PwC IFRS blog

XBRL – coming soon to a financial report near you?

What do you know about XBRL? Many financial executives may have first heard of it a few years ago but dismissed it as something more relevant to their IT-savvy colleagues. So what is it and why should you care?

XBRL (or Extensible Business Reporting Language) is a standardised, international internet ‘language’ for business information. In the same way that HTML revolutionised the internet, allowing ordinary people to share and access information using a browser, XBRL standardises business information descriptions so that management, regulators, analysts and others can more easily access, analyse and reuse business information. XBRL is similar to the bar code that you find on retail goods. In exactly the same way that a bar code provides standardised product descriptions, XBRL provides standardised business information descriptions. Just as with HTML, financial executives do not really need to understand the underlying technology; they need to know what XBRL means to their processes.

As I have mentioned in previous postings, the SEC’s proposed roadmap for the use of IFRS by US companies lists improvement in the ability to use interactive data for IFRS reporting (ie XBRL) as a key milestone. But XBRL is relevant outside the US too.

In May, the European Parliament agreed that the European Commission should support the introduction and adoption of XBRL for EU regulatory filings and business reporting.  In June, the IASB released a complete translation of IFRS as at January 2008 into XBRL; it also released a guide on the subject in August.

More recently, India has joined the growing list of countries looking to encourage the use of XBRL, with the Securities and Exchange Board of India, the Institute of Chartered Accountants of India, the Bombay Stock Exchange, the National Stock Exchange and the Reserve Bank of India all supporting its use.

Did you know that the governments of Australia, Belgium, Canada, China, Denmark, France, Germany, India, Israel, Japan, Korea, Netherlands, Norway, Singapore, Spain, Sweden, Thailand, United Kingdom and United States all have mandatory or voluntary XBRL filing programs? XBRL is clearly not just for US filers, and it is not just for external reporting.

Remember when the bar code was first introduced?  Many retailers were reluctant to embrace the new technology under the impression that it would increase their costs and make it harder for shoppers to understand and compare products.  Views have moved on a great deal since then.

Businesses have a choice to make about XBRL, but is now the time to make it? Can XBRL enable businesses to leverage supply chain standardisation and address some of their pervasive process problems, or is XBRL still a solution in search of a problem to solve?

As always, I am interested to hear your views, either by commenting here or by email.

IFRS as a global language – a tentative step forward

The past few months have represented a tumultuous chapter in the history of IFRS reporting. Criticisms of the IASB have come from all directions, and there has been some concern that IFRS’s future as the single global accounting language might be in doubt. Although the SEC voted in August to seek public comments on a roadmap for the potential adoption of IFRS in the US, some have seen the delay in the publication of final proposals for comment as a sign that US views of IFRS might be changing.

But earlier this month, significant steps were taken towards IFRS adoption, not just in the US but elsewhere in North America. On 11 November, the Mexican Comisión Nacional Bancaria y de Valores, together with the Mexican Accounting Standards Board, announced that Mexico would adopt IFRSs for all listed entities from 2012, with early adoption permissible for some entities from 2008. Also on 11 November, the Canadian Accounting Standards Oversight Council reconfirmed its support for plans to require Canada’s publicly accountable entities to follow IFRSs as issued by the IASB by 2011. Then on 14 November, the SEC issued its long-awaited roadmap.

The key provisions of the SEC’s roadmap are similar to those I described in a previous posting, including the milestones against which progress will be evaluated before IFRS reporting will be mandated. These include:

• Continued improvements to IFRS.
• Accountability and independent funding of the International Accounting Standards Committee Foundation.
• Enhanced ability for interactive data (XBRL) to accept IFRS information.
• Sufficient progress in IFRS education and training in the US.
• Experience of eligible IFRS adopters

Assuming the SEC makes a decision when it reconvenes in 2011, the roadmap contemplates a phased transition to IFRS beginning in 2014 for large accelerated filers, 2015 for accelerated filers and 2016 for remaining public companies.

So does this represent a ringing endorsement of IFRS? Positive statements about IFRS adoption by three countries in only a few days are surely a good sign. But recent events cast a shadow. The SEC has made it clear that “any decision we may take to expand the use of IFRS to US issuers would necessitate our evaluation of whether global developments support the assertion of IFRS as the single set of high-quality globally accepted accounting standards that is applied consistently across companies, industries and countries”.

I would be interested in your thoughts, either by commenting here or by email.