This Week in XBRL: What Are the Real Benefits of XBRL?

Over the past several weeks, we have been broadly discussing the benefits of XBRL, and the SEC’s campaign to sell corporations on them. However, it's about time to discuss what those benefits actually are. Today, we’re going in-depth, and laying out exactly why XBRL is a diamond in the rough.

Benchmarking

Among the most obvious of XBRL benefits is the ability to compare your company’s data easily with that of your competitors. You can analyze numbers from “suppliers, customers, shareholders, stakeholders…” and more, all with the tools already in your possession. There is really no reason not to make use of filings for this purpose.

Risk-Analysis

We’ve already pointed out how big Governance, Risk, and Compliance (GRC) is going to be in 2012, and XBRL filings can help shine a spotlight on your company’s weak links. To quote David A. Frankel’s December 12th interview, “[GRC] across the enterprise is a huge issue for companies right now -- and the solutions all revolve around harnessing intelligence from the data they and comparable companies are producing with their filings.”

Transparency

As we’ve stated above, and as Frankel says many times throughout his interview, the biggest single benefit of XBRL is providing companies with a tool to better investigate themselves. The penalties for GRC failings can be severe, and companies with usable XBRL data will be able to maneuver out of their paths before it is too late.

Unfortunately for many companies, the real benefits of XBRL won’t become clear until they approach the language with open arms and a critical but open mind. “Complying with SEC disclosure mandates does not necessarily yield useful results,” Frankel says, “just compliant filings.”

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Merrill Corporation is proud to offer XBRL Complete, a suite of services that meets - and has options to exceed – the mandated requirements for XBRL for mutual funds. For more information, please click here or call 866-367-9110.

This Week in XBRL: FERF Study Gathers XBRL Opinions

A recent study from the Financial Executives Research Foundation (FERF) presented data on the opinions of 300 public companies in regards to XBRL reporting. The reported concerns are very much in line with what one would expect, with efficiency and liability being the among the most common. Below, we’ve pulled some of the most significant pieces of data from the report.

• The most complicated parts of the XBRL process, according to Tier 1 companies, are education and the review process.
•  Legal liability remains the biggest concern for most companies, with cost-benefit in a close second.
• Most of the responding companies are skeptical that investors are actually using XBRL data.
• Companies are currently focused on improving the efficiency of the tagging process, and are concerned that they lack the resources to complete the process on time.

The report also found that companies have varying opinions based on their size.

• Larger companies are more concerned about presenting two different sets of data (HTML and XBRL) to investors than small companies are.
• Smaller companies are less concerned about auditor involvement.

Perhaps most interestingly, as pointed out in this Data Interactive synopsis of the report, the spread of methods that Tier 1 companies are using to handle XBRL reporting is vast.

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.

It may be discouraging to see such opposition to XBRL reporting, but we have confidence that the SEC’s efforts to promote the benefits of XBRL will take hold among reporting companies.

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Merrill Corporation is proud to offer XBRL Complete, a suite of services that meets - and has options to exceed – the mandated requirements for XBRL for mutual funds. For more information, please click here or call 866-367-9110.

This Week in XBRL: December Headlines

It’s that time of year again: snow is falling, the wind is crisp, and corporations are asking tough questions about the future of finance reporting. XBRL has been at the top-of-mind for many finance industry analysts, and that means a lot of great news and discussion for the language. Here are some of the highlights.

XBRL As a Boon, Not a Burden.

As Ben Cole, at Tech Target, points out, the coming of XBRL wasn’t celebrated by everyone. “If you were to ask filers, some might say the fact that the SEC is mandating XBRL-tagged filings is a hardship, as they have the burden of the costs for compliance,” he says in this week’s article, How the SEC's XBRL Tagging Mandates Can Help Your Bottom Line. He interviewed XBRL supporter David A. Frankel, who responded by pointing out the intrinsic benefits of XBRL, including a greater understanding of your company’s risks, and the power to take better, more profitable risks in the future. Click here to read the full interview.

Finding Larger Uses for XBRL.

