CEBS Why is XBRL recommended to be used?

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Revision as of 10:04, 27 May 2010

Contribution dated 2009-12-23

ALL TOPICS ARE STILL ON DISCUSSION!

(To be completed)

1 Introduction
2 Historical background
3 Benefits of XBRL
4 ...but XBRL is too complex

Introduction

This document intends to clarify why the CEBS (Committee of European Banking Supervisors) recommends the use of XBRL since 2005.

Historical background

In the end of 2004 the CEBS COREP Operational Network provided a set of very complex but harmonised European tables summarising the implementation of Basel II pillar I for Europe to a group of IT experts from different European national banks to create a common electronic format.

Their requirement: the common European electronic data format should represent the defined Excel tables. The set of Excel tables defined reportable financial business data, validation rules, specific views on the data and labels defined first in English but later in several European languages.

We discussed three different alternatives XML, SDMX and XBRL. The last one was in 2004 an upcoming standard but at this time not yet widely used. Because SDMX and XBRL already provided a frame for the report of financial data and both were standardised, SDMX by ISO and XBRL by industry, a proprietary and in-house developed XML format was no longer considered.

The usage of a standard allows to access best results of science and technique and reduces the efforts for the creation of own probably poorer solutions. With each new member adopting a standard the spreading of this technology increases and eases the interoperability. A standardisation increases the efficiency and minimises the market risks.

SDMX provides a good possibility to cover the multidimensionality of the COREP tables whereas XBRL supports multi languages, a possibility to define the presentation and it also included support for validations but it missed a support for multi dimensions.

In February 2005 a group of around fifty volunteers including several XBRL experts met to discuss how XBRL could be extended to support this missing functionality. A solution was found and the standard was extended accordingly and finalised right before the publication of the first COREP XBRL taxonomy. This new functionality made XBRL quite more attractive and now 5 years later the adoption of XBRL increased significantly worldwide http://www.xbrlplanet.org.

Nevertheless XBRL is just a recommendation several European countries participate in the harmonisation process of the CEBS and adopted XBRL as reporting format. Distribution in Europe To join efforts and to exchange experiences the CEBS XBRL Network organise workshops twice a year.

Benefits of XBRL

communication

Single, XML-derived reporting standard
Detailed understanding of data model
Interoperability with existing XML schemas
Several languages can be incorporated

transparency

Comparability of data across Europe
Possibility of a faster exchange of information with regard to the financial crisis
Versioning will be supported
Open source

flexibility

XBRL is extensible --> adaptation to national discretions
Modularised architecture of XBRL
Structural changes in the data are not reflected in the instance

efficiency

Reduction of cost and time along the supply chain for financial information

Eases the possibility of automation by supporting

automated error detection
versioning

Time and cost saving for the reporting entity because of early responses
One common format is more cost-effective than a numerous number of different proprietary formats

support

Shifting of manual support to automated processes
In-house developed systems can be replaced by standardised market solutions

test

XBRL reports can be easily tested before submission
Transition process of a reporting entity could be supported by providing a test platform

validation

Validation via standardised approaches
Extensive possibilities for formula definitions
Summarisation of formulas --> reduction of the amount of formulas
No need for specific in-house solutions for the reporting entities

harmonisation

Approach is in line with the reconciliation for an harmonised reporting in the EU
Uniform validation rules can be used
Allows cooperation on a unified data basis (i.e. Colleagues of Supervisors)
Enables an effective analysis of cross-border financial institutions

standardisation

Assures competitive capacity
Eases the exchange with other European countries
Enables the use of standardised technology
Eases interoperability
Minimises risks
No other standardised business reporting standard exists

...but XBRL is too complex

This concern is often mentioned and should be answered also with an analogy. Let's suppose you are a financial expert and you want to share your analysis with your colleagues in your company. Usually you would summarise these information in Excel sheets and order the figures in a nice tabular way so that they can be easily read and understand by your colleagues. You might also include some formula to summarise data and ensure that the validation is correct. Then you send this Excel file to your colleagues. The file will be opened in Excel, presented in the way you have designed it and validated against your formulas. Let's suppose further that a consultant comes to your company and offers to analyse your processes and he comes to the conclusion that you should prepare your analysis in Notepad and send a simple text file to your colleagues. The only obstacle is that you have to implement your own presentation and also the validation. Your colleagues have to do the same or they just try to read the content in the Notepad style.

You think this is absolutely nonsense? No consultant would propose this stupid idea? You are right but if you replace Excel with XBRL and put in a proprietary XML for Notepad you are sitting right in front the same topic. What is more complex? Learn how to use XBRL and use the XBRL standard software provided by the market or develop an numerous amount of applications for you as well as for your counterparties that generate the presentation and validation on basis of your proprietary XML structure?

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 </ul>
-= Comparison XML to XBRL =
-If you expect to find here a table showing the advantages and disadvantages of both techniques I must disappoint you. You can't compare apples with apples. An XBRL report is an XML report so XBRL includes all possibilities and advantages provided by the XML standard like XML Schema validation, processing via SAX or DOM parsers, XSLT, XPath, XQuery etc.
-But what you can compare is your own in-house developed XML Schema with a replacement in XBRL but first of all you must evaluate your particular objectives and requirements.
-If you can answer most of the following questions with yes, XBRL might be an appropriate solution for you.
-<ul>
-<li>Do you exchange business information?</li>
-<li>With several counterparties?</li>
-<li>Is it possible to categorise (tag) the exchanged information?</li>
-<li>Do you have a specific demand on the quality of data exchanged?</li>
-<li>Do you prefer to use a standard to be able to use software on the market?</li>
-<li>Does not all counterparties understand your language?</li>
-<li>Does your format need a lot of explanations or references to laws or other regulations?</li>
-<li>Is the presentation defined on paper or Excel sheets essential for you or your counterparties?</li>
-<li>Do you change your data format regularly?</li>
-<li>Should your data format be used across Europe or even world-wide?</li>
-<li>Is the data provided to several recipients?</li>
-</ul>
-In case of the CEBS we can answer all these questions with yes and XBRL provided us appropriate solutions for all these requirements. If some functionality is missing, XBRL provides also the possibility to take part in working groups and enhance this open source standard like we have done with XBRL Dimensions, XBRL Formulas or XBRL Versioning.
 = ...but XBRL is too complex =