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XBRL is Extensible

January 19, 2009

Ex·ten·si·ble
Pronunciation: ik′sten·sə′bil
Function: adjective

1. Drawn out in length
2. Fully stretch out

The “X” in XBRL stands for extensible, meaning that XBRL can be expanded or stretched to meet a number of uses. Right now, most SEC filers are thinking of XBRL as a compliance exercise of tagging financial statement data to simplify its use by financial statement users. But SEC financial reporting is just one use of XBRL.

In December 2008, the IBM Data Governance Council announced an initiative to develop a new XBRL taxonomy to describe risk and market losses. The council, a group of 50 global companies including American Express, Bank of America, and Citibank, believes an XBRL risk taxonomy could provide a more thorough picture of risk that is incurred in the overall economy, thereby preventing the sort of market meltdown that occurred in 2008 because of the lack of understanding of the risk in subprime mortgage derivatives.

Mark Cuban suggests in his blog that XBRL should be used to track the economic bailout our government has so quickly and easily agreed to. He also suggested that every entity should be required to utilize XBRL including investment advisors, hedge funds, mutual funds, brokers, dealers, market makers, banks (even to the extent of every loan they make). I like his “possibility” thinking. He is correct about the possibilities that exist for using XBRL to track, report and analyze information.

By creating new standard taxonomies for all sorts of financial information and then using these standard taxonomies to tag all that financial information, the tagged items become machine accessible and web enabled. Imagine the possibilities of how that information could be used and the productivity gains that would be available (even inside your own company).

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