“Since the SEC issued the Interactive Data Mandate in 2009, the focus for companies has been to conquer the learning curve and simply become compliant,” says Accounting Today’s John Swirsding. “…understanding where XBRL goes from here presents companies with a number of new opportunities and risks.”

Swirsding believes that public and private companies can make use of XBRL in three key ways that will lead to a larger, global infrastructure, which he compares to the growth of the internet over the past thirty years. The areas Swirsding sees as the next frontier for XBRL are Legislation, Liability, and Leverage. By utilizing the infrastructures already in place, he argues, companies can reap huge benefits from systems they are already required to know.

FASB Talks XBRL.

At the National Conference on Current SEC and PCAOB Developments on December 6, FASB Chairman Leslie Seidman spoke about international accounting standards and private company reporting.

These are two of the most important issues facing our profession, our capital markets, and our companies, so I think it’s important for us to have a frank, constructive discussion of them… The reason we have accounting standards is to provide information that is useful to existing and potential investors and other users of financial reports in making decisions about whether to provide resources to the company or nonprofit organization.

Seidman explained his views on the two topics, and how reporting structures like XBRL are transforming the world of business and finance. The full transcript of Seidman’s address is here, and is well worth reading.

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Merrill Corporation is proud to offer XBRL Complete, a suite of services that meets - and has options to exceed – the mandated requirements for XBRL for mutual funds. For more information, please click here or call 866-367-9110.

This Week in XBRL: What’s Coming Up in GRC?

Compliance 360 and MarketWatch have put together a list ofGRC trends that are likely to affect financial reporting in 2012. The full list is extensive, and worth reading, but we will summarize some of the highlights below, along with some of our own thoughts, opinions, and commentary.

Compliance Proof WillBecome Important.

“Historically, regulators have been satisfied with companies that have implemented compliance programs, but now they want proof that the programs are actually working.” Regulatory bodies have wised up to the fact that having compliance procedures in place, and those procedures actually functioning, are two separate concepts. Analysts predict that 2012 will bring about data and process distillation, which will test the effectiveness of compliance procedures.

GRC to be Used asBrand Strategy.

Compliance failures, ethics charges, and public court battles have become common knowledge in recent years, thanks to improving news and communication technology. As more and more consumers become aware of a brand’s compliance issues, board members will become more and more aware of the impact of their GRC actions. Compliance 360 predicts that smart company owners will promote their strong compliance record as part of a branding strategy.

Analytics Will Riseto the Top.

One of the important secondary features of software and languages like XBRL is the staggering amount of data that is collected and organized during compliance processes. Some analysts think that GRC software can be used for the same purpose, resulting in more effective compliance efforts. “From the board down, GRC users need to see trend lines and correlations to identify and address root-cause issues before auditors come calling. As examples, the additional insight corporations can glean by linking training programs to the types of issues received via a whistleblower hotline, or mining various systems to determine how to change audit plans for the next cycle, can be highly valuable.”

XBRL and compliance go hand-in-hand, and it will be important for any in the financial industry to keep an eye on these developing trends. Early actions can get you a few strides ahead in the compliance race.

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Merrill Corporation is proud to offer XBRL Complete, a suite of services that meets - and has options to exceed – the mandated requirements for XBRL for mutual funds. For more information, please click here or call 866-367-9110.

This Week in XBRL: A Bright Future for XBRL

“With Year 3 of the SEC's mandate rolling on,” begins a recent CPA Success article, “nearly all public companies are filing their financial reports via XBRL, bringing us this close to realizing the data tagging language's long-promised potential.” If there is a success story buried in this decade’s financial world, XBRL is the likely hero. The reporting language has already brought efficiency to most of the country’s corporations, and is now quickly gaining a following on a federal level.

CPA Success reports on three signs pointing toward the language’s destiny.

Auditors are starting to pay close attention as they search for ways to help their clients make the switch to XBRL through services like assurance, knowledge-sharing and training.

The MACPA is serving as a case study of sorts for how private companies can use XBRL. In fact, the association has been asked by the Financial Accounting Standards Board to work on a separate XBRL taxonomy for non-profit organizations.

