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XBRL-US rolls out a more complex set of computer-code tags that turn financial statements into interactive data, but critics worry it will be costly to implement.
Alix Stuart, CFO Magazine
October 22, 2007
CFOs may not be able to avoid the topic of XBRL for much longer. A new and more comprehensive version of the data tags that turn financial statements into "interactive data" has been completed and goes into market-testing this month. XBRL-US, the nonprofit organization hired by the Securities and Exchange Commission to develop the tags (small pieces of computer code), will work with at least 13 of the 48 companies currently filing SEC documents in XBRL to see how well the new version works, according to CEO Mark Bolgiano. Since taking over the project last year from the Financial Accounting Standards Board (which inherited it from the American Institute of Certified Public Accountants), the group has been standardizing tags for primary financial statements and footnotes, expanding the number from less than 2,500 to 15,000.
That sixfold increase means companies will have to do less customization, which should make it easier to convert the typical items found on financial statements into XBRL format, according to Bolgiano. Critics, however, are concerned that it will make XBRL more costly. "They've built a Taj Mahal when what we needed was a nice four-bedroom house," says one source close to the matter. He predicts that conversion will require substantial — and expensive — consulting help similar to what was required for Sarbanes- Oxley compliance. The new language as currently drafted may not satisfy one major constituency — Wall Street analysts — since its structure is too complex, says Eric Linder, CEO of Savanet, which makes a software tool that analysts would use to read XBRL statements.
While the SEC has not yet mandated the use of XBRL, it has invested $54 million to create the technology necessary to, as it stated last year, "pave the way toward universal XBRL." Chairman Christopher Cox's public enthusiasm for the project, as evidenced in speeches, multiple roundtables, and congressional testimony, has only heightened the expectation that XBRL will replace the current HTML-based system. There's no official word on when or whether that might happen, but the eventual public release of the final XBRL code (expected in 2008) will be a major milestone, says Jeff Naumann in the SEC's Office of the Chief Accountant, since the current EDGAR system can already handle XBRL documents.