Open Platform: XBRL Filing Success

When the Securities and Exchange Commission (SEC) mandated the adoption of Extensible Business Reporting Language (XBRL)—or “interactive data”—for public company filings, many assumed it would be a simple extension of electronic data-gathering, analysis, and retrieval (Edgar), or even a replacement of Edgar altogether. With a few exceptions, the overall attitude was “wait and see,” while learning the requirements before committing resources.

With the approach of the June 15, 2011, deadline that mandates XBRL for the biggest group of public companies, there are more than a few anxious people in corporate compliance offices. As companies are beginning to realize what is truly required, many are searching for the best way to do the job correctly and efficiently.

A few of the critical issues for these companies to focus on include:

Mapping decisions from the outset

Understanding internal limitations

Finding the right partner

Decision Mapping
Currently, there are about 13,000 XBRL concepts that companies can choose from. Of course, not all of them will apply to your company, but that’s a daunting number for even the savviest filing experts when you are striving for accuracy and transparency. Incorrect XBRL submissions require an amendment filing to be made within 24 hours. And with such a short turnaround time and the complexity of XBRL, the potential for further errors exists, not to mention the manpower and resources needed to rectify these errors.

Companies should begin the XBRL process by “mapping” their XBRL decisions. This means they need to discuss, ratify and record the decisions made around the selection of each XBRL concept. With these decisions documented, firms are not only able to detect XBRL concept-selection errors prior to submission, but they also have a record of what they decided and how it was decided, if needed some time in the future.

Mapping concept selection decisions is a key building block in the XBRL process, and if done well in advance of production prior to a compliance deadline, it could save an enormous amount of time and resources on the back end.

Overcoming Stumbling Blocks
Because XBRL is relatively unfamiliar to most companies, it’s not unusual to hit some stumbling blocks along the way. We have seen companies take an initial pass at XBRL mapping and tagging, only to get the job about 80 percent complete and be unable to complete that last 20 percent without assistance. We have even seen instances where the XBRL process needed to be quickly redone from scratch. It’s important to be realistic about what you can accomplish on your own.

One of the most common challenges is that even a working knowledge of XBRL can only take you so far. Basic concepts like “revenues” for total revenues do not present much of a problem, but unusual financial statement data and even some relatively common financial data necessitate a closer look. The SEC requires that you review all of the approximately 13,000 available XBRL concepts to select the appropriate tag, and if it is determined that there is no existing concept that applies, an extension to the taxonomy must be created. Unless you speak the language, technical questions about extending the taxonomy don’t make a whole lot of sense.

Take, for example, an actual line item listed as an asset on one company’s balance sheet that reads “expenditures billable to clients.” As a business practice, this is nothing particularly unique and is done around the world. Many firms that provide client services regularly account for this business practice. One would naturally be inclined to think that something so seemingly commonplace should not be problematic in the context of the XBRL process. Think again. There is currently no standard taxonomy element for a corporation that reflects the concept “expenditures billable to clients.” Accordingly, you would likely have to create a taxonomy extension or new tag that reflects this concept. You would also want to make a note of this so that your company’s taxonomy is amended to include this addition for future use.

Selecting an XBRL Partner
The difficulty of first-time XBRL filing makes the prospect of tossing your financial statements over the transom to a third-party provider like a financial printer and having it perform all of the XBRL work, appealing. This can be done, but it is rarely­—if ever­—the optimal choice. The reason is fairly straightforward: While an experienced services provider may be an expert in XBRL, it is probably not an expert in your line of business or in your company. When it comes to relatively common elements such as “revenues” and “marketable securities,” your XBRL partner can probably manage. But for industry-specific and company-specific nuances, it is imperative that the company take an active role in the decision-making process.

The best approach to producing successful XBRL is having both parties­—the business experts and the XBRL experts­—at the table together in order to discuss the available options and arrive at the most appropriate solution. Your XBRL partner’s job is to consult and provide recommendations based on the data and knowledge that you provide, and then to execute the XBRL tagging exactly as you have approved during the mapping phase.

Your "decision map" will be critical to your XBRL partner’s effectiveness. By providing the rationale, your partner will be able to understand your reasoning in order to verify and ratify the pertinent decisions. In addition to helping with the tagging, a quality partner will be able to scan the financial statements using XBRL software and check the results against standard US Generally Accepted Accounting Principles (GAAP), XBRL concept definitions and references.

Note that even if you have a great XBRL partner, it does not necessarily mean that you don’t need to know XBRL. It may not seem practical­—especially in today’s difficult economy­—to dedicate the resources necessary to learn the intricacies of XBRL, but a good working knowledge will help ensure an informed conversation, and will avoid having your partner make critical compliance errors that could leave you vulnerable to disciplinary action.

Measure Twice, Cut Once
There are many potential pitfalls along the way for first-time XBRL filers. Taking the time and effort to map decisions, understand your limitations, and engage with the right partner can significantly reduce errors and additional costs, and are the first steps in establishing a robust, repeatable filing process.

Bob Buckholz is vice president, general manager, of Command Financial, a content management and financial printing company based in New York City.