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An XBRL Challenge to the US Government

March 10, 2009

We are in an economic downturn. Businesses need the government to get out of the way so the challenges can be managed by business owners and stakeholders. The government can assist by reducing regulatory requirements and streamlining the compliance information flow thereby reducing compliance costs.

Consider the Dutch government as an example for our government to emulate. The Dutch government believes that filing financial reports in XBRL will “revolutionize financial reporting”. They believe XBRL can cut regulatory red tape by 25% which they estimate will save companies $515 million per year making them more competitive.

Dutch companies file financial results, tax amounts, economic statistics, and employee payroll information. They often file the same amounts with multiple agencies. But the reporting burden is in the process of changing to a voluntary XBRL based approach that the government is backing.

The first phase of the project to convert to XBRL was the generation of a national XBRL taxonomy. Every government department now uses the newly developed uniform taxonomy of business and financial terms. The uniform taxonomy provides a uniform definition to terms like “asset”. When the taxonomy was initially developed, there were approximately 200,000 elements. But the government worked to seriously reduce the number of elements businesses would have to use to 8,000 (the US GAAP taxonomy has approximately 15,000 elements).

One result of the taxonomy development and pruning exercise is that government departments are now working in a more cooperative way. Agencies are beginning to share information instead of asking for it from businesses multiple times. In addition, usage of the uniform taxonomy has reduced the number of errors in amounts reported.

The next phase is for companies to begin using the uniform taxonomy to file government reports in XBRL one time for all departments in the Dutch government. The concept is for companies to file business and financial information one time for all Dutch government departments (see the graphic depicting the Dutch government’s plan)

dutch-xbrl-project4

Now is the time for the US Government to reduce the regulatory burden that US businesses are bearing. Learn a lesson from the Dutch and begin to streamline regulatory reporting. President Obama: that would be a change we could all support.

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