Slowly but surely, XBRL in Europe is coming of age.

The idea behind XBRL, eXtensible Business Reporting Language, is simple. Instead of treating financial information as a block of text - as in a standard internet page or a printed document - it provides an identifying tag for each individual item of data. This is computer readable. For example, company net profit has its own unique tag.

This impacts companies in a number of ways.

Firstly, there is a growing number of regulators across Europe who are mandating the use of xbrl for financial reporting. These include tax authorities, banking supervisors & banks, securities regulators, stock exchanges and statistical agencies.

Examples of these projects in Europe include the Dutch taxonomy project, where all companies – and not just listed companies – are now required to file accounts, tax returns and financial statistics in xbrl. Meanwhile across the border in Belgium, the Central Bank is looking to 270,000 registered companies to file accounts in xbrl by April 2007. And in Italy, the NIS system – equivalent to Disclose or RNS – is being redesigned to transpose information submitted to an xbrl format for distribution to the listed company’s website, Information vendors, the media and regulators.

So companies need to develop systems, processes and teams capable of responding to rapidly evolving regulatory and market demands. They also need to ensure that deadlines can be met without reliance on quick manual intervention outside of the normal control environment. The regulatory focus on these controls is intensifying.

Clearly this is a challenge that cannot be met overnight. The good news is that many of the necessary adjustments can be made incrementally, over an appropriate planning horizon. For example, IFRS can be embedded in existing management systems through the use of XBRL which can streamline reporting and minimise the need for manual intervention.

Perhaps inevitably, xbrl is further advanced in the US, where Christopher Cox, the new chairman of the SEC, is on a mission to improve financial reporting. "We really are on the threshold of a revolution in corporate reporting," he has said. During his tenure, he intends to "bring our system of corporate disclosure and financial reporting into the 21st century."

He presented his vision for interactive data to the 12th XBRL International Conference, "Interactive data could make it possible for issuers to reduce the cost of substantiating the numbers that appear in their financial statements. It would assist regulators in maintaining the integrity of the markets. It will also make disclosures more useful to investors, and to every market participant," said Cox.

In the early stages of any new technology, there are early adopters, who tend to be technologically aware. Others are satisfied to use existing technology until the new technology is more widely accepted and better tools are developed. SEC Chairman Cox seems optimistic and not concerned with the slow pace of adoption. "The reason that everyone is not doing their financial reporting using interactive data is simple: it's a new concept. People will use it when they discover how much time and money it can save them, by automating and speeding up the process." Indeed, he says the SEC wants it because it will make financial reports much more useful to investors.

"Companies will want interactive data for the same reason. The truth is, it's inevitable - and if the 21st century has shown us anything thus far, it's that technological change occurs extremely quickly."

Cox continues: "It's not surprising that we're hearing from both filing agents and accounting firms that their clients are suddenly showing greater interest in interactive data. Given its enormous potential, there's no doubt this increased interest in interactive data will soon translate into widespread adoption."