All standards are not created equal. The XBRL standard is a free, open, non-proprietary, financial data standard, developed and maintained by a global, not-for-profit standards body . Each of the descriptors highlighted in that last sentence are characteristics of XBRL that are critical for governments, businesses, nonprofits and others looking to adopt a standard.
Here’s why.
Open.
The XBRL technical specification was created and is maintained, through an open, collaborative process with input from all stakeholders. Good standards demand this kind of cooperation from data creators, intermediaries and users, to build a standard that meets all needs, thus encouraging rapid, broad adoption. A “closed” standard, software or protocol very likely will have limited public participation in its initial and ongoing development.
No royalty fees (free).
There are no licensing fees associated with the use of the XBRL technical standard. That means that anyone can build an XBRL taxonomy, at no cost. XBRL taxonomies developed or managed by XBRL US or XBRL International, like the US GAAP Taxonomy, the Orange Button Solar Taxonomy or the Surety Work-in-Process Taxonomy are, by definition, freely available for use by data creators, intermediaries and data users.
Some standards, like CUSIP (the Committee on Uniform Securities Identification Procedures), a securities classification system managed by Standard & Poor’s, requires users to pay assignment fees ranging from $50 to $200 for each securities identifier. The requirement that users of a standard pay licensing fees, can significantly hinder widespread adoption and limit effective usage.
Non-proprietary.
Proprietary standards, like Excel or PDF or CUSIP, which was mentioned earlier, can be considered de facto standards because they are widely used. These standards are controlled by single companies, and their development is not governed by a standards organization. Proprietary standards like these can mean significant expense to users as they must request changes from a single entity with commercial interests; and there may be usage fees, set by that same entity. Adoption of a standard developed and maintained by a commercial organization may also be hampered because of conflicting competitive concerns.
Governments and businesses looking to adopt a standard that will be used by multiple reporting entities and users, should opt for a non-proprietary standard. Ongoing development and business strategy for a non-proprietary standard is not tied to a commercial entity that has the interests of a single organization in mind. The use of non-proprietary standards means that upgrades or changes in reporting requirements by users of the standard, will likely be managed through nonprofit standards organizations, effectively removing roadblocks to ongoing development related to conflicting commercial interests. Only a standards organization can bring together competing members of a supply chain to reach consensus.
Financial data standard.
There are lots of standard formats designed to transport data – XML, CSV, JSON, to name a few. But there is only one financial data standard – XBRL. Why is XBRL uniquely suited to financial data? Because it consistently, efficiently conveys the features of financial data including time period, units of measure like currency, entity identification, definitions, labels and financial tables.
Global.
XBRL is used around the world – in 60+ countries, by 10 million+ companies. And it’s been adopted by over 100 regulators. In the world of international financial markets, standards to transmit financial information must be globally accepted. Anything less is a non-starter.
Not-for-profit standards body.
XBRL US and XBRL International are both not-for-profit standards organizations with a mission to improve business reporting. XBRL International focuses on developing and maintaining the technical specification. XBRL US is responsible for building data standards for U.S. reporting.
Commercial entities simply cannot effectively develop and disseminate a data standard used by other competing commercial entities. Only a market-driven, not-for-profit standards organization can bring together representatives from reporting supply chains, for the kind of collaboration essential to good quality standards and adoption.
So, why XBRL?
All standards are NOT created equal. Open, non-proprietary standards with no associated fees are critical to the creation of any government or industry-driven standards implementation, for financial or business information. Only XBRL fits the bill.
