How to make the best of the (fill in the blank) XBRL situation

From Twitter: @mwillis001: How to make the best of the XBRL situation. PwC Webinar, May 11 2pm EST ... http://bit.ly/en84ki

Now, some people might expect me to say something like "How to make the best of the XBRL situation". After all, the "XBRL situation" could be described as an avalanche of mandate rushing downhill, about to crash over those nice little American businesses all standing around with theirs cups of hot chocolate by the ski lifts. Okay, maybe not, after all, it will be in July and August that more than 8000 companies will produce XBRL for the first time and provide it to the SEC. I just could not bring myself to use the tsunami metaphor.

Regardless, there is a significant additional reporting burden arriving, and all the wishing won't make it go away. And that means that business must get ready.

How to make the best of the (fill in the blank) XBRL situation:  So to jump directly to my suggestion, then you can read the rest is you want, is for filers to download and read the 2011 XBRL Buyer's Guide. No decisions should be made based on one single factor, but on a balance of the factors that matter most to the situation and needs of the company.

But now, back to the my stream...

I was just bemused to see one of the greatest advocates for XBRL and the first Chairman of the XBRL International Steering Committee actually promote a webinar call "How to make the best of..." anything. To me, "how to make the best" has always been one of those phrases that is linked with "of a bad situation".

I for one do not think that XBRL is a bad situation, but is it a situation of significant additional cost to business. raas-XBRL, my firm, provides inexpensive production of XBRL for SEC registrants. We're proud of what we do, how we do it, and the fact that we use state-of-the-art software that is the best and most intuitive by far. (And I've been looking at this stuff since 2003).

So what are the "situations"?

We keep hearing estimates of 80 or more hours to produce the first "block tagged" XBRL. We think this is crazy. We consider 10 hours to be plenty of time. Also, we think that 4 hours of review, for the vast majority of companies, is plenty of time.

Learning a new technology. Why? How much time did you spend learning PDF?

Implementing specialized software. Frankly, I expect virtually all accounting and reporting packages, regardless of their size, to be including XBRL as an output format within the next three to four years. And the great news with this is that only the worst laggards will have XBRL as an output format only. I also fully expect accounting and reporting software to be pushing XBRL deeper into the process, so that information is linked to appropriate company specific (or industry standard) taxonomies from the point of initial entry of the information. This will allow the information to be tracked all the way through the process.

So XBRL is going to deliver significant business process improvements. Eventually.

But today vendors are suggesting that you should not wait until your existing accounting and reporting systems cater for XBRL, but you should invest potentially tens of thousands in new systems or replacement systems, simply so that you can avoid spending a far more modest amount of money to "make the problem go away".

But of course, its not a problem, is it? It is a "situation".

So I also recommend you attend the PwC Webinar on May 11, so that you too can learn "How to make the best of the XBRL situation".

Recent XBRL myths

Over the past weeks and months even, there has been a growing pool of myths about XBRL. Some of these are, frankly, uninformed while others provide justification for the high prices that some vendors are charging. Here we present some of the fallacies that we are hearing that are being passed off as hard fact.

1. 30,000 - 40,000 or more elements in the taxonomy

More and more websites are cropping up with warnings that with 30,000 or 40,000 elements in the 2011 US-GAAP taxonomy, XBRL is a really complex problem that will require experts to help solve - even if it’s just to wade through all those elements.

Fact: the FASB says that there are around 15,000 elements, and that the 2011 release has not resulted in any meaningful increase in the total number of elements. Now, we're not suggesting that 15,000 elements is not a lot, from first hand discussions with the FASB, we have been told that the 30,000 - 40,000 number is just plain wrong.

Fact: there have been a huge number, easily over 100,000, Extensions. but extensions are not a core part of the taxonomy, and may be contributing to the confusion.

2. 80 hours or more of client-side (filer) time

First-wave filers (the top 500 companies) did take an average of over 120 hours to create their first block-tagged XBRL (57% of respondents to an AICPA/XBRL US Inc survey of first time, top 500 filers). Additionally, as recently as December 2010, one of the major filing agents told an audience that they should expect their block tagging to require 125 person hours, *plus* internal filer time and expertise.

Fact: We think this is madness because we have been producing quality XBRL that requires an order of magnitude less total time, on our side and on the client-side. Opinion: any process that requires that much time (80+ hours for block tagging of Wave-3 filers) is simply inefficient or uses inefficient software.

3. Complexity

Yes, XBRL is a complex standard but then so is PDF. If there is one common comment we keep hearing it is, "How can this be so complex, our financial statements are not that different from our peers or even from most other companies. We do nothing exotic, so why is this so difficult?"

It does not need to be, and again this is Opinion, but anyone who tells you how complex this is, is simply ensuring that you are too scared to either do it yourself (with the right software) or engage someone to make the problem go away at a fair price. Consider your options. We've heard the president of one software provider say that they will not be satisfied until XBRL (with their tool) is "as easy as Word", and from what we've seen, they are well on their way to accomplishing that goal.

4. Cost

There are plenty of vendors charging from $15,000 to over $30,000, and some that are charging as low as $995 for software. These are not myths. The myth is that to get it done right by someone else you either need to pay that those exorbitant amounts, or that if you buy the $995 software you will not need to spend a huge amount of time becoming an XBRL expert.

5. It can be really really cheap

Well, that's not really a myth either - it can be really really cheap. Remember though, you only get one grace period, and if your service provider is not resourced for the peak time, then you will use that first grace period, and be stuck worrying about your provider’s ability to actually get it done on time next time, when you have no grace period.

6. FPIs are getting a deferral

As yet, Foreign Private Issuers have NOT been given a deferral. The SEC has said that they cannot file in XBRL until there is an approved taxonomy, and the IFRS taxonomy has not yet been approved by the SEC. That is very different from a deferral. Of course there might be a deferral, but that is not what the SEC has said.

Opinion: We fully expect the IFRS Foundation to release an updated taxonomy (they have already announced that they will), and for that taxonomy to be approved by the SEC which means that FPIs will indeed have to file XBRL versions of their financial statements.