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.