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 In 1999, five accountants, working
independently, tried to figure out if the Enron lie could not have been
caught before it blew up. The basic question before the five
accountants was: where did Enron hide its muck. They asked if there
were lessons to be learnt from the Enron saga that would improve
disclosure.
Thus was born eXtensible Business Reporting
Language or XBRL as it is called. As the language for the electronic
communication of business and financial data, it is revolutionising
business reporting around the world. The XML properties of XBRL make
the information machine-readable. The addition of business rules to XML
creates XBRL, creating an information set that is more easily
deciphered. XBRL greatly increases the speed of handling of financial
data, reduces the chance of error and permits automatic checking of
information.
More than 100 countries have embraced XBRL—the list includes China, Korea, Japan, the US and most recently, India.
We also found a company that has been reporting the same cash flow
statement for three years running, word for word, number for number,
decimal place for decimal place. At IRIS, our exercise to develop
India’s first XBRL database of listed companies threw up some startling
findings. We were stunned that for several companies, the financial
statements for financial year 2008 lacked internal consistency in the
sense that the numbers reported in the schedules did not tally with the
number in the main financial statement. The variations ranged from as
high as 40 per cent in some elements in some companies to less than 1
per cent in others.
We also found a company that has been reporting
the same cash flow statement for three years running, word for word,
number for number, decimal place for decimal place.
It is still early days but the benefits are
self-evident. The outgoing US SEC Chairman Christopher Cox calls it the
new Information Revolution. All companies listed on US exchanges have
two years to move to XBRL-based reporting, the investment companies
have until 2009 to do so and the rating agencies have been asked to
comply soon.
India, a late adopter, is slowly but surely
moving in the same direction, XBRL implementation is happening at BSE,
NSE, SEBI, RBI and MCA, with each of them working to their own
schedule. The Institute of Chartered Accountants of India has taken the
leadership to form an XBRL jurisdiction in India.
But could the adoption of XBRL have helped in
the early detection of the Satyam fraud? The answer is no. However, the
use of XBRL can now help investigators unravel the Satyam story
quickly.
Also, the implementation of XBRL can help the
board see the information tabled before it with greater clarity,
knowing fully well that if there is a footprint anywhere that is out of
place, it will be visible. With the implementation of XBRL, you can’t
hide, the trail will show up somewhere on the radar.
S. Swaminathan is the Founder CEO of IRIS, and India’s leading XBRL evangelist
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