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XBRL: The Inside Story

After years of development, data tagging seems little more than a minor financial-reporting requirement. Yet some now say it could transform internal finance operations. Is this XBRL's true calling, or just more hype?

That, said Bob Laux, the software giant’s senior director of financial reporting, is because vendors of enterprise resource planning and general ledger systems have not yet embedded XBRL functionality designed specifically for internal reporting purposes.

“In our opinion, these systems just don’t make it as efficient as it needs to be,” Laux told CFO.com. “Compared to the amount of information that’s going to be reported externally, tagging all the information that a company has available internally will be quite a daunting task. It needs to be made easier — and I think it can be, through the software companies. So we’re looking at it, but like other companies, we haven’t implemented it.”

XBRL’s potential for internal efficiency “is pretty large,” added Laux. “It’s a daunting task, but not so daunting that you just ignore it. But I think it’s going to take a few years.”

According to Laux, “there’s been maybe a lot of hype [from the XBRL community] and an overpromising of what can be done. I’m a strong advocate and think these things can be done, but they take time.” For the software companies, he noted, there is an understandable Catch-22 factor: there’s little interest in building the capabilities until demand increases, but there may not be much demand until the tools are created.

Gartner’s Van Decker agrees. “Companies are waiting because the ERP vendors have not seen the demand,” he says. Both Oracle and SAP, he notes, have formed partnerships with UBMatrix, an XBRL taxonomy firm. However, he says, “The XBRL capability they’ve inserted has been primarily for external reporting. They’ve tacked it on to the financial consolidation as opposed to building taxonomy values into the ERP and general ledger systems. The management reporting perspective is pretty much being ignored.”

The Gartner report counseled companies to “monitor the market closely for developments in technologies that embed XBRL into business applications.”

Asked to respond to Laux’s and Van Decker’s comments, James Fisher, SAP’s senior director of solution marketing for enterprise performance management, wrote in an e-mail: “Aside from regulatory reporting, there are essentially no legal requirements for management reporting. This is a likely reason why XBRL adoption outside of financial statements is low. With SAP BusinessObjects XBRL Publishing, users can tag any data from any part of SAP, and create taxonomies as needed for internal reporting purposes.”

Oracle, also asked to comment, did not respond by press time.

Meanwhile, a Gartner survey of 256 companies portrayed the low demand: less than 5% said they currently plan to use XBRL for internal reporting purposes. About half of the surveyed companies were privately held, and they were even less likely to report interest in internal usage, Van Decker says, though he notes that the benefits would be equal for public and private entities.

Even for public companies, the benefits would be more recognized if they took on the task of implementing XBRL for purposes of their public filings themselves, rather than outsourcing it to their financial-statement publishers, according to Van Decker. “I think public firms that are actively involved in XBRL projects will see the advantages for management reporting,” he says, “but if they just let the publisher handle it, they won’t see that opportunity.” About 90 of the 100 firms in the SEC’s voluntary adoption program took the outsourcing route, according to the Gartner report.

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