XBRL is an offshoot of XML, which is a markup language. Similar to the way HTML allows you to markup language for the internet, XBRL allows you to markup business data. So, what does XBRL stand for? XBRL stands for Extensible (abbreviated as X) Business Reporting Language, and it stands as the current global standard for exchanging business information between companies, regulators, and investors. Because it enables structured, machine-readable financial data, XBRL ensures accuracy, comparability, and efficiency in reporting.
What is an XBRL Filing?
XBRL is a format for classifying information. It relies on taxonomy, in which a set of elements are defined, similar to the way words are defined and classified within a dictionary. The taxonomy not only defines the elements of classifying information but the relationships among those elements.
For example, "cash" is defined within the XBRL taxonomy, but so are the relationships among cash and other terms that encompass cash, such as "assets." The "extensible" part of XBRL acknowledges the fact that the classification system is incomplete and, as such, may be added to by companies as they markup documents for filing with the SEC. This ensures consistency in meaning across reports, making it simple for analysts, regulators and investors to interpret data in the same fashion. Recent SEC updates have aligned this taxonomy with GAAP and IFRS taxonomy changes to keep it as up-to-date as possible.
What is XBRL Tagging?
XBRL is applied to a document through tagging, which operates in much the same way as applying a tag on social media. Adding the right tag to the right element in the source documents makes the snippets of information contained within each filing searchable, sortable, machine-readable, and classifiable. Tagging a document with XBRL requires the use of software that allows you to mark or tag elements with the right classification (i.e., to denote cash and assets as such).
How does the taxonomy work? This is only one of the important questions when it comes to understanding and applying XBRL tagging and its newest iteration, iXBRL, which integrates into human-readable text to provide accessibility and transparency for investors and machines.
Who Uses XBRL — and Why It Matters Beyond Compliance
Although XBRL is required by the SEC, the demographics of XBRL users is far wider than the pool of businesses that complete SEC filings.
Business filers are one user group for the markup language. Analysts and investors make up additional user groups. Whereas data collection and analysis previously required a significant investment of time and resources, the extensible data format significantly streamlines the time required to sort, filter, analyze, and review business data.
Consider that previously, analysts would need to pull a report and visually scan the file for a keyword they wished to track, such as the tax liability of foreign-earned income. Using iXBRL, research analysts can search for the tag associated with tax liability of foreign-earned income and generate accurate results in a fraction of the time.
Many investment firms also rely on XBRL to review and display relevant business data for their end users. Their clients — individual investors — are able to review data nearly instantly, versus the time lag associated with HTML.
iXBRL vs. XBRL
While XBRL has been around since 2009, iXBRL is relatively new. The “i” stands for “inline,” meaning that XBRL tags can now be embedded inline rather than appended to the document. Inline XBRL tagging is not only easier, but it also reduces inaccuracies.
There are other technical differences to note, such as the way certain tags are closed or how certain HTML aspects aren't supported within iXBRL. Since users are generating iXBRL with software rather than hand-coding it, they shouldn’t need to memorize these slight technical differences in order to generate the iXBRL language required by the SEC.
Feature | XBRL | iXBRL |
Machine-readable | Yes | Yes |
Human-readable | No | Yes |
Inline filing with SEC | No | Yes |
Key Benefits of XBRL and iXBRL
Since XBRL can be read by machine, computers can automatically analyze and review data without human input. There are significant time-saving benefits to this ability. Among the many benefits of XBRL in terms of internal and external reporting are:
Enhanced accuracy and consistency
Faster report preparation and review
Greater transparency for investors and regulatory bodies
Simplified data sharing across systems
Automated error detection and correction
Although XBRL has been mandated for years, the data hasn't been as useful as the SEC initially hoped due to data quality issues. In making the inline version of XBRL available, the SEC hopes to reduce the data quality issues and improve the quality of business data within corporate filings. iXBRL acts as a bridge between XBRL and HTML, meaning that it can reconcile differences in the markup languages in order to render XBRL data in website format, where people can easily review it. In most cases, it is cheaper and easier to work within iXBRL, because HTML and XBRL markup languages can be reviewed at the same time.
While most of these benefits affect filers, there are also benefits to the end user and to the SEC. Thanks to iXBRL, the data becomes more transparent and it can easily be searched because human-readable and machine-readable formats are merged. Thus, it is more likely that investors and analysts will be able to use the data when making investment decisions.
Challenges in XBRL Implementation and How to Overcome Them
The complexity of XBRL reporting can make implementation extremely challenging for organizations that don't have a strong handle on the concepts. One of the many factors that contributes to this confusion is the lack of standardization across various XBRL-based platforms. This means that XBRL filing can become muddled and confused as errors and discrepancies arise during the exchange of data. One potential solution to this challenge is to adopt certain common structured data exchange standards, which can make sharing information in the XBRL format much more streamlined and compatible across multiple systems.
The intricacies of XBRL filing also can lead to resistance within your organization as users struggle to become comfortable with the ins and outs of the taxonomy. To ensure all your stakeholders understand and embrace standard and inline XBRL protocols, you may need to implement training and development programs to help bring them up to speed and make sure they're aware of the expectations and procedures. Cloud-based platforms with pre-validated taxonomy libraries also can make the process simpler, as well as AI-driven review tools for anomaly detection and consistency checks.
How DFIN Simplifies XBRL Compliance
Understanding structured data requirements, such as XBRL, is only one step toward using the markup language when filing. You still need to apply the language, generate business filings, and transmit to the SEC.
Fortunately, DFIN helps companies all over the globe handle the complexities of financial reporting in today's business environment. DFIN ActiveDisclosure offers a cloud-based, collaborative, financial reporting solution, that securely supports iXBRL tagging, taking the complexity out of compliance. ActiveDisclosure can help with:
Built-in validation and compliance checks
Secure workflow collaboration
Integration for peer benchmarking and insight generation
Expert service support from DFIN professionals
