There's a new and improved way to share business information. Its name is XBRL, and it's about to become a key financial reporting standard for companies everywhere.

XBRL is a short way to say a long name: eXtensible Business Reporting Language. Analysts say it's the most efficient financial reporting standard that most people have never heard of.

Whether they're aware of it or not, top managers should note that the Securities and Exchange Commission began phasing in the XBRL standard for some U.S. companies in mid-June.

Ripple effects from the shift are expected to be huge. "XBRL is going to fundamentally change financial reporting," said Charlie Hoffman, one of XBRL's creators.

"It allows people to create financial software that costs less money than before," he said. "And it makes it so the whole process of exchanging information is easier."

Universal Way To Share Data

XBRL is a standard that is the basis for a new type of financial software. It's universal and easy to use. One thing it does is tag data with labels and send them over the Internet, either to a government agency or to another company. There are more than 16,000 tags to choose from, so far.

XBRL will let companies easily compare their financial and operational data against peers. It will give them a better idea where they stand.

XBRL is an offshoot of the XML (eXtensible Markup Language) standard for creating languages for the Web.

Researchers in the 1990s began creating new Web languages based on XML. In 1998, a group of accountants on the West Coast — Hoffman among them — came up with a variant they called XBRL.

Today, most software companies — including UBmatrix, Germany's SAP (SAP), Microsoft (MSFT) and Oracle (ORCL) — are starting to create XBRL software to help companies send financial data over the Web.

Company officers, analysts and investors will have quick access to a lot more data on a company than in the past.

Hoffman cites the options backdating scandal that gained recognition in late 2005 as the kind of problem that XBRL could have helped to scuttle in its infancy.

Regulatory agencies were unable to get the true facts about backdating practices for many years, until academics ferreted out the truth. If XBRL software had been in wide use, regulators would have quickly seen what was happening.

China, India Use XBRL

The standard is already widely used in other parts of the world. Unlike most new technologies, the U.S. is late to the party. China, India and others have taken the lead in rolling out XBRL. It's just starting in the U.S.