Disadvantages of Using XBRL

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Extensible Business Reporting Language (XBRL) was designed as a language to electronically communicate business and financial data instead of the more traditional ASCII or HTML formats. The SEC mandated that as of June 2009 all public companies over $5 billion in assets must report financials using XBRL. XBRL uses an open-standard of creation and does not require licensing fees. A non-profit international consortium heads up development of XBRL. Despite its advantages, XBRL has disadvantages as well.

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Inexperienced users

Not all accountants have familiarity with XBRL; in fact, some have only heard of the language. XBRL's complexity combined with letting inexperienced users create data for transmission increases the opportunity for errors. These errors lead to a lack of confidence in the system and by investors. Because of this reason, many companies outsource the implementation of XBRL instead of letting in-house management information systems resources (MIS) manage the implementation. This outsourcing leads to increased cost and defeats the cost-cutting benefits associated with implementing XBRL.

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Company transparency

A big push for the use of XBRL involves financial transparency. XBRL takes away a company's ability to "hide" financial tricks in the books. Despite the fact that XBRL's design makes filing financial information easier, cheaper and faster, investors could find themselves digging deeper to determine the exact data reported.

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Security

Because XBRL data remains available at all times, it requires more security to maintain its integrity. These stricter security requirements not only affect security breaches initiated outside of the company's database, but security breaches from within the company as well. More accurate data makes XBRL a great tool, but it also means the data must remain secure. If a data breach occurs and investors gain access to the breached data (because of its constant availability) then inaccurate investment decisions could stem from the breach.

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Cost

The largest disadvantage remains cost. According to Malin, Bergquist and Company, LLP, "Although some experts say, over time, XBRL could lead to up to a twenty five percent decrease in reporting costs, some companies may find it difficult to justify the initial costs… " Unless a company has an automated tagging process, tagging XBRL data consumes hours of labor, increasing the cost associated with using the language.

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