Saturday, May 30, 2009

XBRL:Advantages and Disadvantages

XBRL stands for Extensible Business Reporting Language, which is a language used for the electronic communication of business and financial data. It assigns unique tags to different financial terms, categorizes them , shows the relationship between them, and allows the data to be analyzed by the computer software. XBRL is expected to revolutionize the business and financial world. Listed below are some advantages and disadvantages of this language.

Advantages of XBRL:
  • Provides a standardized language for all companies reporting their financial data
  • Allows investors and stakeholders to easily download and understand financial reports
  • Provides a list of definitons (taxonomies) for the financial terms used
  • Saves time in entering and reporting financial data and increases efficiency
  • Is very cost-effective

Disadvantages of XBRL:

  • Is not used by all publicly traded companies as of now
  • Tags may be wrongly assigned to financial terms
  • There is still a lack of consistency in the use of standards
  • Wrong definitions (taxonomies) may be given to certain financial terms
  • It may pose security risks for companies publicly reporting their financial information

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Please add to advantages and disadvantages of this technology. Also, please share your experience with the technology.