations between concepts. The definition linkbase has some specific roles but for now it will be sufficient for you to remember that it is important for definition of multidimensional breakdowns (like Profit and Loss reported according to "by product" breakdown or "by geograpical area" breakdown). The label linkbase allows for adding multilingual or more user-friendly and human-readable labels to concepts. The reference linkbase allows to tie the business concept with the underlying legal acts. Wow now you learned quite a few things about the architecture of XBRL taxonomies. But I want to bring your attention to one more linkbase: formulas. This fairly new mechanism allows for creation of advanced logical and mathematical business rules between concepts. With the formulas linkbase the XBRL taxonomies describe not only the structure of business data but also allows for detailed data-quality checks as well as powerful internal control procedures to be built into the taxonomies.

Lastly I would like to briefly tell you about an interesting feature of XBRL. It allows not only to create XBRL taxonomies but also to adjuts its business and technical scope to fit into specific reporting entity requirements. Please take closer a look at the concepts related to the above-mentioned 'by product" breakdown. The names of particular product lines or products are specific for almost every organisation. Of course there are international classifications of industries but very often the business entity may wish to describe their financial concepts according to specific products. Also if you are familiar with the International Financial Reporting Standards you know that they base on principles and thus allow for a significant flexibility in financial reports creation. In order to accommodate such requirements XBRL has a built in mechanism called extensibility.

I don't want to bore you with all the technical details but in general the XBRL taxonomy can be extended which means that its business and technical scope can be modified to fit in specific reporting requriements. Certainly there are reporting domains like banking supervision where extensions of taxonomies scope may not be desired from the functional perspective but in importantly the extensibility is inherent in XBRL and you can use it to adjust some international taxonomies to your requirements.

XBRL for internal reporting

Don't worry AMI I have not forgotten about it. If you have had an occasion to read our Strategic Finance magazine you might have noticed a column on something called XBRL Global Ledger. XBRL Global Ledger (or XBRL GL) is a specific XBRL taxonomy designed to enable description of data from general ledgers. Its architecture bases on the XBRL specification and allows for definition of metadata of journal entries which can later be populated with particular accounts values (and other supportive information). This allows internal systems to communicate such information in a computer-understandable manner. Importantly XBRL GL has a built-in mechanism to link to external reports. That in turn allows for drilling external reports and find all the underlying general ledger accounts. There are several uses of XBRL GL and frankly this will be our focus in the entire Lab so I will stop here and invite you to check our case studies section.