09 March 2011

Is XBRL expensive?

At a recent XBRL meeting, a participant (a representative of a large organization - not a filer) opined that he thought $25,000 was a perfectly reasonable price for a public company to pay for the production of their XBRL - after all, these are public companies and as such have the resources to pay whatever is needed to produce reports demanded by regulators. Basically - "what are these people complaining about?"

Personally, I consider an additional $25,000 to be an expensive additional cost to businesses, especially if someone else gets the benefit (but that is a different topic). Perhaps it is not so important to the Fortune 1000 companies, but unfortunately it seems easy to forget that many of the other 8000 SEC registrants are not big companies, and some actually are quite "small".

I do wonder what the reaction would be from the same person if they had to go to their superiors and say "We need to spend $25,000 on a new reporting requirement that gives us no benefit, but might help someone else, someday..."

They would inevitably be asked "How much does this reporting cost us today?"

"Well, last year we spent about $5,000 on all our SEC filings with our filing agent."

"So what you're telling me is that this year, simply to report is going to cost us 6 times as much as last year?"

Suddenly that does seem a bit expensive. Six times the cost at zero additional benefit.  Of course, there are alternative options that include pushing XBRL further back into the reporting infrastructure, but here we're talking about the specific cost of implementing a regulatory reporting requirement. After all, if your advisers have already come to you with demonstrations of how embedding XBRL deeper in internal processes would save money, then you would already have done so, and wouldn't be reading this.

Being fair, I've see prices ranging (external dollars spent, excluding any internal costs for resources) from as little as $3,000 to as much as $30,000. I do recommend that anyone considering a $3,000 solution ask our "5 Questions". Actually, I recommend everyone ask our "5 Questions" of multiple vendors, regardless of the price quoted.

Number 4 in our "5 Questions" is "How much will this really cost?" We recommend filers (and their filing agents and their advisers) ask what will be the expected total cost. After all, software alone is not the only cost, nor is time. Too frequently we're hearing pricing for software separate from consulting support. We are also hearing and reading about the additional time that could be required, both by external providers and by internal resources.

Again, here are our "5 Questions":

1. How much time will this really require?
2. How long must we budget for XBRL production after "pencils down" on our filing?
3. What is the quality of XBRL filed with the SEC using your solution?
4. How much will this really cost?
5. Do we need to learn XBRL?

Because $25,000 (excluding your internal costs) is expensive, especially when there are less expensive options that require significantly less effort on the part of the filer.

So the next time someone tells you that XBRL compliance is not expensive and that $25,000 is a reasonable price to pay, ask them how much of that they would like to contribute - after all, they will probably be one of the beneficiaries of that spend.

(To provide additional assistance, we have developed the 2011 XBRL Shoppers Guide.)


  1. I would add that Broc Romanek has jus tposted a very interesting note "concerns raised with SEC about upcoming XBRL filing crunch": http://www.thecorporatecounsel.net/Blog/2011/03/concerns-raised-with-sec-about.html

  2. Perhaps the "Sixth Question" that no one, including the SEC, is asking is "Who on Earth is actually using XBRL? In other words, are we spending a lot of time and money on something is being used by very few people?" If there is a huge demand for XBRL, great. So far, I have seen no evidence to suggest that there is. While it's a good concept in theory, let's figure out whether/how it's being used in practice before mindlessly plowing ahead with it. Data tagging for data tagging sake doesn't make a lot of sense to me.

  3. Douglas,

    (As Pete Haynsworth has raised the same question, I'll give the same answer here as well as in e-mail)

    Mike Willis (Partner at PwC and the first Chair of the XBRL International Steering Committee) recently addressed that very question - "Who is using XBRL" in a number of discussions on in various LinkedIn Groups. I think Mike has done the best job in both presenting the case and following-up with additional examples in the IR Web Report group. The link is: http://www.linkedin.com/groupItem?view=&gid=2640689&type=member&item=45841919&qid=e9a3eeef-8054-4b5d-bfc5-0de748509812&goback=.gmp_2640689 - but you will need to be a member of that group.

    Mike has also posted the same core question in the XBRL Enthusiasts group, and at least one other group in LinkedIn.

    XBRL is being use, and will deliver significant benefit to the user. Now we just need to get the price down for the providers of the data.

  4. Thanks for pointing me to the Linkedin discussion. I have now read the chain and commented.

  5. And internal costs may double the 25k$, so we are talking about 75k$ at least.
    For what? For pleasing the beautiful eyes of XII's pr persons.