Systems integration and professional services companies such as PricewaterhouseCoopers LLC are urging their banking and financial services clients to use emerging Extensible Business Reporting Language-enabled software not just for reporting to external agencies but to sharpen internal business reports as well.
The Federal Financial Institutions Examination Council is requiring that U.S. banks by the end of this year submit their quarterly reports tagged using XBRL metadata taxonomies. It joins more than two dozen regulators and other public authorities worldwide that have adopted such policies.
Less than four years old, XBRL describes a standard way for reporting business information so that when companies aggregate data from a variety of data warehouses to create reports, the information can be automatically integrated and validated as correct without human manipulation.
Without this automatic integration and validation, the flow of vital information through a business is slowed down at every step by clerks and managers trying to get numbers laid out in different formats to line up.
"Aggregating information is a core competency of financial services companies; it is very important to have the correct aggregated information to assess the risk on borrowers and policy holders," said Mike Willis, a partner at New York-based PricewaterhouseCoopers and the founding chairman of XBRL International, the governing body overseeing the development of the XBRL specification. "Without XBRL, you go back to the pre-Henry Ford type of supply chain."
Willis, who has been involved in the deployment of XBRL-enabled general ledger and other applications, said regulatory compliance is a big reason banks are interested in the specification.
But once they really understand the power of XBRL, banks will use it for internal reporting to make their businesses more nimble, he said.
To take advantage of the possibilities that XBRL offers, however, financial services companies have to do a little software development and a lot of business process re-engineering. Because of this, PwC does not have a separate XBRL practice but includes XBRL experts in its audit, tax, risk management and other practices.
"When you look at a project, it is 5 percent XBRL, 15 percent other technology and 80 percent process re-engineering," Willis said.
In addition to a chief financial officer and a controller, participants in planning for XBRL pilot projects should include the CIO and the information architect.
Banks and other financial services companies would be well-served in initiating their XBRL deployment by infusing the technology into Sarbanes-Oxley compliance efforts, Willis said. This is because SarbOx is focused on managing financial reporting controls, which XBRL aims to improve.