Even governments are getting into the act. The state governments in Nevada and Oregon are setting the pace, and others -- including Maryland's -- are testing the waters to find out if XBRL can boost transparency and accountability at a governmental level.

Of course, with great power comes great responsibility. A host of new regulations and best practices will accompany XBRL into the next few years, and a lot of them, according to FASB chief of taxonomy development Louis Matherne, will rely on CPA’s.

As always, Merrill Corporation will continue to monitor any changes to XBRL reporting best practices, to ensure that our services remain convenient, accurate, and above all else, compliant.

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Merrill Corporation is proud to offer XBRL Complete, a suite of services that meets - and has options to exceed – the mandated requirements for XBRL for mutual funds. For more information, please click here or call 866-367-9110.

This Week in XBRL: Site Outages, Congress Support, and IFRS Goes Global

XBRL has had a rocky week! Despite a growing increase in the use and spread of XBRL, experts are starting to see cracks appear in the automated solutions that some companies in the UK are already using.

For several hours yesterday, many UK businesses were unable to access http://www.xbrl.org, or any of its sub-domains. For those companies, this meant that their XBRL software was unable to connect to online taxonomies, and Corporation Tax returns could not be filed. Software can be configured to reference locally-stored taxonomies, but the process is complex and would require downloadable taxonomy packages. For now, current best practices require XBRL software to reference the online document, or companies can rely on XBRL experts like Merrill Corporation, who are less effected by such outages.

When the site outage dust cleared, discussion this week turned to the likely spread of IFRS through more global jurisdictions. Already popular in the UK, Brazil, and Japan, most analysts believe the SEC will support the International Financial Reporting Standards by the end of the year, and that means a change in the way corporations report business.

Finally, another major talking point came this week when AICPA reported on the numerous bills in Congress calling for the use of a reporting system like XBRL.

[The Standard DATA Act] is certainly not the first bill that calls for the use of XBRL. Earlier this year, President Obama signed the Children and Family Services Innovation and Improvement Act into law. This law requires that the Department of Health and Human Services designate a common data reporting standard, i.e. XBRL. Specifically the law is aimed at standardizing the reports that the states submit to the federal government on how they spend federal funds for child welfare programs.

AICPA also pointed out the Digital Accountability and Transparency Act (DATA Act), which is still under consideration. All of these pieces of legislation point toward the adoption of XBRL reporting for congressional purposes.

As always, Merrill Corporation will continue to monitor changes in the XBRL environment, to be better prepared to provide your XBRL solutions.

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Merrill Corporation is proud to offer XBRL Complete, a suite of services that meets - and has options to exceed – the mandated requirements for XBRL for mutual funds. For more information, please click here or call 866-367-9110.

This Week in XBRL: CPA's Believe XBRL is a Perfect Fit for Government

Continuing our theme of XBRL use in government, we are looking this week at an article published by the Maryland Association of CPA’s.

Portions of the federal government have already adopted XBRLfor financial reporting. The MACPA hopes that this trend will continue. They interviewed Hudson Hollister, legal council for the House Committee on Oversight and Government Reform.

"It should be possible," says Hollister, "for citizens, watchdog groups, media, and even the appropriators in Congress to use all of this spending data to judge whether government is working for them or not."

The solution, he and [California Representative Darrell Issa] believe, is a single platform for federal spending information, driven by a consistent, government-wide set of data reporting standards.

Sound familiar, XBRL fans?

MACPA believes that XBRL could allow anyone seeking financial information to find transparency in the federal government, something which many feel has been lacking up until now. Both Hollister and MACPA point out that the DATA Act would require the government to designate a reporting standard, and that XBRL would be the best fit for that purpose.

It is not hard to see how a system as widespread, versatile,and efficient as XBRL could be beneficial for a project as large as this, but only time will tell what the government decides.

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Merrill Corporation is proud to offer XBRL Complete, a suite of services that meets - and has options to exceed – the mandated requirements for XBRL for mutual funds. For more information, please click here or call 866-367-9110.

