Mar 19

eXtensible Business Reporting Language. Part 3: What is XBRL?

by David Harper, CFA, FRM, CIPM

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We continue to highlight concepts from our screencast An Introduction to XBRL. The screencast earns 0.5 credit hours under the Professional Development (PD) program at CFA Institute.

XBRL is XML

In the last post, we explained that eXtensible Market Language (XML) is the general-purpose market language and XBRL is an industryâ€“ or application-specific version of XML. We like to say that XBRL is one of many "flavors" of XML. There are dozens of application-specific XML languages, from MusicXML (e.g., musical notes on a staff) to SVG (for vector graphics). Even RSS feeds are specified in XML; it's the tagging of blog content that allows feed readers like FeedDemon and RSS Bandit to recognize the structure of the feeds. For an example that is closer to home, consider RIXML, which is designed to share investment research reports.

Xbrl_xmlCluster

XML tags content. By tagging content, structure is imposed on the data. Generically, we can store the number pi within a start tag and an end tag:

<Element type="number">3.1415927</Element>

Why not simply use plain-old XML for financial statements? Because it's generic and not specific to our purposes in reporting financial statements. In order to share data (machine-to-machine), organizations must agree to their definitions. In the case of financial reporting data, XBRL International is the international consortium that facilities the development of shared definitions. In this way, all software will recognize that gross profit will always be tagged in this way:

<GrossProfit>445700</GrossProfit>

Every item on the five primary financial statements (balance sheet, income statement, statement of cash flows, stockholders' equity, and comprehensive income) has a corresponding tag in XBRL!

Taxonomies are dictionaries

Definitions for tags, like the tag above for Gross Profit, are stored in dictionaries called taxonomies. There are many existing taxonomies are more on the way. There are different taxonomies for business type (e.g., corporations, banks, pensions, mutual funds), countries (e.g., U.S., China, U.K., Germany) and even for sections of reports (e.g., SEC certification, MD&A).