A majority of U.S. public companies that plan to file their financial statements in XBRL are actively preparing to do so and have at least a basic knowledge of the extensible business reporting language, according to a survey by the AICPA and XBRL US.
The “XBRL Preparedness Survey,” conducted online in November found that 93% of the 215 respondents (90% of whom work for U.S. public companies), had at least a basic knowledge and 73% have begun preparation.
That is good news, especially given that many of the companies represented in the survey are not yet required to file in XBRL under the SEC’s mandate, according to Ami Beers, Business Reporting, Assurance & Advisory Services and XBRL manager at the AICPA.
“People are starting to learn about XBRL and not waiting until the 11th hour,” she said. “They’re getting ready. They know it will take time.”
It’s not unusual to see companies take 120 hours or more to get up to speed for their first submission, but that time is greatly reduced on the second round of filing, Beers said.
Of the 25% of survey respondents who had already submitted XBRL-formatted financial statements to the SEC, 57% said it took their organizations more than 120 hours to prepare for XBRL adoption for the first time, including getting educated about XBRL in general and the SEC mandate specifically, choosing a vendor for instance creation software for in-house preparation, including software training, or choosing a third-party service provider.
On the second round of filings, 37% of those respondents took less than 20 hours to prepare; 27% took 20 to 40 hours and only 6% took more than 120. Additionally, 45% of respondents said the preparation process was “significantly easier” than the first time.
Detailed tagging of footnotes remains a challenge, however, with 21% of respondents saying they need more information on how to do this. Beers attributes this to the fact that no one has been required to do this type of tagging yet and therefore best practices have not been made available.
The first phase of mandated XBRL filings to the SEC began for the 500 largest U.S. public companies in June 2009, all large accelerated filers must begin filing in XBRL this June and all public companies will be required to do so in June 2011.
Companies that began filing last June will have to familiarize themselves with the detailed footnote tagging process by this June, but they may have difficulty deciding what information needs to be tagged and selecting the accurate elements within the US GAAP Taxonomy.
“It’s a judgment call,” Beers said. “Companies need someone who is familiar with the information in their financial statements, who can choose the correct elements in the taxonomy that are depictive of what’s in those statements.”
Inside vs. Outside
Another finding is that 14% of respondents said they would like to learn how to increase efficiencies in preparation and submission.
The best way to accomplish this is to move the XBRL tagging process up earlier in the process, Beers suggested, which may mean using internal resources despite the fact that 55% of respondents who had already submitted XBRL filings outsourced the process and 56% of those who had not yet filed in XBRL said they will use an outsource provider.
Outsourcing is a bolt-on/after-the-fact approach in which companies produce their financial statements and then start the XBRL tagging process.
As more data is required to be submitted in XBRL format, companies can gain efficiencies by implementing XBRL earlier in their processes, she said.
The House passed two bills in December with provisions related to the use of XBRL.
H.R. 2392, the Government Information Transparency Act, contains provisions to simplify mandatory financial reports for companies receiving federal funds by having federal agencies collect the data in a uniform, searchable format using XBRL. H.R. 4173, the Wall Street Reform and Consumer Protection Act, states that financial market regulators must report to Congress for the next five years on how they are “encouraging the use and acceptance of interactive data” to increase transparency in financial reporting. Neither provision has passed in the Senate.
Eventually, more companies also will start to realize the benefits of using XBRL for internal reporting, especially large entities that need to gather information from multiple sources, Beers said. Currently, only 4% of respondents said they are considering using XBRL data for “internal reporting and analysis of information for management decisions.”
Regardless of whether they outsource or do the work in house, companies still hold ultimate responsibility for the accuracy of their filings when they sign off on the process and therefore will need to educate themselves, Beers said. (For more on this topic, see “Panelists Advise Companies to Take Responsibility for XBRL Tagging—Even When Outsourcing.”)
Many free resources are available to help. Those most commonly used by respondents were the XBRL US GAAP Taxonomy (22%), their service or tool provider (16%), XBRL US Preparers Guide (12%), educational webinars (12%), tool provider training (12%), SEC resources (11%), review of competitor filings (11%), SEC EDGAR Filer Manual (10%).
The AICPA is offering a free Webcast titled “XBRL – Preparing for Phase II and Detail Tagging,” which will take place at 2 p.m. on Jan. 27. To register, click here. For more information on XBRL filing, see the final rule on the SEC’s Web site, visit xbrl.org/us or see the Edgar Filer Manual.
Click here for more details on the survey.