This Week in XBRL: How Can XBRL Improve Government Efficiency?

“I’ve heard nothing in early discussions about the so-called supercommittee charged with finding more than $1 trillion in budget cuts to indicate that it is considering structural changes in how the government operates,” says W. David Stephenson of Stephenson Strategies. “That’s a terrible omission.”

In a lengthy commentary on Federal Computer Week, Stephenson explains that the Federal Government’s reporting systems are too antiquated to properly function.

There’s little hope for long-term savings if we continue to run the government using obsolete 20th-century methods. That’s why the final package of cuts should include a management plan that builds on the proposals by the GOP and the Obama administration to radically alter the way government agencies report on their operations and process information from corporations.

XBRL is one such solution.

XBRL, in its most basic essence, is a method to preserve the context of given pieces of financial data. This allows that data to move seamlessly from one form to another, preventing the need for it to be entered over and over again, costing time and money.

It would let employees better coordinate with suppliers and customers to improve efficiency and earn public confidence through transparency…In addition, regulatory reports could be generated automatically from that same data, which would achieve the Republican goal of cutting regulatory compliance costs.

An XBRL-based reporting system is already in use in Australia and the Netherlands, according to Stephenson, allowing businesses to file a single XBRL report which is automatically filtered through to relevant agencies. Because American businesses are already filing XBRL reports with the SEC, it seems obvious that government adoption of the system would be the best step for financial transparency. 

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Merrill Corporation is proud to offer XBRL Complete, a suite of services that meets - and has options to exceed – the mandated requirements for XBRL for mutual funds. For more information, please click here or call 866-367-9110.

This Week in XBRL: GRC Software ROI

There has been no shortage of publications this week regarding the umbrella concept of GRC, or Governance, Risk Management, and Compliance. In today’s blog, we’ll look at an analysis of the return on investment for GRC software, and explore how it may relate to your business.

Analysts at FierceComplianceIT.com have taken a look at the potential returns of a GRC initiative, something which has been somewhat dismissed until now. “Regarding GRC justifications, the returns can be somewhat hard to pin down, though I wouldn't say they are completely intangible,” the article reads. “The justification is usually there, it just has to be articulated in terms that key decision makers can understand.”

With help from Corporate Integrity’s Michael Rassmussen, they compiled a list of the most obvious ROI wins for using GRC software. One of these returns was a significant reduction in reporting errors, as high as “30 percent to 40 percent.” Other researched companies were able to save time and money by eliminating the need to manually update and compile paper manuals detailing compliance regulations.

“Lowering your overall risk creates a more stable environment … customers don't like to deal with unstable organizations,” said Stephen Fried, CISO and Vice President at People’s United Bank, “If you have a failure in your risk management program, it will affect your organization's ability to operate effectively.”

Of course, XBRL solutions, like MerrillCorp’s XBRL Complete, are one such way to control GRC in your financial reporting. XBRL Complete is an end-to-end service offering producing accurate and reliable data in XBRL format supported by dedicated XBRL experts, regulatory expertise, four decades of financial services experience, and a cost-effective and efficient process

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Merrill Corporation is proud to offer XBRL Complete, a suite of services that meets - and has options to exceed – the mandated requirements for XBRL for mutual funds. For more information, please click here or call 866-367-9110.

This Week in XBRL: XII Releases XBRL Abstract Model

The 23rd XBRL International Conference began on October 25^th, and has obviously been one of the largest talking points in the industry this month. Headed by XBRL International, the conference is used a platform for some of the largest innovations in the eXtensible Business Reporting Language, and this year was no different.

XBRL International (XII) is a group that should be familiar to anyone dealing with XBRL reporting. Founded in 1998, the group was formed to improve and promote XBRL. Now, they are publicly delivering on that promise.

On October 26^th, XII released the first public draft of the XBRL Abstract Model at the conference. According to the press release, published on MarketWire,

The abstract model has been developed by XII's Abstract Modelling Task Force (AMTF) as a means of establishing a common framework for communicating and understanding the XBRL technology. The abstract model provides a conceptual framework for understanding XBRL and gives developers a strong foundation for implementing XBRL solutions.

