A new standard file format, Extensible Business Reporting Language (XBRL), for submitting financial reports to the SEC in the United States is being mandated for June 2009. A similar standard is currently in effect in Europe and other jurisdictions. This standardization initiative requires that all terms in all financial reports must be submitted in an approved taxonomy, so comparable terms are used across different companies.

While this is another task for companies to master, it has some positive benefits. The main one being that financial analysis will be easier to perform when comparing different companies. But, it can also be used within multi-entity companies as an internal standard of reporting and as an error-free method of exchanging documents between systems and users. This imposes an accepted uniform taxonomy for existing and new entities as they arrive.

As with any new compliance requirement the process of preparing the submission of XBRL files should be documented and certified as part of proper governance. The quality of the XBRL document does not depend on the tags, but on the process that ensures their conformity to the standards. This paper discusses the pitfalls of using manual steps that are currently common for transposing financial documents into compatible XBRL files, looks at the advantages of substituting an automatic process, and illustrates that process.

The ability to report from an XBRL file so a company can check their own submissions and analyze and compare them with other companies is also becoming an important new capability. Both the creation of, and reporting from XBRL, are functions performed by the same new tool described in this paper.