21 February 2011

Lasagna, or where are all the XBRL Experts (II)?

There's nothing like a really good lasagna - well, I think so. So much so that I also like to have it the next day. A nice, thick lasagna with lots of meat, cheese, and tomato sauce. I also like to add onion, and lots of garlic, which goes with just about everything (except creme caramel of course). I've even been known to enjoy my lasagna the next day cold, cut into thin strips. But that was probably too much information.

Sometimes a message can be the same. If it's an important message (with lots of garlic etc) then it may need to be said again.  And again.

Which brings me to the message. Over a year ago I wrote "Where are the XBRL experts? I pointed out that one of the first things I said when I became Chair of the XBRL US Steering Committee was that if thousands of companies were going to produce XBRL, then we would need thousands of XBRL Experts, not the 10s or 100s that existed at the time. Well, it is more than five years later, and we still need the 1000s, not the 100s that there are today.

So what is happening? Simply put, not enough.

This year 8000+ companies in the US will provide XBRL versions of their financial statements and notes to the SEC. Over the past two years approximately 1500 - 1700 companies have provided XBRL to the SEC. Last year the first 500 or so provided additional data in the form of Detail Tagged XBRL. This year, all 1500 - 1700 companies will be providing detailed tagged financial statement and notes.

Anecdotally, the vendors are getting stretched for resources.

What does this mean?

Bluntly it means that filers who wait will pay. And they will pay top-dollar for resources that will be learning on the job, just like in those wonderful SOX days.

Does that mean the XBRL Mandate should be renamed the "full employment in the Accounting Profession Act II"? No. But it does mean that filers need to get active in their selection process.

Also, filers need to be asking the basic questions - how much of our time will this take? do we need to learn XBRL (and if so, where is the "real" training)? How much will this really cost?

In the UK there is such a shortage of resources, and some of the software is just coming on stream, that there has been an almost Cairo-like rebellion against the HMRC (Her Majesty's Revenue and Customs - their IRS equivalent). HMRC has stood firm, and has pointed out that they fully expect the iXBRL provided to be a minimum set of data, and that errors are expected this year.

The SEC has made no such statement, although from the very beginning they have said that companies get a two years window of litigation relief.

Still, the message is clear - there simply are not enough experts. There weren't enough last year when I said this (and was chastised for saying it).

Now the Blame Game

So who is to blame? Well, no one actually. With no demand, there has been no groundswell of training available, few people learning (because there are been few jobs asking for XBRL skills) and confusing messages. XBRL International has been too busy trying to keep itself afloat through under-subscribed conferences and flat jurisdiction revenue, to be running real training or adequately supporting real training. XBRL US Inc has been too focused on the taxonomy and other projects, but finally is beginning to push the importance of training.

So back to the message - where are all the XBRL experts? The unfortunate answer is - they don't exist, yet. Searches for XBRL-savy resources will become more difficult. Software and services that limit the amount of XBRL a filer actually needs to learn will be important. Also important will be the amount of time required to actually create the XBRL - because more time will almost invariably mean more knowledge required, and more work.

Companies will face the choice of building expertise internally, or outsourcing to those firms with world class processes and software - and hopefully finding companies that will do so at a fair price. After all, the trade-off will be in the cost (in dollars and time) of training someone to use what can be complex tools and processes, vs outsourcing where the prices/time/quality/effort equation delivers a more cost effective result than building the skills internally.

A secret - in my lasagna there are only two things I use "pre-made"; the lasagna pasta and sometimes I use a jar of sauce as my base. I know my limitations, and creating a great tomato based sauce is beyond my expertise, so I "outsource" that. It's still a very good lasagna, if I do say so...


  1. I've been tracking XBRL for years. I worked with Mike Rohan as he started Rivet in 2004. I've attended conferences in the US and Europe.

    From the outset the general XBRL idea was co-opted by big projects and big accounting firms for statutory reporing - for all the best reasons. But such projects take a long, long time to mature - too long for anyone who isn't directly funded by the projects (of which there are few) and don't have pockets deep enough to stay in the game independently.