XII hopes that this model will eventually provide developers with more tools to utilize the language. The bulk of the model is comprised of “use case diagrams, class diagrams, object diagrams, and sequence diagrams,” according to the release.

This first draft is intended to give the public opportunities to comment on the model, and to provide feedback that will bring XII closer to a functional Abstract Model. Merrill Corporation is always supportive of initiatives to broaden the reach of the XBRL reporting language, and we are happy to see XII’s initial success.

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Merrill Corporation is proud to offer XBRL Complete, a suite of services that meets - and has options to exceed – the mandated requirements for XBRL for mutual funds. For more information, please click here or call 866-367-9110.

This Week in XBRL: The End of Limited Liability Approaches

Until now, many companies reporting in XBRL fell under the SEC’s limited liability rule. This rule essentially granted a reporting company a certain level of forgiveness for a period of 24 months following their firstXBRL-compliant report. The rule was created as a method for companies to learn from XBRL reporting failures without punishment.

For companies that filed after June 30, 2009, this will be the first reporting period without that safety net.

KPMG has a few more details:

XBRL-tagged financial information submitted after the provisions expire will be considered filed and not furnished and therefore be subject to the same level of liability as other information included in the registration statement or periodic report that includes the XBRL instance document. Companies affected by the expiration should carefully evaluate its impact and discuss this matter with their audit committee, legal counsel, and other relevant parties.

We expect that many more companies will be making an effort to contact outside agencies to ensure the accuracy of their reporting. KPMG also lists several of the largest changes to the 2011 taxonomy, adding a further level of complexity to this quarter’s reporting.

Updates for Recent Accounting Standards. The updated taxonomy includes elements for new accounting guidance recently issued by the FASB. In total, the taxonomy adds elements for 17 recent accounting pronouncements.

New Industry Elements. New specific elements for the airline, entertainment, franchisor, and agriculture industries are included.

Cash Flow and Income Statement. New elements, many of which are frequently used extensions that were identified by the FASB, were incorporated into the taxonomy. 

Comprehensive List of Text Blocks. Text blocks are used for tagging a group of information, such as a footnote, in one tag even though additional tags may be necessary for individual facts within the group. New text blocks have been added. The FASB amended the labels of all text blocks to include an indication of their intended use based on the type of tagging with which it corresponds in the SEC rule.

For those companies looking at their first unprotected XBRL filings, we have a few services you may want to consider looking at.

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Merrill Corporation is proud to offer XBRL Complete, a suite of services that meets - and has options to exceed – the mandated requirements for XBRL for mutual funds. For more information, please click here or call 866-367-9110.

Volcker Rule Draws Industry Criticism

Back in March, we wrote a blog about a headlining scandal that threw Goldman Sachs into courts against the then-recently-created Volcker Rule. Since then, not much has been said about the legislation, until this week, as regulators released a proposal that was, “so complex that banks blasted it as unworkable and consumer groups dismissed it as too weak.”

The proposal has received almost universal opposition, due mainly to the unacceptable level of complexity in the document. Reuters interviewed American Bankers Association Chief Executive Frank Keating for his opinion on the proposal:

"Only in today's regulatory climate could such a simple idea become so complex, generating a rule whose preamble alone is 215 pages, with 381 footnotes to boot…How can banks comply with a rule that complicated, and how can regulators effectively administer it in a way that doesn't make it harder for banks to serve their customers and further weaken the broader economy?"

Consumer interest groups like Americans for Financial Reform also commented in the article, suggesting that the rule heavily favors bank flexibility over consumer protection. Reuters quotes them as responding, "Unfortunately, the proposal issued today falls well short of what the Volcker Rule could and should achieve.”

Other opposition states simply that the rule would require too many banks to fracture into smaller businesses in order to remain competitive. Many analysts are predicting that companies and investors will both fight for the rule to be dampened in those areas.

