What is XBRL?

Getting your head around XBRL can be challenging.  Much of this challenge is similar to trying to teach someone about algebra or calculus if they do not understand how to count or do not understand the mathematical operators of addition, subtraction, multiplication, and division.

Many people tend to try and dumb down the definition of what XBRL is in order to explain it.  This occurs for two reasons.  First, they think it makes it easier to explain XBRL, but the common result is a poor communication of what XBRL truly is.  Second, the person trying to explain XBRL may not truly understand XBRL themselve.

In my view, the best definition of XBRL can be found on Wikipedia.  That definition is:

XBRL (eXtensible Business Reporting Language) is an open standard which supports information modeling and the expression of semantic meaning commonly required in business reporting.

A key term here is the "information modeling".  Many people associate the phrase "automating data exchange" with XBRL which is a mistake.  Also, many people erroneously think of the term "data" when trying to get their heads around XBRL.  Further, the name "XBRL" tends to get in the way of understanding what XBRL is, rather than helping one understand it.  Left out of this definition though is the notion that XBRL is a formal agreed upon way to model information and the notion that the information model is readable by both humans and by computers.

This blog entry shows a high level model for XBRL.

Business reporting is only one type of information exchange, it is not the only type of information exchange.  Further, the information exchange is a by product of what XBRL really does which is define the information model.  That information model is what makes the information exchange possible.  But the information model also makes a lot of other things possible!

Business people don't generally grasp the true meaning of terms such as "syntax", "semantics", "meta data", "business rules" or the difference between "structured" and "unstructured" information.  Yet, these terms are critical to the understanding of what XBRL really is and why it is important.

Technical people tend to think that XBRL is just another form of XML.  That is a big mistake.  Technical people tend to confuse the term "extensible" and think that the way XML uses the word and the way XBRL uses the word is the same.  It is not.

Notice that no where in the Wikipedia definition of XBRL does the word "exchange" or the term "financial reporting" exist.  These are mis-perceptions people have.  XBRL enables exchange; that is only ONE of the things it does.  More importantly is the understanding that XBRL enables INFORMATION exchange, not just DATA exchange.  Sure, you can use XBRL to exchange data.

But to truly grasp the importance of XBRL, this understanding of fundamental concepts and using them correctly is important. 

To think about this in another way, imagine a world where XBRL is pervasive.  As an example, imagine a repository of information available in XBRL for all U.S. public companies (i.e. the SEC Idea system).  Imagine that everything works and that there is 10 years of data available in XBRL.  How would other things which we do today be different if that data exists in XBRL?  If you can answer that question for yourself, then you really "get" XBRL.  XBRL has been described as a transformational technology by Gartner.  So, as yourself what will be transformed.

Here is a list of resources which explain what XBRL is, how XBRL works, and what it means.  There really is no one good explanation which exists in one place currently, which is unfortunate.  I have done the best I can to explain what XBRL is and I have collected other explanations I have come across.

  • Summarized, simple explanation:  What is XBRL?  (2 page explanation)
  • Detailed explanation:  What is XBRL?  (17 page explanation)
  • Simple explanation (video):  XBRL in Plain English  (6 minute video; pretty basic, does not provide a good vision as to the earth shattering transformations XBRL will cause)
  • How XBRL works (video):  How XBRL Works  (5 minute video which explains how XBRL works, which helps one realize what XBRL will do and what it will not do)
  • Lots of detail, but old and a bit dated (book): Financial Reporting Using XBRL  (This is a lot of material, but buried in these 513 pages is very good information as to what XBRL is, how it works, what it does, and what it means.)

If you know of an explanation of XBRL which is better than these and might be useful to others trying to understand XBRL, send me an email or post a comment to this blog and I will link to it.  If you don't know of a good explanation but think you can better explain XBRL than others have, please do create that explanation and I will link to it.  If you want to translate any material provided here into other languages, feel free to do so with any of the material I have authored...you have my permission.