Originally published on Forbes. Post written by Emily Huang, CEO & Co-Founder at idaciti, Inc., a Fintech SaaS company focused on making public financial & non-financial data usable.
Finding a shared language is fundamental to how we interact with and understand one another. When I travel internationally, I may not speak Japanese or Italian or Arabic. However, I am fortunate to be able to communicate in English – which has become the standard global business language .
In the same way that English gives global travelers a common vocabulary, XBRL (eXtensible Business Reporting Language) has emerged as the standard international language for financial reporting and analysis. XBRL, sometimes referred to as “interactive data,” is a markup language that adds tags to the individual piece of financial data. When combined with HTML for presentation, it is easily searchable and readable by both humans and machines.
XBRL is still an evolving language, but it has already had a powerful impact on how we consume and evaluate financial information. In 2005, the SEC began a voluntary program to encourage publicly traded companies in the U.S. to submit filings using XBRL, and by 2009, the SEC made XBRL filing mandatory. XBRL is now used in more than 50 countries, covering more than two-thirds of the global capital markets.
Our company provides a platform that compiles, analyzes and creates visualizations of financial and non-financial data, and I have seen how XBRL is quickly transforming the financial industry. It is deepening insights and breaking down barriers in several ways:
Before XBRL, it was almost impossible to compare data between companies in different countries. Take a U.S. company and a Brazilian company, for example. Not only would the financial disclosures be written in different languages, but they would also use separate accounting and reporting taxonomies. The U.S. follows GAAP (generally accepted accounting principles) for financial statements, while most other countries adhere to IFRS (International Financial Reporting Standards).
XBRL creates a unified framework, allowing you to compare companies on the same terms, regardless of language, country, currency or accounting standard. Companies are no longer just competing within their own borders, and XBRL fuels this move toward increased globalization.
In the past, there was no simple way for business leaders to research other companies’ financial information on a global scale. Unless you were willing to sift through hundreds of pages of quarterly and annual reports for each company, you would have a hard time finding the data you wanted. With XBRL, you can now conduct a comprehensive and detailed search in seconds. You can explore global or regional trends, investigate growth areas or study how companies are dealing with challenges similar to your own.
Analysts will always examine the data from huge multinational corporations. But they often don’t have the capacity to cover smaller companies. Small companies have traditionally stayed small and under the radar, but XBRL is changing that pattern. By offering us the same access to all publicly available information, regardless of company size, XBRL is putting every company on the same level. And an equal playing field gives smaller, lesser-known companies a chance to compete with more prominent corporations.
XBRL has already made a significant impact on financial reporting in the last 10 years, but I believe this is just the beginning. Here are a few trends I see developing in the coming years.
Private Company Filings
XBRL is the international language for communicating public company financial data, but it is starting to expand to privately held companies as well. The government of South Africa, for instance, requires that annual financial statements for many private companies – as well as all public and state-owned companies and nonprofit organizations – are submitted through XBRL. Broadening access to private company data will offer us even more valuable insights.
A company’s financial performance is essential, but it’s not all that matters to investors and consumers. ESG (environmental, social and governance) data is increasingly relevant to the public, especially among younger generations. They want to know who a company is, what it stands for and what good it does in the world. I think we will start to see XBRL capturing both financial and non-financial information to meet this demand.
No one wants to look at data; we want insights.
As XBRL evolves, more financial professionals will learn to look past the quantitative to gain understanding into the qualitative, asking: What does this data teach us? What does it mean? How can we use it to do better? This shift will require us to think beyond the numbers and find new ways to visualize deeper insights.
XBRL has become the language for global finance and accounting. It is already erasing borders, improving transparency and changing the way we think about data – and its influence will continue to grow.