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Sarbanes Oxley : Technology : XBRL
Centralized XBRL-Based Reporting System
XBRL Financial Reporting Promises to be a Boon for Banking, Helping to Drive Government and Consumer Confidence
By
Jaideep Shah
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Jaideep Shah
Product Management Manager
Fujitsu Software Corporation
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Tracking information on a bank can seem like searching the proverbial needle in a haystack. The Federal Financial Institution Examination Council (FFIEC) aims to change all that with the ?Call Report Modernization Project,? which will require compliance by financial institutions starting in October 2005.
The key technology that is enabling this modernization project is the eXtensible Business Reporting Language (XBRL), an XML-based markup language that is becoming the global standard for financial reporting. XBRL International, a non-profit consortium of approximately 300 companies that include leading companies and organizations like Deloitte, Fujitsu Software Corp., and the Institute of Management Accountants, work together to build the XBRL language and promote and support its adoption. Through centralized XBRL-based reporting, public and federal banking regulators can expect easier access to a common pool of information about banks under the FFIEC?s supervision.
A parallel can be drawn between companies required to meet the FFIEC mandate and companies who addressed the first wave of Sarbanes-Oxley Compliance. Those organizations that attacked the issues with SOX compliance head-on and developed a framework for compliance are the ones that made it through the first deadline smoothly and are well positioned to address subsequent deadlines. Those companies that took a ?band-aid? approach, by only doing the work necessary for the first deadline, now face substantial challenges meeting follow-up deadlines. The companies with the foresight to anticipate future compliance demands by building a sustainable compliance framework are now reaping rewards. Similarly, the investments that banks and other financial institutions make in complying with XBRL-based filing mandates provide a foundation to meet future compliance demands.
The drive behind the Call Report Modernization Project is to simplify data collection and presentation for banks, regulators, analysts and the public. That is no small order when you consider the complexity of reporting faced by financial institutions and the five government agencies that report into the FFIEC: the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA) the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS).
? ?Call books? delivered quarterly contain information comprised of 2,000 fields from 8,300 financial institutions.
? The traditional filing method requires a financial institution go through 400 pages of instructions.
? On the back end, there are 1,500 edit formulas in place to promote data quality.
With a new centralized XBRL-based reporting system, all of the manual work, calculation, and information redundancies will be boiled down into a straightforward process. Significantly, XBRL enables a common approach to tagging and collecting data that is distributed across many different computer systems, databases and applications. This simultaneously helps to shorten financial reporting cycles while increasing both the transparency and accuracy of information. As a result, federal agencies, banks and consumers all can expect to benefit from the implementation of XBRL-based reporting.
The Call Report Modernization Project represents the first time in the United States that XBRL-based filing has been mandated by a federal agency. However, XBRL is a well-established standard. Led by the American Institute of Public Accountants (AICPA), its development and use has been promoted by financial institutions and their technology partners since 1998. By 2002, the XBRL standard was far enough along some companies began reporting their financials using it. Today hundreds of companies around the world are using XBRL to streamline their financial reporting using tools like Fujitsu?s Interstage XWand.
Although XBRL is a proven standard, meeting the Call Report Modernization Project still requires some work, and many banks and financial institutions are wondering just how much and how fast they need to make changes in order to achieve compliance by this October. One way for organizations to determine their compliance game plan is to look at the parallel that can be drawn with companies that have worked to comply with Section 404 of the Sarbanes-Oxley (SOX) act covering corporate financial reporting.
While the ?Call for Modernization? is looming in the back of many financial institution?s minds, come October, those institutions that have implemented XBRL processing can feel confident, not only about their reporting today, but also their ability to meet the financial reporting demands of tomorrow.
Jaideep Shah
Product Management Manager
Fujitsu Software Corporation
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