The Shanghai Stock Exchange (SSE) General Engineer Bai Shuo indicated that the SSE had made great achievements in the application and promotion of XBRL in the past few years. Bai made this remarks in an interview during the interval of the recent "International Symposium on Standardization of the Securities and Futures Industry". He said that the SSE with taxonomies in line with international practice, made reporting process smooth, accumulated enough instance documents, thus greatly improving data quality. Authorities from the XBRL International Steering Committee (ISC) remarked that the SSE, as one of the earliest user of XBRL, set a good example in the global promotion of XBRL.

In the interview, Bai, the Global Chairman Kurt Ramin of the XBRL ISC and the Vice President Ms. Liv Watson of Global Strategy at Edgar Online Inc. explained what XBRL was and how the capital market benefited from it.   

Information disclosure quality upsurges

A good securities market sees truth, transparence, standardization and high efficiency in information disclosure of listed companies. While investors and other market insiders are doubtful about and confused by information disclosed by listed companies, few of them know that information technologies can greatly help them get high-quality information. On the China's securities market, information was disclosed through fax, and then via reporting software, ultimately the XBRL.

In the interview, the experts were quoted as saying that "XBRL technology creates "Internationalized Label" for financial reporting. The XBRL enhances the speed, quality and sharing of information disclosure, thus, preventing, to some extent, false information disclosure."  

Refuse "self-speaking"

The sticking point for financial reports is to disclose relevant information in line with regulators' rules. Although most financial reports, printed in newspapers or released in such formats as PDF, DOC and HTML, are readable copies for man, it's difficult for computers to use the statistics of the disclosed data for analysis, comparison and examination. Before the application of XBRL, regulators, intermediaries and information service providers had to reduplicate these data, which led to low efficiency and high rate of errors. Once they released the processed information, investors – information end users – often faced barriers such as different disclosure methods, diversified technical standards of text forms and various data alien to international conventions. Often, investors, unable to extract data for analysis, decided to invest elsewhere. Many of them were overseas investors. Such a "self-speaking" situation could be easily found in security markets home and abroad, for lack of XBRL. But with the advent and international promotion of XBRL in 2001, it is hoped to see an end of the situation. "On the website of KOSDAQ of South Korea, we can easily see an international diversification of investors in corporations applying XBRL in information disclosure." Deputy Director Huang Hongbin of the SSE Listed Company Department said.

"Besides, with more hedging instruments used by Chinese enterprises, financial derivatives will be more and more sophisticated and financial data on China's capital market will be more and more complicated, it's imperative to get a uniform standard for information exchange." said Mr. Ramin. XBRL technology would promote the application of "Internationalized Label" in financial reporting, and the data can be translated into 40 languages at the same time to better serve the international market.

The first gatekeeper

Some listed companies such as Enron and Worldcom, making use of the uncompetitive date analysis, release false information to misguide the market. However, XBRL can be the first gatekeeper against disclosure of false information. Bai explained that XBRL would have mandatory data filling and automatical check on the data. If data are contradicted, instance documents will refuse to come out. Moreover, with many analytical instruments to compare and analyze instance documents of different corporations, abnormal data can easily be detected. Ms. Watson said, "It's like the ‘FedEx', and mails can be traced anytime." Such a powerful function owes itself to the advanced XBRL technologies. XBRL can read and classify financial data, and provide a solid platform to interpret and analyze financial information. Based on constant improvement of the transparency of commercial reports, XBRL improves the data security by reinforcing the control over the data flow between the computer systems.

Mr. Ramin and Ms. Watson agreed that the SSE, as one of the earliest user of XBRL, set a good example in the global promotion of XBRL.

Supported by high-ranking officials of the SSE and the China Securities Regulatory Commission, the SSE Listed Company Department was the first to apply and promote the XBRL. In early 2003, the SSE began electronic reporting of listed companies' periodical reports based on XBRL standards. Initially, the SSE selected 50 Shanghai-based listed companies as the pilot units of XBRL to report the abstracts of annual reports of 2003 via standardized reporting template. But ultimately a total of 118 corporations participated in the project. Through over 3 years of practice and promotion, all SSE-listed companies can produce and report XBRL instance documents of their periodical reports through the standardized reporting system, thus greatly improving the quality of information disclosure of listed companies.

The SSE was supported and recognized by the XBRL International in the application. In April 2005, the SSE became a member of the XBRL International upon application. It was the first time that a Chinese company had been accepted by the XBRL International. In September 2005, the China Listed Company Information Disclosure Taxonomies, independently developed by the SSE, became the first of its kind acknowledged by the XBRL International. In June 2006, the China Fund Company Information Disclosure Taxonomies, also independently developed by the SSE, was the first of its kind ever acknowledged by the XBRL International in the international XBRL application field.

Summing up the SSE's experience in applying and promoting the XBRL in recent years, Bai said, "The SSE had made great achievements in the application and promotion of XBRL over the past few years, formulated taxonomies geared to international practice, made reporting process smooth and accumulated enough instance documents, thus greatly improving data quality."

Linking up the value chain

According to Mr. Ramin, their trip aimed to actively push forward the establishment of a XBRL jurisdiction in China so as to help China's enterprises accelerate their process into the international community.

A XBRL volunteer project recently developed by the U.S. Securities and Exchange Commission (SEC) showed that major companies such as Microsoft and General Electric had adopted the XBRL for reporting. The SEC announced recently that it would invest US$54 million in restructuring its public information disclosure system and that the new system would mainly be based on the XBRL standards. In the Netherlands, taxonomies based on XBRL won the National Innovation Award. A peak time for promoting XBRL application is coming worldwide.

Seeing the worldwide trend and the reality in China, Bai explained, "At present, the value chain based on the XBRL is not linked up in China. The listed companies' information in XBRL format, after being processed by different users, should return to the market for boosting the transparency of listed companies. More analytical and demonstrating instruments are in demand to help market participants get their needed information for higher efficiency. We should work on the following three aspects: (1) to get more resources, (2) to obtain more support, (3) to add value. Specifically, firstly, to educate the market for more convenient information reporting and adoption of XBRL in more fields and industries; secondly, to get support from international organizations and industries and to fully take advantage of the trend of promoting the XBRL; thirdly, based on texts, to invent a whole set of instruments to get the data value known and used by the market as soon as possible.

Mr. Ramin concluded, "In the promotion of the XBRL technologies in China, the XBRL ISC only retains its trademark and doesn't charge any fees. As the XBRL technologies are open resources, no patent fee is charged. Moreover, the developers shall own the copyright of the taxonomies independently developed by them, even based on the technologies."

Background

XBRL (eXtensible Business Reporting Language), the application of XML (eXtensible Markup Language) in the information exchange field of financial reports, is the latest standard and technology in current unstructured information processing, especially the financial information processing.