Electronic data is increasingly being shaped by the 4 Vs – Volume, Velocity, Variety, and Veracity. Corporates and individuals have never had so much access to information at their fingertips. And while this throws up exciting possibilities as more data is democratized and made available, the secret sauce lies in being to organize and managing the data to make it discoverable and usable.
Here the use of data standards such as XBRL (eXtensible Business Reporting Language) plays a pivotal role. It would not be an understatement to say that XBRL is the next best thing to sliced bread in the world of business information. Initially conceived more than a decade ago, the standard has matured significantly with greater adoption around the world.
Let’s look at what makes XBRL such an attractive option for exchanging electronic information
1. It is Comprehensive
The XBRL standard is comprehensive and can accommodate various domains of business reporting. And while financial and business information seems like a natural fit, there are many examples of XBRL implementations across varied domains such as Operational and Performance Reporting, Sustainability Reporting, Transaction-Based Reporting, and Internal Reporting. Several regulators/government agencies have implemented XBRL including the Securities Exchanges Commission in the US, the European Banking Authority, the Reserve Bank of India, and the Financial Services Agency of Japan.
2. Delivers Cleaner Data
One of the key reasons for XBRL’s popularity is its ability to define business logic and validation rules, thus making the data cleaner. This is made possible through many hooks that the XBRL standard offers, and which are used by many implementers when they create XBRL-based taxonomies. For example, in an XBRL taxonomy, rules can be defined to check if mandatory fields are reported, or if the amount reported for an item tallies with the sum of values reported for its constituent items. Not only this, but validation rules can also be set to check if values are consistently reported across periods, and/or if expected data formats are followed or not. These in-built business rules help in validating data during the creation of the report itself, rather than after it is received by the regulator. This ensures quality output.
3. Provides Distinct Definitions
The XBRL standard offers a distinct way of reporting concepts along with its metadata. This helps in a clear understanding of reporting requirements. For example, if a concept like ‘Loans and Advances’ is to be reported, the XBRL framework allows for several attributes that can be used to define the concept, such as:
• The data format of the expected value – is it a number, text, or per-share value, etc.
• The nature of expected value – is it a ‘stock’ concept (available ‘on a particular date’) or a ‘flow’ concept (
a value ‘between two dates’)
• Documentation of its definition
• Guidance on its measurement and disclosure
• Link to authoritative reference e.g. a legal regulation or directive
4. Ability to Define Various Data Models
The XBRL standard allows various options to define the data model. Depending on the structure and usage of data, modeling techniques can be chosen. A simple list report, for example, can be modeled in a hierarchical structure, and for more complex requirements where a firm wants to report sales by geography, and also by business line, and both views tie up to total sales, various degrees of dimensional modeling can be worked out.
Since XBRL provides a standard structure to data and allows multi-dimensional models, querying and analysis become much easier. The granular data model of XBRL empowers rich data analysis, thus adding value to the data consumption experience.
5. Easy Data Rendering
XBRL also offers multiple features to render information in a human-friendly format. The cherry on the cake is its multi-lingual rendering capability. This helps XBRL documents reach a wider audience across the globe. The XBRL taxonomy can have reporting labels in English, Japanese and Spanish, or any other language of choice. And these labels make XBRL data instantly consumable without additional translation.
6. Open Standard
One more advantage in favor of XBRL is that it is an Open Standard. A large resource base, both in terms of software and domain experts, has already been built over the years and is available for use. The maintenance and enhancement of the standard, therefore, are not restricted to specific providers.
With more countries adopting XBRL, the standard has started growing stronger and more refined. More individuals, firms, associations, and governments have started to contribute to testing the standard and making it more robust and meaningful to their daily use. And today, it has evolved to a point where XBRL is the preferred standard for reporting business information across the world.