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Equipping corporations to harness the potential of XBRL will fall to alliances built of the information systems staff and the finance department. At present there are few commercial tools available, even fewer taxonomies or classifications, and a skills dearth.

The XBRL system for tagging electronic financial information is developing all the hallmarks of a looming international standard. And it will be a standard demanding collaboration between the CIO and the CFO.

US librarian Melvil Dewey saved the reading public from madness by inventing the decimal classification system for books. Suddenly it was possible to identify, locate and access a book without searching dusty stacks for days. Charlie Hoffman, an American accountant, might yet save the rest of us.

In 1998 Hoffman started playing with XML (eXtensible Mark-up Language), to see how it might be applied to financial information. Traditionally, corporations have published financial information as required by regulators and the markets, in a variety of formats. That information can be transferred electronically, but generally key financial data has been buried deep in reports that needed reading and sifting in order to get at the raw numbers.

What Hoffman developed was the foundation of XBRL (eXtensible Business Reporting Language), giving the first glimmer of hope that there might be a way to access more easily raw financial information which would be identified and verified at source. That information could then be transmitted in its raw but identified form, and if necessary loaded into analytical programs by financial analysts, ratings agencies or regulators for further processing, saving time, money and reducing the chance of rekeying errors.

It is early days yet. No one really expects XBRL to become commonplace for two to three years at least, with some predicting the dawn of the International Accounting Standard (IAS) in 2005 as the most likely trigger for making XBRL widespread - but no one disputes that XBRL tagging is coming.

Equipping corporations to harness the potential of XBRL will fall to alliances built of the information systems staff and the finance department. At present there are few commercial tools available, even fewer taxonomies or classifications, and a skills dearth. Of course that scenario is just grist to the mill for CIOs.

Right now no Australian business is mandated to use XBRL. The Australian Prudential Regulation Authority (APRA) is able to accept XBRL-tagged data, but it does not demand it. Its own description for its systems is that they are designed to be "XBRL savvy". Clearly if APRA, or the ATO, the ASX or ASIC, did mandate the use of XBRL tags, corporations would have to race to comply. While the big stick is missing to hurry things along, there are some carrots that might lure corporations towards XBRL before they are forced into it.

In the wake of the US corporate accounting scandals a number of governments are pushing through reforms to their corporate laws. In the US, the Sarbanes-Oxley Act is coming on stream for many organisations, including the 140 or so Australian companies that have issued American Depositary Receipts and are therefore obliged to comply with US Securities and Exchange Commission [SEC] regulations. And in Australia the rollout of CLERP (Corporate Law Economic Reform Program) continues. Each of these has modified the nature of disclosures required from corporations. In addition, corporations and individuals are already fully aware of the pace of change demanded by the ATO on an annual basis.

This rapid pace of change, which is unlikely to slow any time soon, constantly ups the ante for corporations in terms of compliance. At present IT departments are forced to extract from their data silos the financial information required to comply with the regulations. It is not always easy to do, and can force IT departments to cobble together software that will extract the required data required, which may be different from that required the year before.

XBRL's promise is that once data is tagged it is more easily located, and can be matched into a unique XBRL-based taxonomy. So for example, although the SEC and the ASX would have completely different taxonomies, the XBRL tags that attach to financial information would be constant. For corporations, once the raw data was tagged, matching the XBRL-tagged data with individual XBRL taxonomies would be a relative breeze. And for global corporations there seem to be some advantages in using XBRL internally as it would eradicate language problems that might arise when, say, a division in Spain asked for financial data from Shanghai. The fact that the Chinese office did not speak Spanish would be irrelevant, because the XBRL tag would exist as a form of financial Esperanto.

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