Businesses rejoice—the paper trail is dead. Before you get the party started, however, allow me to introduce its replacement: the digital compliance trail.
The new digital trail may take up less space on employees’ desks, but it is no less formidable. Securities and Exchange Commission (SEC) quarterly filings can weigh in at more than a thousand pages. Pharmaceutical companies monitor hundreds of laboratories and studies daily to ensure Food & Drug Administration compliance. Legal practices must make sure every document they produce meets strict, new digital requirements per the Federal Rules of Civil Procedure (FRCP). Federally regulated websites need to be accessible to all Americans, regardless of age, location, or physical ability.
Companies will increasingly be compelled to have their content comply with federal and international laws, not just in terms of what they’re saying but how it’s structured, accessed, and searched. While national law has issued some preliminary guidelines for content compliance, the majority of standards are being forged through cooperative efforts from within industries and interest groups working to ensure information architects build something suited to their specific needs. Leaders in these efforts are also working to make the standards universally available, accessible, and adopted.
For many companies, this means it’s time to figure out a compliance solution. Obviously, not every investment banker or nurse is XML-savvy, nor can every employee be expected to keep track of the myriad laws with which their content must comply. A new crop of content tools are developing ways to help employees file and manage everyday documents that meet regulatory standards.
XBRL Transforms Financial Reporting
A common refrain in today’s economic climate is, “If only we’d known.” XBRL may just be the key to managing the vast amounts of financial information monitored by federal agencies, allowing regulators and investors to see what’s really going on.
Whether federally mandated XBRL compliance could have averted the meltdown is anyone’s guess. But XBRL U.S. CEO and president Mark Bolgiano recently testified in front of Congress’ Domestic Policy Subcommittee hearing of the Oversight and Government Reform Committee that XBRL should be a critical part of a rebuilt economy.
“XBRL is real,” Bolgiano said in a statement. “The market is equipped for even broader applications. And it’s relevant to the issues in today’s financial crisis and can be a part of the solution to establishing better reporting systems and getting the markets back on track.”
XBRL uses XML metadata architecture to model and assign meaning to different sets of data in financial reports. Common phrases found on, for instance, an SEC quarterly report form are assigned XBRL tags in common industrywide taxonomies, published in the U.S. as the U.S. general accepted accounting principles, or GAAP. Specific subtaxonomies dictate standards for industries such as accounting, mutual funds, real estate, and insurance financial reporting.
The standards and taxonomies are constantly evolving based on industry and IT input. XBRL International oversees global cooperative efforts, and different national chapters work on the ground to lobby for and actively promote the implementation of XBRL reporting by companies.
“Think of XML as the grammar and syntax—the basics of how you construct a sentence, and lots of sentences have different syntax,” said Diane Mueller, first vice chair of XBRL International and vice president of XBRL development at JustSystems. “XBRL is the language of finance, with the commonalities of XML.”
The FDIC began requiring U.S. banks to file call reports using XBRL in 2005. Today, more than 8,000 banks report using XBRL.