Companies are quickly migrating from outsourcing with third party XBRL tagging vendors to built-in application implementations, which are also commonly known as 'Disclosure Management' applications. With the March 31, 2012 XBRL reports submitted to the SEC's EDGAR over 2,000 companies have made this transition. As a result of these 'built-in' implementations, leading practice companies are realizing 30%+ cost and time reductions in their report assembly and review processes.
For the companies that are considering Disclosure Management applications, there are some features that may help to differentiate individual application feature strengths and weaknesses as it relates to company specific reporting environment process, controls and diversity of reporting requirements.
Following is a listing of some of the differentiating features reporting professionals may consider when assessing the effectiveness of Disclosure Management applications for their specific and unique reporting environment and corporate culture:
- Client Server or SAAS - The implementation approach may have an effect on how Disclosure Management applications are used as well as potential access to and security of draft company reports. Client Server implementations typically require engagement of corporate IT Resources where SAAS implementations may require less consideration of internal corporate infrastructure. Certain SAAS-oriented Disclosure Management applications may not enable connectivity to source systems, thereby requiring an incremental manual step to upload relevant source information into the SAAS platform. Further, the nature of the application (e.g. Client Server of SAAS) may also affect license and maintenance costs as well as the timeliness of application updates. Care should be taken to understand licensing costs for some SAAS applications where costs are associated with report volume; and can appear to be very reasonable when thinking about the problem in the context of three 10-Q's and a 10-K per year and possibly less reasonable when thinking about the hundreds to thousands of compliance reports required by regulators here in the U.S. as well as in countries around the world.
- Connectivity with the full range of source systems relevant to reporting and quality analysis. How does the Disclosure Management application 'connect' to company consolidation, ERP, spreadsheet applications and other relevant information sources? How easy can reporting professionals connect to the broad range of internal information sources relevant to reporting?
- Interoperability -- Connectivity with relevant information sources via a semantic XBRL-format interface. Does the Disclosure Management application 'consume' XBRL thereby enabling reporting professionals to pull information from a broad range of information sources including external sources such as the SEC EDGAR system? In the short term, the ability to consume XBRL is particularly relevant for those companies looking to streamline their peer analysis and risk assessment processes. In the longer term, the ability to pull standardized content from a range of internal data stores may be particularly relevant to a broad range of performance management, business intelligence and integrated reporting efforts.
- Taxonomy Mapping -- automated taxonomy mapping "wizards" that provide suggestions for specific taxonomy elements relevant to specific company disclosures. More advanced Disclosure Management applications also provide peer company benchmarking on disclosure elements. Reporting professionals may also want to inquire as to the range of taxonomies for which the mapping wizards apply and how quickly new taxonomy versions are incorporated.
- Taxonomy Management -- features targeting the import, view, and management of multiple taxonomies relevant for a single report. Reporting professionals may also want to inquire as how Disclosure Management applications handle unused extension elements and presentation links, the units registry and the timeliness of addressing new taxonomy releases.
- Rules Management -- features enabling assessment and analysis of various standardized rule bases such as those outlined in the SEC's EDGAR Filer Manual and those developed and maintained by company reporting professionals. Reporting professionals may also want to inquire as to the collaborative nature of rules with others, both within the company and within the vendor customer base.
- Collaborative Workflow and Controls -- Empower the entire extended reporting team to collaborate on report disclosures (within a single document or one constructed of document components) in a simultaneous, multi-user process. Collaborative processes within controlled workflows that enable management oversight and monitoring of widely distributed and authorized professionals who can author, tag, review and edit disclosures. This common feature empowers reporting professionals to more effectively share and build corporate intellectual property and when desirable collaborate with trusted partners outside of the enterprise (e.g. legal counsel, audit committee members, third party auditors, advisors, etc.).
- Report management -- Manage a broad range of report attributes highly relevant for reporting professionals including the roll forward of prior period values, metadata, dates, headers, references, etc.; and the synchronization of report disclosures and related metadata used within a single report and/or across multiple reports; and report navigation including ease of disclosure filtering, visualization, reference management, comments and revisions management; and query or search capabilities across disclosure content and related metadata.
- Presentation management -- Management of a broad range of reporting templates reusing company disclosure information. Value added features may include a range of reporting formats (e.g. pdf, html, ppt, xls, doc, xbrl, EDGARization, etc.) as well as standardized communication methods including RSS.
- Reference management -- Identification and management of the explicit relationships between disclosures and relevant standards and SEC Regulations (such as those included within the US GAAP Taxonomy) as well as those within the company such as those relevant to company policies and resources.
- Analytical Assessments -- Support for reporting professionals to effectively interrogate draft and final reports to identify reporting issues that some investors and analysts may perceive as material errors. Reporting professionals may want to inquire as to how the Disclosure Management application enables them to more effectively identify common disclosure meta-data issues and make the subjective assessments critical for high quality reports. This feature is particularly relevant when it enables identification and review of subjective assessments in the presentation context of reported disclosure.
- Technical Compliance -- Support of the XBRL Technical Specification and periodic updates including the XBRL Inline Specification (iXBRL) which is increasingly the compliance format of choice for regulatory XBRL mandates.
- Support -- Technical support for users in countries around the world, including taxonomies and rules relevant to specific regulatory agency reporting requirements. Support would also include languages relevant to professionals working in countries around the world (e.g. English, French, German, Japanese, Mandarin, Spanish, etc.).
- Solvency II Taxonomy -- support for this taxonomy requiring information disclosures as well as those for risk models and formulas. This feature is particularly relevant to reporting professionals in the insurance sector and may also be more broadly relevant to reporting professionals looking to collaborate on reporting concepts such as financial and nonfinancial Key Performance Indicators.
While the above is certainly not a complete listing, it does provide reporting professionals with some feature topics that may be useful when considering Disclosure Management alternatives. When discussing these features with software vendors, it is a good idea to ask questions in the form of "How does the application do XYZ?" question rather than simply "Does the application do XYZ?" The response to a 'How does' question may allow reporting professionals to gain better insights as to the level of complexity, effort, time, cost for a particular feature rather than a more 'yes' or 'no' response as to the existence of a specific feature. How does that sound?
Comments to this blog that identify additional differentiating features would be greatly appreciated.
by Mike Willis