Digital Financial Reporting

The Japanese Institute of Certified Public Accountants has published a cartoon which explains what XBRL is, explains the benefits of XBRL, and explains how it works.  The video is about 15 minutes long, in Japanese, but has English subtitles.

You can get to the cartoon here.

This video cartoon is quite clever and does a good job of explaining important ideas about XBRL and how it will be impacting financial reporting and auditing in the coming years.

Here are three quotes from the cartoon for CPAs:

The way audits are conducted my also change from paper-based verification to computer verification.

XBRL may alter the way information is disclosed and audits are conducted.

A few years from now, the job of a CPA will probably undergo dramatic change because of the availability of audits by XBRL and the assurance of XBRL data assurance, among other tools.

I had a very interesting experience which I thought I would share. Doing this was enlightening. It is not directly related to XBRL, but it does have many parallels to issues XBRL is grappling with.

Several years ago I created a little video called How XBRL works.  That was for another experiment, to fiddle around with YouTube and to try and embed a YouTube video into a blog page which I did here. (If you want to understand how XBRL works, I would encourage you to check this video out.)

My new experiment was to try and see if I could get a podcast, audio and video, to show up in iTunes. You can see the successful results of that experiment by going to the iTunes store and searching on "XBRL" and you will see my XBRL Channel and two podcasts.  (Or, if you have iTunes, you can click here.)

Turns out, this is a pretty easy thing to do.  Here are the steps:

1. You have to understand the iTunes RSS specification.  You can find that here.
2. You have to create your content in the appropriate format (i.e. MP3 for audio, MPEG4 for video, etc)
3. You have to create an RSS feed.  This is the RSS feed that I created.
4. You have to tell iTunes about your RSS feed. You can do that from this web page.  See the section "How do I submit my podcast?"  The link in that section takes you to the correct place in iTunes.

What does all of this have to do with XBRL you ask?  Well, because iTunes has created a specification for certain tags which it looks for within an RSS feed (go view the source of my simple RSS feed), it can reliably use that information within iTunes.  This creates an operating environment which is easy for users.

Further, because I follow the iTunes specification, all I have to do is put my RSS feed out on the Web somewhere, put the content on the Web, and my content can end up on your iPod or iPhone!  I don't have to build any infrastructure, no special hardware, no special anything...all I have to do is follow the standards and other specifications.  It really is both simple and powerful.  This also contributes to ease of use by leveraging the Apple iTunes environment.  I am not restricted to using only the Apple iTunes environment, I can still distribute my videos on YouTube.

One day,  this is how XBRL software will work.  Or rather, I should say that this is how business reporting and analysis software will work, leveraging XBRL's capabilities within that software.

Now, the iTunes specification is proprietary.  But, that does not mean that you can only use that RSS feed in iTunes.  The iTunes tags are becoming an ad hoc standard for RSS feeds.  Not everyone (like iTunes competitors) uses them, but it does create the possibility of cross software interoperability.

The US SEC has an RSS feed.  That RSS feed is proprietary to the US SEC.  The SEC had to create some of their own RSS elements because there was no standard that they could pick up and use.  Maybe the SEC RSS feed tags will become an ad hoc standard.  This could happen.  Or, someone like XBRL International can take a look at how the SEC and other regulators are making people aware of XBRL instances and XBRL taxonomies so that software vendors can more easily get the functionality that business users need inside their software.  For example, here are the US GAAP Taxonomy files.  Meta data about "entry points" and "references" and other things can be put into computer readable form (rather than human readable documentation) and software vendors can provide the ability to use the taxonomy without every having to look at the files.

I think that XBRL International should create a standard set of RSS feed elements and attributes which all systems which make use of XBRL could leverage.  Short of that, perhaps software vendors will standardize on what the SEC provides.  One day XBRL users will be has happy as iPhone users!

What is your opinion?