How XBRL Web services impacts regulatory assessments

How can XBRL help regulators capture, analyse and report growing volumes of information? How can XBRL help regulators realize e-government goals through critical Internet standards? How can XBRL help regulators better serve the marketplace? PwC's global XBRL experts provide a comprehensive guide for regulators, regulated entities, software makers and market participants.

Regulators and other government agencies are faced with managing, processing and analysing growing volumes of business information. In the past, information exchange between regulated entities and regulators was typically conducted through the manual exchange of paper based forms. From those forms, regulators applied a range of analytical procedures almost all of which started with the manual transfer of critical information from the relevant forms into storage and analysis applications.

To increase their efficiency and effectiveness, regulators around the world are migrating their processes onto the Internet. Many regulators already offer web based forms into which regulated entities can enter their information. This enables regulators to access and re-use reported data in their analytical applications in a more automated manner, reducing processing time, increasing information integrity and improving the timeliness of their own analysis and reporting, all by eliminating manual preparation work.

The paper-to-Internet transition introduces two critical issues for regulators. First, assessing whether their paper-based information format is the most effective presentation from the standpoint of re-use, or if the Internet’s greater flexibility presents opportunities to enhance regulatory processes and drive down costs through an improved presentation format. Second, selecting an Internet based communication standard that is the most workable for their needs as well as for those of reporting entities and the regulators’ own information recipients.

Ideally, electronic filing forms should be capable of interfacing with a wide variety of software programs that reporting entities use, so that submitting information is as fast, easy and low-cost as possible. In addition, regulators need to deliver information in a format that their audiences in other government areas, the markets and the business community can access easily and cheaply, as well as use at their convenience.

In addition, regulators are confronted with adapting to new reporting requirements, such as International Financial Reporting Standards, the Basel II accords, the Sarbanes-Oxley Act of 2002 and more. Regulators must use still-unfamiliar data to develop working practices that ensure continuity of oversight and, in the case of international standards, facilitate co-ordination of cross-border interpretations. Transparency and, therefore, trust and confidence in new standards depends on consistent and clear application of standards.

Several regulators around the world have already discovered that the Internet can be leveraged to improve information flows and related analytical processes for themselves, as well as for reporting entities on the one hand, and those of other agencies and the public on the other: XBRL Web services. XBRL Web services provide a more cost effective and reliable platform for information transfer, in which data is instantly accessible and re-usable across the corporate reporting supply chain — between businesses and regulators, among regulators and between regulators and their audiences in government, the markets and industry.

Benefits of XBRL Web services deployment

Implementing XBRL Web services offers regulators and other government entities the following benefits:

  • Automated and more reliable exchange of regulatory and financial information across all software formats and technologies, including the Internet.
    • Reduced or eliminated manual data re-entry, lowering risks associated with transcription errors.
    • Lowered costs of preparing and distributing regulatory reports and related information, such as instructions, definitions, etc.
  • Improved access to financial information reported by regulated entities through a format which enhances information re-usability.
    • Lowered production costs, greater reliability and faster processing speed for more timely, accurate and informed regulatory assessments.
    • Increased efficiency of regulatory assessments and analytics.
  • Accelerated changes to and adoption of reporting standards and requirements through an extensible, flexible platform that facilitates and thereby accelerates changes in and adoption of reporting standards.
    • Collaborative nature of XBRL process provides regulators with input on the standards via enhanced communication and cooperation between regulators and respective industry organisations.
    • Reduced cost of regulation by spreading development and maintenance among collaborating organizations.

XBRL Web services are currently being used in the US, Europe and Asia for several different types of regulatory reporting, including:
  • Bank position reports consisting of thousands of individual data points collected by regulatory authorities
  • Company financial reports consisting not only of individual data points, but also text disclosures of policies, tabular schedules of assets, consolidations and a myriad of notes under a variety of accounting standards.
  • Business statistical information

As regulatory communication with regulated entities, industry groups, the markets and other regulators becomes increasingly critical to the global economy, XBRL Web services offers a compelling alternative to proprietary information standards that isolate agencies from the larger flow of information based on open, collaborative standards.

Who’s using XBRL?

A sampling of global regulators having already adopted XBRL Web services includes:
  • The UK Inland Revenue, which will start accepting XBRL filings for the 2003 tax year
  • The National Tax Agency of Japan (Kokuzeicho), which has scheduled implementation for 2003
  • The Australian Taxation Office (ATO) recently advised that it had adopted version 2.1 of the XBRL Specification as its content standard for electronic lodgment;
  • US Federal Financial Institutions Examination Council will begin using XBRL for collecting, processing, and distributing data from banks to audiences inside and outside the government beginning in 2004.
  • Autoriteit Financiële Markten (Netherlands Authority for the Financial Markets)

Case study

The first regulatory XBRL Web services adopter in the US is the Federal Financial Institutions Examination Council (“FFIEC”), an inter-agency body composed of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Controller of the Currency and the Office of Thrift Supervision. PwC teamed with Unisys and Microsoft to work with the FFEIC on its first deployment, the Call Report Modernization Project. The goal is to centralize and migrate the regulatory reporting process used for 8,000+ US banks onto the Internet using XBRL Web services. The enhanced regulatory processes will provide for more effective validation, processing and analysis of bank information much more rapidly and at a substantially lower cost than what is expended today. This project anticipates that all US banks will be reporting in this manner by the Third Quarter of 2004.

To learn more
Regulation magazine, Corporate reporting enters the information age, special edition, September 2003 (712kb)