Bob Schneider is a Partner in 
Wilson So is the Director of Hitachi America, Ltd. XBRL: Short-Term Costs Will Yield Long-Term Benefits - Part I
Written by Bob Schneider Posted February 16, 2007
Events this decade have been so dramatic that it’s hard to recall it began with prospects of a Y2K meltdown. Billions of dollars were poured into correcting the ancient code that expressed years in overly economical double-digits. The Y2K effort was naturally focused on avoiding catastrophe and not on any ancillary benefits. But after January 1, 2000, came and went without major incident some charging the fears had been overblown, others that the huge Y2K investment had saved the day technology officers began to contemplate the resulting gains.
Inventory-taking of software and systems that was once done haphazardly, if at all, was standardized. Systems for communicating software issues, both within the organization and to customers and suppliers, were upgraded. Formal software audit policies were introduced. Rules for contingency and disaster planning were detailed and prescribed.
The return on Y2K investment grew dramatically in the wake of 9/11. When the terrorists attacked, the redundancy built into information systems in the event of a Y2K meltdown proved highly advantageous. The global banks headquartered in lower Manhattan were able to shift with relative ease to the backup systems that had been enhanced through Y2K outlays. The Northeast Blackout of 2003 provided additional evidence of the efficacy of Y2K expenditures, with the relatively rapid restoration of power in many areas because of Y2K capital investment.
Just as the country was recovering from 9/11, the series of business scandals symbolized by Enron came to the forefront. In the wake of corporate deceit, the Sarbanes-Oxley Act (SOX) was passed in 2002. In my post XBRL Dovetails Nicely with SOX’s Surprising Benefits, I discussed the Harvard Business Review article that enumerated the unexpected gains from the law. These included strengthening the overall internal control environment and exploiting convergence opportunities from other regulatory requirements. Although I wouldn’t declare that the view of SOX in Corporate America is now widely positive, I think it’s fair to say that many organizations have become resigned to the law and are now focusing on ways to leverage their SOX investment.
Now CFOs may face another significant challenge: a mandate by the SEC that public companies file their financial reports in XBRL. Such a requirement would be far different in both scope and character than either Y2K or SOX. It would not be a response to an imminent threat of systems meltdown or to a loss of confidence due to corporate chicanery. Rather, it would be an effort to improve upon existing methods of financial reporting that, all things considered, have worked fairly well. And the resources expended would be far below those for Y2K and SOX.
Nevertheless, since more than a few firms will view the cost/benefit equation from an XBRL mandate to be mostly cost and little benefit, it’s important to consider whether there are likely to be longer-term positives from their outlays for XBRL. In other words, do public firms have reason to believe that, like Y2K and SOX, they will be able to leverage their XBRL investment?
In the second part of this post, scheduled for publication on February 23, I will discuss why I think the return on complying with an SEC mandate for XBRL financial reporting may be better than many companies now believe.