When you cut through all the details of banking applications, specialized industry applications, special tools for formula processing, other tools for presentation, international applications, and more … there are really just two fundamental uses of XBRL.

Here is the first use: You start by producing your financial statements the same way that you always do. Once you have your completed financials in hand, you convert them to XBRL and send them out into the world. In this model, XBRL is for the benefit of everyone else. They thank you.

Here is the second use: You identify all of the fundamental transactions in your business according to a taxonomy expressed in XBRL. You use this classification of all the basic financial facts within your organization as a way to aggregate these facts, discover new facts, track activities, and produce reports. What you learn from this use of XBRL is your business. You’ve got yourself to thank.

It is possible to combine the uses, starting with the second use, using XBRL for your own purposes inside your company, and then moving to the first use, creating XBRL reports for the rest of the world. The possibility of combination should not obscure the differences between the two uses.

Not surprisingly, these two different uses of XBRL get separate treatment within the XBRL community. The first use–focused on external users–is supported by a set of “financial reporting” taxonomies,collectively referred to as “XBRL FR.”  The second, internally focused use has a taxonomy of its own, called XBRL GL (for “general ledger”).

If I were betting, my bet would be that the success of XBRL–the breadth of adoption–will depend on which of these taxonomies takes hold in the market.

More specifically, I would bet that broad use of XBRL depends on the eventual success of XBRL GL, or some descendent or variant of it. The reason is that internal use is the only way to get return on investment in XBRL. It could be used to automate internal controls, contributing to better internal decision making, better risk management, and more affordable, sustainable compliance. It could be used to radically reduce the cost of external audits.  It could be used to support management decision tools–dashboards, metrics, benchmarking–to help the organization become more competitive.

By contrast, it is hard to see where the payout is from tagging financial statements in XBRL only at the end of the process, for release to the analysts and regulators.

The people who would bet against me are those who figure that XBRL is going to be imposed from the top down, as a requirement by regulators. I don’t see that happening in the U.S. As the SEC’s Peter Derby said last Tuesday morning at the XBRL conference, XBRL is currently hard to do and U.S. regulators prefer to follow the market’s lead when it comes to technology. It could be a different story in Europe, where, for example, the need to bring 25 different national banking systems together under the direction of a single Committee of European Banking Supervisors really does appear to require something like XBRL:  If it didn’t exist, they would need to invent it.

Assume for the moment that I am right–that internal use of XBRL will be what drives this market forward, and that broad availability of XBRL FR, created automatically from the in-house XBRL GL, will be the consequence, not the cause of market acceptance. Given that assumption, you would be looking for evidence of internal adoption. Is it happening?

From the evidence at last week’s conference, the answer is “NO.”  The only country where there seems to be serious focus on internal use is Japan. Hitachi showcased a case study of an XBRL GL implementation for WACOAL, an apparel manufacturer, and PCA Corporation, which offers a Japanese financial accounting package that was described as being similar in scope and market reach to Quickbooks, has announced support for XBRL GL within their product.

What might broaden this activity?

XBRL GL is currently a technology looking for a good problem to solve. This is not to say, at all, that XBRL GL is not potentially useful. Look at the list–executive dash boards, more effective internal control, reduced cost of compliance–each of these outcomes is very useful. But XBRL GL has yet to demonstrate that it is the critical, secret sauce that makes any one of these good outcomes doable, affordable, or more effective than ever before. XBRL GL needs to move from a technology that could beused for any of these good things to becoming the critical technology that an organization must haveto make some one of these good things available and affordable.

I think this can happen.  It will be driven by an application that needs XBRL GL, and not from XBRL GL needing an application. There are a number of candidate applications. What remains to be seen is whether the companies building and using those applications will find that XBRL GL is the missing piece they have been looking for.