Federal insurer turns to XBRL to provide a standard for banks to report financial data.
About half of the 8.500 banks that report quarterly earnings to the Federal Deposit Insurance Corp. do so with mistakes intact.
The Washington-based FDIC, along with the Federal Reserve Board and the Office of the Comptroller of the Currency, are trying to correct that problem and make it easier for banks to understand the FDICs complex reporting requirements. They are engaged in the Call Report Modernization initiative, which will require all banks by the end of 2004 to file financial reports using XBRL (extensible business reporting language), an XML variant targeted for use in financial reporting.
"One of the things about XBRL is that any company can have access to the data standard and incorporate that [into their IT systems] and they dont need a license ," said an FDIC official who could not be named. "If youre using an IBM format or a SQL format, there are costs associated with that. This is open and free for anyone to use."
To this end, XBRL.org standards body in charge of the specification this week at the XBRL International Conference in Seattle rolled out two updated taxonomies: Commercial and Industrial Generally Accepted Accounting Principles taxonomy and a Banking and Savings Institution GAAP taxonomy that reach into new financial sectors.
The first taxonomy is intended to provide detail-level accounting terms that will allow commercial and industrial-type companies that conform to U.S. GAAP to tag financial statements in XBRL. The latter taxonomy is intended to provide detail-level accounting terms that will allow banking and savings-type companies that conform to U.S. GAAP to tag financial statements in XBRL.
XBRL.org also unveiled an updated Candidate Recommendation for its XBRL 2.1 specification that clarifies and enhances the way in which business reporting software can produce and consume XBRL-tagged data. Changes in Version 2.1 will ease implementation of XBRL-enabled software and will improve the ability of developers to create platform-independent XBRL applications and tools, said officials of the group.
All this ties in nicely with the FDICs requirementsand goals for XBRL.
"We are hoping XBRL becomes the vocabulary that everyone uses to communicate financial information in the futureits going to be that much easier," said the FDIC official. "As it is now everyone speaks different languages. We all think we are saying the same things, but there are nuances that can result in communication errors. ... I love humans but they make errors. One of the things XBRL will do is move data from entity to entity without having to be touched by a human hand. Right now, [banks] have someone re-entering all this stuff."
Currently, a good deal of the financial data the FDIC receives from banks is cleaned up after the fact and the FDIC spends a fair amount of time on the phone or faxing documents to try and clean up the reports.
"Weve got accurate data but it takes a lot of scrubbing to get there," said the FDIC official. "So were changing the process so that scrubbing is done at the bank, and not by the regulators.
"I cant wait until we implement this [so] we dont have to call any body back," he added. "After we have a few quarters under their belt by the end of 2005 I wouldnt be surprised if we have to call no more than a few hundred banks for each quarter."
Edgar Online Inc., which provides access to financial information collected by the Securities and Exchange Commission on more than 12,000 public companies, is already a convert to XBRL. The company this week announced that it is working with Microsoft Corp. on new software, the Microsoft Office Solution Accelerator for XBRL, to help users more easily author and analyze financial documents using Microsoft Word and Excel.
Click here for more information on the Edgar Online and XBRL connection.
"This is a revolutionary change," said Liv Watson, director of XBRL at Edgar Online, of Norwalk, Conn. "Anyone who creates financials, they are very comfortable in the [Microsoft] Office environment, using Word and Excel. With this [partnership] they will be able to [create financials] as save as XBRL. Now it can be in their environment for trend analysis [with the ability] to bring in external data. That data will travel with it, just like a UPC code travels with a product."