XBRL News and Commentary from the Hitachi XBRL Business Unit
1

FERF Survey Offers Glimpse at XBRL Experiences to Date

Written by Tammy Whitehouse
Posted on December 22, 2011 Comments
December 22, 2011 | General | Barron King

Tier 1 XBRL filers consider the XBRL-related activity to be the biggest bottleneck in their financial reporting function, according to a recent study by the Financial Executives Research Foundation, and they consider the review process to be the most challenging part of the overall XBRL experience.

FERF surveyed more than 300 different public companies on their XBRL experiences so far and discovered Tier 1 companies find the XBRL process to be the biggest headache in their reporting function. They consider the review process and getting educated to be the most challenging aspects of XBRL. Tier 1 companies also noted that mapping and tag selection remains a challenge, but they ranked it behind the review process and education in terms of difficulty.

When ranking their concerns about XBRL generally, Tier 1 companies were most focused in 2011 on the legal liability – and with good reason as the SEC’s limited liability protection for XBRL submissions expired for Tier 1 companies this year. Nearly every Tier 1 company named legal liability as their biggest concern, but close behind they also showed some angst over the cost-benefit equation. Many of the largest companies are still skeptical that investors and other users of financial statement data are finding any real use for the data presented in the XBRL format. They also worry about having adequate resources to get the XBRL filing done on time.

Now that they’ve been at it for a few years, more than 90 percent of Tier 1 companies said their biggest concern about the tagging process specifically is how to get it done more efficiently. Distant behind that primary focus, they’re also thinking about how to control the ongoing cost of XBRL and how to better define and control the process.

Tier 1 companies worry more than smaller companies about the risk of having two different sets of financial data available to investors – that submitted in XBRL, plus their traditional HTML filings. And they worry more than smaller companies about auditor involvement in the XBRL submission.

So far, the SEC does not require an audit of the XBRL submission, although many financial reporting experts speculate it will be required eventually. An increasing number of Tier 1 companies are voluntarily bringing their auditors in to check over the XBRL submission just to add an extra layer of protection as they faced full liability for the accuracy of the filing this year.

Another interesting detail from the study: Tier 1 companies were widely dispersed in terms of how much time they spend on their XBRL submission, whether performing it in-house or outsourcing it to a third party.

Among companies that outsourced the process, 15 percent spent less than 40 hours on XBRL, 31 percent spent 41 to 80 hours, 12 percent spent 81 to 120 hours, and 32 percent spent more than 120 hours. The numbers aren’t significantly different for companies that handled the XBRL process internally: 8 percent spent less than 40 hours, 31 percent spent 41 to 80 hours, 23 percent spent 81 to 120 hours, and 38 percent spent more than 120 hours.

 

 

0

XBRL Gives New Visibility to Balance Sheet Outliers, Study Suggests

Written by Tammy Whitehouse
Posted on December 15, 2011 Comments
December 15, 2011 | General | Barron King

Companies marching through the paces of detailed XBRL tagging don’t like to hear it, but we’re still just on the cusp of seeing real utility in the repository of data that is starting to build via XBRL. Investors have a long way to go to learn how to use the data to make investment decisions.

Regulators, on the other hand, have had a bigger head start, and the Securities and Exchange Commission is rolling up its sleeves to determine how it can use the data to better regulate capital markets. The SEC has said it is gradually getting more of its accountants up to speed on using XBRL to perform its routine filing reviews.

A recent academic study out of the University of Virginia demonstrates how XBRL data can be mined and managed in a way that makes it much easier to spot outlier elements in balance sheets and income statements. Those outliers can be indicative of any number of things – from investment opportunities to possible fraud, the authors conclude.

Randy Cogill, a professor in systems and information engineering at the University of Virginia, and his assistant, Steve Yang, applied graph similarity measurement to XBRL-rendered financial statements to measure structural differences in those financial statements. Graph similarity measurement has been used in applications such as text mining, pattern recognition, and computer vision, among others.

The authors selected a sample of 44 public companies in the retail and energy sectors for their analysis. They formulated the financial statement similarity measurement problem as a generalized graph similarity problem and constructed a graph similarity metric to measure the similarity of financial statements. They confirmed that the graph similarity metric is sensitive to structural changes in balance sheets, laying a foundation for discovering more important monetary movement patterns in financial statements, the authors say.

Yang said one of the benefits of XBRL data is that it lends itself to such modeling and measurement so that users of the information can extract any information they need. With so much information to digest, it’s the best way to glean meaningful insights. He envisions the findings could be useful for investors, who might build automated tools to help select financial information that is most important to them.

He also sees the benefit for regulators, who can use the tools to identify outliers that command extra attention. “It could be that they will find a deviation is because someone is doing something wrong,” he said, whether intentionally or unintentionally. “They can extract very valuable information from this complex structure.