The public has until January 13, 2012 to comment on the proposal, giving companies plenty of time to suggest beneficial changes. We predict a lot of attention being paid to this legislation over the coming months.

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Merrill Corporation is proud to offer XBRL Complete, a suite of services that meets - and has options to exceed – the mandated requirements for XBRL for mutual funds. For more information, please click here or call 866-367-9110.

This Week in XBRL: IMA(R) Pushes for DATA Act

In a continued effort to educate on the development of XBRL technology in industries such as financial services (and beyond), Merrill Corporation will share articles and columns published on the topic.

This week, the Institute of Management Accountants (IMA(R)) has distributed a press release showing their support for the use of XBRL in creating government transparency and efficiency through the Digital Accountability And Transparency Act (DATA Act). IMA(R) believes that XBRL will lend efficiency and accuracy to the government’s financial reporting. Part of this support is based in the Child and Family Services Improvement and Innovation Act, which requires states to report spending for child welfare to the federal level.

This Market Watch article includes part of IMA(R)’s statement, which they attribute to the Hon. Kim Wallin:

By requiring the Secretary of the Department of Health and Human Services to consider XBRL, the federal government is getting the tools it needs to deliver better data -- which will help the Department better administer its child welfare programs and ultimately help states better serve children…We need to know who is and isn't receiving federal aid to more effectively help our children in greatest need. I think it's fitting that the first U.S. law mandating XBRL is helping our government better meet the needs of our most vulnerable children.

We are always excited to see XBRL branch off into larger use, and an application as noble as improving children’s well being is even more cause for celebration. XBRL has proven to be an effective tool in nearly every industry it has been applied to, and we see no reason for it to fall short here.

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Merrill Corporation is proud to offer XBRL Complete, a suite of services that meets - and has options to exceed – the mandated requirements for XBRL for mutual funds. For more information, please click here or call 866-367-9110.

This Week in XBRL: Eyes on the Future

In a continued effort to educate on the development of XBRL technology in industries such as financial services (and beyond), Merrill Corporation will share articles and columns published on the topic.

On our Twitter and LinkedIn profiles, we put out a question: “What do you see in store for the future of XBRL?”

Admittedly, tagging systems for financial reporting may not be the most obvious subject for abstract thought, but over the past decade, we have already seen XBRL being adopted for any number of unusual uses. In theory, XBRL tags could be used for any software-based financial purpose:

Now, MarketBrief, a new start-up based in Mountain View, California, promises to publish over 1000 stories per day thanks to its software journalists.

It's easier than it sounds. SEC filings are published in a format called XBRL, or eXtensible Business Reporting Language, much like websites are published in HTML. MarketBrief's software generates articles by extracting key facts from the XBRL data and slotting them into pre-defined sentences.

This NewScientist.com article points out that the only real downside to this reporting software is the lack of humanity. “The result is readable, if dull,” says reporter Jacob Aron, “but MarketBrief will beat a human journalist to the punch every time, as the company claims it takes just three to 20 seconds for it to break a story.” If MarketBrief can iron out the dryness of their ‘software journalists,’ the site could easily become a go-to location for financial news, and that reality isn’t far off.

We cannot say whether or not MarketBrief is making the effort to remove the computer-generated tone of their reporting, but other software clearly is. AI “chatterbots,” like Cleverbot and Jabberwacky use complex algorithms to read and respond to live discussion from human participants. As time passes, the artificial intelligence gets smarter, learning more and more of the eccentricities that differentiate humans from computers. In fact, Cleverbot recently scored a 59.3% success rate on the Turing Test, a method of determining whether or not a speaker is human or software. That means that the majority of people having a chat session with Cleverbot could not tell that they were speaking with a computer.

Will Fortune Magazine replace their reporters with web-crawling software? Maybe, eventually, but we would suggest still picking up the phone if they call.

Do you have thoughts on the future of XBRL in the upcoming decades, share them below.

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Merrill Corporation is proud to offer XBRL Complete, a suite of services that meets - and has options to exceed – the mandated requirements for XBRL for mutual funds. For more information, please click here or call 866-367-9110.