Given the amount of data that must be tagged and the compressed filing time frames for public companies, XBRL tagging is having an adverse effect on reporting cycle times and review processes. At least that’s the view of the Committee on Corporate Reporting at the Financial Executives International.
Committee Chairman Loretta Cangialosi is appealing to SEC Chairman Mary Schapiro to amend certain XBRL requirements. Cangialosi reminded Schapiro that the committee has raised concerns with the SEC before about the filing time lines and cost-benefit issues related to detailed tagging of footnote information.
True, the SEC has engaged in extensive outreach with preparers, users of financial statements and XBRL service providers, she acknowledged. But the problem hasn’t gone away, she said. There’s just too much data to tag with too little time to properly tag it all and meet filing deadlines, she contends.
“Whether this activity is performed internally or outsourced to third-party service providers, the commitment of resources is significant and the effect on reporting cycle times and review processes has been adverse,” she wrote to Schapiro.
Whether companies perform the tagging in-house or outsource it to third-party service providers, companies are struggling with the reporting cycle times and review processes. “Based on current trends in the volume of disclosure provided in registrant filings, we expect this effect to become more pronounced and costly in the future,” she wrote.
Cangialosi contends only a fraction of the tagged information is actually used by data aggregators and other financial statement users. Instead, those users are primarily interested in tagged information in the basic financial statements, with only a small subset looking at the detailed tagging of specific footnotes.
“We estimate that roughly 75 percent of the volume of XBRL tagging is not actually used by investors and yet the tagging of the entire data set is contributing to delays in filings and diffusion of data preparation and review efforts across the registrant population,” she wrote. Just have a look at the number of hits on corporate websites, Cangialosi contends, where the average is in the single digits.
The committee is calling on the SEC to develop a more focused approach to detailed tagging that limits its application to the core financial statements and the standardized, comparable footnote data that is used by analysts and investors. The group also hopes to see the SEC develop a way for registrations to efficiently and effectively submit a single filing that incorporates XBRL information instead of requiring companies to continue to file both in HTML and XBRL. Cangialosi also calls on the SEC to exempt wholly owned subsidiaries that qualify for abbreviated disclosure rules from detailed tagging, especially when considering their data is consolidated to a parent company’s financial statements.