Not many CFOs may actually enjoy the process of filing their company’s financials by way of eXtensible Business Reporting Language (XBRL). But many have concluded it’s a job best done within the walls of one’s own company, according to a recent study by the Financial Executives Research Foundation.
“Usually the trend is to outsource what is not your core competency, whether it’s payroll or AP or whatever, but XBRL seems to buck that trend,” says Bill Sinnett, senior director of research at FERF and author of the study.
To determine how companies are handling Securities and Exchange Commission reporting and compliance with XBRL tagging, FERF surveyed 416 finance executives from small, medium, and large companies in 2012 and found that organizations across the board expect to take greater responsibility for their XBRL filings. The percentage of respondents not planning to outsource XBRL at all over the next year jumped 16% year-over-year among large accelerated filers (those that had to comply with XBRL requirements starting in 2009).
Over the next year, 43% of respondents from companies farthest along in XBRL compliance said they planned to complete the tagging process in-house, while 21% said they would continue outsourcing the function completely. The remaining respondents fell somewhere in between. Half of the respondents from smaller reporting companies planned to continue outsourcing the function.
The survey showed that companies in every stage of XBRL compliance are hoping to improve on XBRL tagging, which was the most often mentioned bottleneck in SEC reporting across all reporting groups in 2012. XBRL beat out late changes to documents, internal review processes, closing the books, and timely collection of data for the top spot.
Among the largest companies, 55% cited XBRL tagging as their greatest difficulty when filing, as did 64% of smaller reporting companies. Respondents cited their internal teams’ level of XBRL competency, getting educated on the technology, and the final review process as contributors to the bottleneck.
Sinnett suggests that dissatisfaction with XBRL providers is leading companies to bring the function in-house, particularly with regard to a provider’s “pencils down” policy, which refers to the number of business days prior to a planned filing when an outsourced XBRL-solution provider requires a final version of the document.
“Many times companies will have a last-minute change they want to make, but if they’ve already sent the filing to the outsourcer, they can’t make that change, or worst-case-scenario, their filing is late,” he says. “If you do the tagging in-house, you can make those last-minute changes.”
XBRL-provider satisfaction rates for filers dropped from the 2011 survey, which researchers found to be related to the stepped-up complexity associated with detailed XBRL tagging. R.R. Donnelly, which Google blamed for the premature release of its third-quarter earnings report in October, had the second-lowest satisfaction rate among all respondents. Providers that did not have a pencils down policy — that is, no cutoff date — had the highest customer-satisfaction ratings.
Respondents across the board said they planned to increase both the size of their internal XBRL team as well as the level of internal XBRL competency. The vast majority of respondents (98% of large accelerated filers, 91% of accelerated filers, 96% of nonaccelerated filers, and 86% of smaller reporting companies) said they planned to file in line with the time frame of previous filings or faster.
Finance executives have not held back in expressing to the SEC their concern over XBRL’s value from the start, and the survey found that concern has not waned over time. Among smaller reporting companies, 68% reported that the biggest concern raised with regard to XBRL compliance is the cost-benefit equation of the XBRL mandate. It was also the biggest concern among 45% of large accelerated filers, which ranked potentially receiving a comment letter from the SEC on the same level.