Extensible business reporting language (XBRL) may have moved to the SEC’s back burner in the past few weeks. There are obviously more pressing issues demanding the agency’s attention. Nevertheless, it’s a topic that isn’t going away – and it’s a topic that many people responsible for corporate planning and reporting remain clueless about.
In August, BPM Magazine conducted exclusive research on the topic, sponsored by TITAN-Pinnacle, a TITAN Technology Partners company. The results are astonishing.
Of the 196 respondents to the survey, two-thirds work in public companies that file with the SEC (a handful work in companies that file overseas; the remainder are in private companies or government agencies). Yet only 1 percent of respondents work for companies that have implemented XBRL.
The companies that haven’t implemented XBRL offer a range of reasons. For 9 percent of respondents, cost of new software to support data tagging is the largest obstacle; lack of demand for XBRL holds back another 16 percent. This is significant for some survey participants. Wrote one: “[XBRL] isn’t for our benefit; it is for the benefit of regulators, vendors, information aggregators, analysts, etc. It is foolish for a company to think it will save them money. We already know all our numbers and can look at them every which way. Some analyst or regulator will make assumptions and make a wrong analysis, and then we will have to spend more time and money explaining to them the error of their ways.”
Clearly, many of our readers have not bought into SEC chairman Christopher Cox’s assertion that using a standard, searchable data format such as XBRL “promises to let companies prepare their financial information more quickly, more accurately, and for less cost.”
Even worse for XBRL’s prospects in the near term, at least among organizations that aren’t required to adopt it, is the fact that our survey respondents most frequently cited “time and effort needed to learn about XBRL” as their company’s biggest barrier to data tagging (selected by 32 percent of participants). When asked to describe their current level of knowledge about XBRL, 43 percent called themselves beginners, and 38 percent said they have no knowledge at all. Of those who have no knowledge of XBRL, 81 percent work in public companies, and 43 percent work in companies with more than $1 billion in annual revenue. They include finance managers, financial and business systems analysts, vice presidents of finance, project managers for BPM software implementation projects, even consultants with well-known firms.
Perhaps these results aren’t as alarming as some of the other news rocking the SEC this week – but they’re worth noting. A proposed SEC rule would require certain very large companies to use XBRL in all of their SEC filings for fiscal periods ending this December 15 and beyond. Says KPMG director of advisory services Michael Ohata, “CFOs and other finance executives don’t need to be XBRL experts, but they should understand XBRL’s potential impact on the organization’s financial reporting processes, including what XBRL reporting actually looks like and how it differs from current filings.” Our research indicates that many finance managers remain far from this base level of understanding.
If I’m describing you, what can you do? The BPM Magazine and BPM Express online archives can help. In May’s newsletter, I explained XBRL at a pretty fundamental level. We’ll continue to cover XBRL reporting in future issues. It’s also a good idea to monitor the XBRL information coming out of the SEC, and many software vendors and consultants are interested in making the case for benefits companies stand to gain by making their data more accessible to investors, analysts, and others.
XBRL is coming, whether companies like it or not, and there’s no longer a good excuse for finance professionals in public companies to stay uninformed.
