Why does it take days for investment analysts to provide recommendations about stocks after the financial statements have been delivered? Because the information arrives on paper and needs to be re-keyed into proprietary analytical models - the systems don't speak the same language.
XBRL is changing the way financial information is exchanged from system to system and organization to organization because it is one, unified language. It works through the application of a unique tag or element to each reporting concept.
A lot of what is produced in a business report is not new. Indeed, there are distinct advantages in terms of comparability and analysis to ensuring that reports conform with industry norms, and generally this is imposed by securities laws. Many (perhaps most) concepts can be identified and become part of an agreed standard.
Taking an existing authoritative reference, like the U.S. GAAP financial accounting standards, and assigning XBRL tags to each unique concept, is the way that many of these standards, called "taxonomies" of unique concepts are produced. These taxonomies represent industry consensus and are the foundation for open information exchange in the XBRL era.
While most of the work of the XBRL jurisdictions is focused on developing accounting taxonomies, the same process can be taken and applied to other environments, like the reporting concepts unique to management information reporting in a single enterprise, or the statistical standards used by national statistical agencies.
The tags contain all of the necessary definitions, including the relationship between concepts, to ensure that a common understanding can be reached about each idea that is being communicated by examining the taxonomy.
Since some ideas in business reports are unique to a particular organization, it is also possible to extend the consensus taxonomies with your own, unique concepts, and show the way that these ideas fit into the rest of the reporting hierarchy. For that matter it is also possible to alter the way an existing reporting hierarchy fits together.
The idea of the extension taxonomy is extremely important in this field. It allows business terms that differentiate one company from another, or that are the critical reporting concepts for a work unit, to be published using XBRL, without artificially forcing them into forms or templates that are not customized to that particular report.
You can compare the impact of XBRL tags in business reporting to the impact of bar codes in the publishing industry.
Since 1970, the ISBN (the International Standard Book Number) has been in use, allowing publishers or group agencies on behalf of publishers to categorize books and other publications, define their content matter, and then assign a unique identifier to the publication. More recently, and almost ubiquitously, ISBNs have also been printed as bar codes on books and magazines.
So in the book industry, with knowledge of the ISBN, or a bar-code scanner to accurately identify the ISBN, it is possible to determine all of the important information that uniquely identifies that publication. By referencing the ISBN catalog, you can identify the author, the date of publication (and which issue is current), the publisher, the subject matter of the publication and, of course, the price.
A publisher with a new book to print can apply a new ISBN to it, upload the new entry to the appropriate catalog, and then print the book with its identifier. Everyone else can instantly access the catalog information, based on that unique identifier.
Since the ISBNs are machine readable via a bar code, users can look up the code to learn about the publication with just that code. It doesn't matter whether it’s a new code or an old code - the definition can be accessed.
XBRL works in a similar way. Of course, the tags in this environment relate to individual concepts inside a report - a bit like having a different ISBN for every page, but the same properties accrue to XBRL tags. That is, the tags ensure there is a single, well-understood definition available to users of the information so that users with no knowledge of each other can still exchange information, reliably and electronically. Where one of the concepts that is in common use does not quite fit the bill, it’s a straightforward exercise to create a new, unique definition that others can access. You can publish the definition and let the whole world see your new concept, or you can keep it inside your organization or within a circle of trusted parties.