    Perhaps as a consequence, those jurisdication meetings seemed filled with Big n accountancy staffers with a few hanging on trying make a meagre living and, largely, shutting others out rather than evangelizing. At least that was my experience.

    I'm technical. I understand XBRL. Though not an accountant I've built FAS/IFRS consolidation and reporting systems for organizations large and small both sides of the atlantic so understand the accounting requirement.

    Because it's inevitable that large government-style projects take a long time to mature, XBRL implementations have been too slow to get going for small organizations like mine to hang around. And I can't imagine we're the only ones in this situation.

    I imagine similar concerns even play out in big accountancy firms. Yes, they can afford to keep staffers involved. But until there's the prospect of billable hours why would they train their staff?

    So without advanced commitment either from government or from filers you end up with only a small pool of expertise.

    My guess is there will never be a very large pool of expertise and it will be fragmented. For the most part 'filing consultants' don't need to know XBRL (the spec) they need to know one of the taxonomies. You only need to know the spec if you need to analyse arcrole, linkbases and so on or intended to write an XBRL app.

    But taxonomies are complicated and jurisdiction specific which, I think, means consultant knowledge is largely not transferable between jurisdiction (there's always the odd savant but these will be the exceptions which prove the rule). This lack of trasferability helps to keep the pool small because there's limited scope to ensure your investment pays off.

  2. Hindsight is always 20/20 with XBRL being a prime example. With the technology in it's birth phase and XBRL-US charging very high membership and conference costs, starting companies could not move forward without substantial investment. Even then, the market was not yet defined.

    Today it is, but lack in incoming revenue means that many software companies are unable to keep up with needed development and marketing costs. Still, with minimal exceptions, companies will not file unless they absolutely have to, much less pay for it. That means future, instead of present revenue.

    Human skill set falls behind accordingly. Without software and revenue, there is little reason to learn the technology.

    Hence, we are where we are, with few software selections. Those that are available are mostly in need to revenue in order to create something exquisite. Professionals are anxiously waiting in the wings for it all to happen.

  3. If SEC subsidizes all or most of the costs of hand-on XBRL training programs,in the form of grants or cost reimbursement, filers will be emcouraged to use its internal resources to learn and apply XBRL. After all it is the SEC that mandates XBRL filing.

  4. Is XBRL is still a hobbyist movement? It seems so...

  5. SEC should commit more financial resources in supporting XBRL-related R&D or start-ups in the form of grants. A few years ago some were worrying about that the free XBRL data would disrupt the financial eco system. On the contrary, there is no viable business model to provide XBRL-related data services. The true cost of doing so was greatly under-estimated. Without visible profitability, companies hesitate to commit resources in developing XBRL-related services (other than filing). Without applications that can demonstrate the benefits of XBRL data, participants are lack of motivation to keep the momentum going. SEC can change that by providing some fuels - grants for training and software development - to re-energize the XBRL industry and the stakeholders of the industry.

  6. I would love to attend an XBRL conference, but I just don't have the money for the conference, never mind the hotel and travel costs. Other comments have been made about how small software development companies don't have the resources to develop software, that would seem to point to individual developers like myself who have ideas and work on our own until we can sell something and make money and expand. We're out there, just no way to participate in the "bigger picture."

  7. Clemrick,

    There are a number of ways to participate in the XBRL world, and to learn about XBRL. Certainly there are the "free" webcasts from vendors - that will give you background based on what they think it is important for you to know - to pick them. But there are other venues also. XBRL International's website is a start (www.xbrl.org), and sites like our attempt to provide introductory information (www.raas-xbrl.com).

    There are a number of LinkedIn groups.

    Frankly, most of what happens at the conferences you can learn from sources online and already available. Send me an e-mail and I'll see what I can find for you. At least one of the conferences has almost the entire main stage online for you to watch from the comfort of your own PC.