Section Two:  XML and the Financial Community

The Internet is a wonderful tool for business. Over the last few years, businesses have flocked to the Internet to sell products, assist customer relations, exchange information and much more. As businesses woke up to the potential of the Internet, Web pages utilizing the hyper-text markup language (HTML) flourished. Businesses seeking to present information to customers and business partners found publishing HTML rendered Web pages significantly added to their ability to communicate. Detailed information was now available to customers and business partners at the click of a mouse.

Financial departments seized the opportunity to present financial information directly on Web sites. Starting with the re-production of annual reports, publicly traded companies found new ways to communicate with their company’s stakeholders.

Companies soon found that presenting annual report information and Securities and Exchange Commission (SEC) documents such as the 10K report on the company Web sites was a good idea. Stockholders, security analysts, and potential investors liked the convenience of using the Internet to look at information that previously was not available except in printed form. In fact, the SEC recently began requiring companies to submit various financial reports in a form that the SEC could use to publish directly onto the Internet. Several firms such as FreeEDGAR.com and Edgarscan.com developed methods of taking SEC data from EDGAR and creating customized reports. The reports generated from the online EDGAR services provide data that could be loaded into spreadsheets, databases and other software tools for further processing.

Enter XML and XBRL

Extensible markup language (XML) allows users of electronic data to significant improvements over data obtained by using HTML. HTML is a flat, one dimensional markup language that specified how information will be presented. The language does not have the capability of carrying contextual information. For example, an HTML file can display a financial statement but cannot tell the user how the numbers were prepared. In contrast, XML provides the user with the ability to both display the numbers and to give information about the context in which the numbers were created. The ability to simultaneously display and reveal context of financial information is one of the primary motivations behind XBRL.

Articles for further Study:

Journal of Accountancy "The X-ML Files" A great article detailing what XML is and how it can be used to produce financial statements.  The article was written by Charles Hoffman, the person who led the early charge to develop XML-based financial statements.  Additional help came from Christopher Kurt and Richard J. Koreto.  Charles continues to work very hard on XBRL, helping put the finishing touches on the July 31, 2000 First Specification for Financial Statements.   

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Copyright 2008 Saeed Roohani, XBRL Education