XBRL – will it clean up accounts reporting?
It'll help, MS, PwC, Nasdaq say
Microsoft Corp has joined Nasdaq and PriceWaterhouseCoopers in promoting eXtensible Business Reporting Language (XBRL) for storage and presentation of publicly traded companies' quarterly and annual financial reports.
Under the project, reports and financial footnotes will be stored online and accessed through an XBRL-ready version of Microsoft's Office.
Nasdaq, PriceWaterhouseCoopers and Microsoft believe XBRL will help to tidy-up reporting and accounting practices, brought into disrepute by recent corporate scandals. As a widely traded company, Redmond, Washington-based Microsoft believes it understands the needs of both corporates and shareholders.
"As a company with perhaps the largest and most involved share-holder base in the world, we at Microsoft see the issue both from our perspective and from the perspective of shareholders," said Microsoft chief financial officer John Connors.
Until recently, Microsoft was itself the subject of an unofficial Securities and Exchange Commission (SEC) investigation into so-called "cookie-jar" accounting.
The SEC ordered Microsoft in June to "cease and desist" from future accounting violations. The SEC found Microsoft failed to accurately report its financial results, causing overstatements of income in some quarters and understatements of income during other quarters. The total balance of these accounts ranged from approximately $200m to $900m, between July 1994 to June 1998.
Microsoft neither admitted nor denied any wrongdoing, under an SEC settlement.
Microsoft believes XBRL will help ensure accuracy in all traded companies' reports. "Now is a great time to dive right in, because the XBRL specification is real," said company chief financial officer John Connors.
Nasdaq vice chairman Alfred R Berkley III believes XBRL-enabled systems and reporting processes could help analysts and shareholders quickly extract financial data. "Computer programs can easily extract every piece of information in an XBRL statement. Today, a computer program can't be asked to 'get the total revenues for 2001'," he said in a statement.
Berkley called the current translation between the method a company reports and the method used to analyze data "hand-tinkered and labor intensive." "XBRL will promote the democratization of financial data," he said.
However, XBRL is only likely to reduce the potential for human error in reporting, by streamlining both the data collection and presentation process. It is unlikely to deter deliberate miss-counting of results before they are entered into XBRL.
Under the project, announced yesterday, financial data of 20 publicly traded semiconductor companies and Microsoft is being converted into XBRL and stored in an SQL Server 2000 database by PriceWaterhouseCoopers.
For its part, Microsoft has created an Excel-based workbook for users, for download, to access the data.