The language developed for business reporting promises to make financial statements more accurate, easier to produce, and simpler to analyze.

With the public's attention focused so intently on the results of financial statements, particularly with what's happening in the mortgage industry, few outside the accounting and IT industries are talking about the technology revolution occurring in the back office affecting how those statements will be prepared.

What I am referring to, of course, is the imminent worldwide adoption of XBRL, or Extensible Business Reporting Language, as the standard for virtually all financial reporting. Because XBRL has been in the oven now for nearly 10 years, it's difficult to believe that its adoption is just around the corner.

Do you remember the day you went into the music store and realized that they were no longer selling LPs and that you guessed it was time you went out and bought yourself a CD player? You knew the technology was going that way, but you delayed buying a new player. Why? First, after the stall of Sony's Betamax format, you weren't sure the industry was going to standardize on the CD design, and second, making a purchase commitment meant that your record collection was virtually obsolete.

With so many languages, standards, and formats available to developers, does it really make sense that XBRL will be the one the financial industry adopts as the winner? The answer to that question is simple. It's a yes.

XBRL has been percolating through the world's financial aquifer for nearly a decade and is now poised to emerge in the well of the major U.S. regulatory agencies with the SEC being the most prominent. European regulatory agencies and governments are already starting to standardize on XBRL, and major corporations are gradually coming on board. The Netherlands, Australia, and New Zealand are among the countries looking to leverage the use of XBRL to enable streamlined filing for all government entities.

Why is this happening, and why is it inevitable? Just like the widespread adoption of the compact disk format, the reason lies in the obvious-to-the-point-of-being-blatant improvements that the new technology offers over the old. XBRL has so many advantages for both companies that prepare the financial data and the agencies that review it that the outcome is virtually without question. As CPA Richard Oppenheim of the Oppenheim Group said in a recent article, "XBRL as a reporting tool has no equal in its capability for creating meaningful and readable and understandable financial reporting information."

In fact, the SEC, which for the past two years has been accepting voluntary XBRL financial filings, now has a roadmap leading toward mandatory filing by this fall. The firms that likely will be touched first are Fortune 500-class companies. So far, fewer than 50 U.S. businesses are currently taking advantage of the voluntary filing, but they represent some of the largest and include, besides IBM and Microsoft, companies like PepsiCo and General Electric, which collectively represent about $2 trillion in market capitalization.

In 2007, the SEC announced a $54 million investment to update its public company disclosure system through XBRL. In the fall of last year, the SEC kicked off an initiative to create an Office of Interactive Disclosure that will expand the use of digital data for analysts, investors, and business advisors. The follow-on program to move all publicly traded companies toward filing their financial documents using XBRL is seen as a way to create greater financial transparency of these firms financial information.

"While XBRL has been around for years, the SEC's chief accountant, Conrad Hewitt, predicts the XBRL regulations are 'coming down the pipe very fast'," reports Diane Mueller, vice president of XBRL development, focused on the financial sector and XML standards at JustSystems. Mueller, who also is an at-large member of the XBRL International Steering Committee and recently chaired the 16th XBRL International Convergence, says, "Clearly, XBRL's time has come. The interactive data it enables brings direct, top line benefits...."

The FDIC already has committed to an XBRL reporting standard, and U.S. banks are beginning to realize the benefits in terms of streamlining their quarterly call reports. The European Union central banks have committed to it as well.

Many people may not know what XBRL is, believing that it is a language similar to XML, or Extensible Markup Language, which is the standard for the electronic exchange of data between businesses and on the Internet. Under XML, identifying tags are applied to individual data elements so they can be processed by software.

XBRL is, in fact, a version of XML, but it is a very flexible and powerful version. It has been defined specifically to meet the requirements of business and financial information. XBRL supports all the standard tasks involved in compiling, storing, and using business data. It allows for unique tags to be applied to financial data items, such as "net profit." The tags are quite sophisticated, however, and provide a range of information about the item identifying it as a fraction, percentage, or monetary item. It can show how data elements relate to one another and thereby represent how they are calculated. The tags also can say whether they fall into certain groups for organizational or presentation purposes.

The appealing thing about XBRL is that it's extensible, so companies and other organizations can adapt it to meet a variety of special requirements. It is so flexible that it can support all current aspects of reporting in different countries and industries.

A company's financial data is converted into XBRL by mapping processes or generated directly by software. Once in XBRL format, the data can be searched, selected, exchanged, or analyzed automatically. It also can be published viewing in reports.

The benefit derived from XBRL is mainly from its reducing the cost of handling financial data since it dramatically improves the accuracy and reduces complexity in processing it. It also makes it much easier for people to assimilate and understand the information. Groups that will benefit most from the use of XBRL are organizations that collect data, such as governments, regulators, economic agencies, stock exchanges, and financial information firms. Yet others who will benefit are the people and companies who produce the data, such as accountants, auditors, company managers, financial analysts, investors, and creditors. With the increased reporting and compliance demands on both regulators and companies, there is an urgent need to reduce the inefficiencies in the current reporting environment.

The anticipated benefits to companies having to switch to XBRL reporting are expected to more than pay back the costs of conversion. In a report released at the end of last year, Ventana Research and its research director Robert Kugel predict that "within just a few years, almost all large companies will be using XBRL, and not just because the SEC mandates it for filing their financial statements. XBRL will play a broad role in the exchange of financial information and all forms of external reporting, one that goes well beyond its original purpose as a tool for securities analysts and financial regulators."

Among the side effects that the move to XBRL is likely to have are subtle changes on Wall Street. Because information will be so much more readily available, it's expected that a whole new group of freelance research analysts will emerge who will offer advice to ordinary investors for lower fees than that advice currently commands.

CFOs likely will be put under greater scrutiny and expected to explain their financial statements in more detail since data will immediately go into analysts' models, saving weeks of processing. Small companies will likely gain more analyst coverage and investor interest because the cost of obtaining and comparing information about them will drop.

Amateur investors likely will develop a new confidence from having a higher level of financial detail available to them, so you will see more blogs with individuals discussing various companies' chances for growth. There will also be opportunities for software vendors to develop various reporting tools based on XBRL.

How does a company get started using XBRL? One of the leading companies offering XBRL tools and solutions is UBmatrix, Inc., an IBM Business Partner and a leader in providing XBRL information exchange solutions. UBmatrix just last month launched a new solution to help facilitate public companies adopting XBRL.

Called the "First Step Program," it takes advantage of the updated US GAAP taxonomy. It provides companies with the software, services, and expertise needed to get up and running with XBRL reports and filings. It's designed for first-time XBRL filers and includes all the software and services that a company needs to participate in the SEC Interactive Data (XBRL) Voluntary Filing Program.

The package includes a license to UBmatrix Report Builder and UBmatrix Taxonomy Designer along with introductory education and training on XBRL, the US GAAP taxonomy and voluntary filing program.

The program includes gap analysis of a company's balance sheet, income and cash flow statements against the US GAAP Taxonomy, development of taxonomy extensions, if needed, and the tagging of financial tables, resulting in a validated XBRL submission.

"UBmatrix's package will enable more companies to participate in the voluntary filing program resulting in better feedback to the SEC," said Mark Bolgiano, president and CEO of XBRL-US.

Other companies, such as JustSystems, Microsoft FRx, Rivet Software, and SnappyReports, are also reported to be well-versed in XBRL technology. For more information about XBRL, visit the XBRL Web site.