Common XBRL Misconceptions

...and the facts that reveal the truth

Since mandated in 2009, XBRL has caused confusion and uncertainty in financial reporting.

the SEC’s XBRL grace period ends.

It’s time for organizations to focus on XBRL compliance and learn the truth about common XBRL misconceptions.

October 31, 2014

XBRL Misconception #1

When unsure about which standard tag to use, create an extension tag.

?What’s the

reality?

Extension tags are overused.

One study reveals that

22.2% of reports from the financial industry use them.1

1 Columbia Business School Center for Excellence in Accounting and Security Analysis. Democratizing Transparency. New York: 2010. http://www4.gsb.columbia.edu/filemgr?file_id=7216992

Why is this problematic?

It undermines XBRL’s primary goal to make it easier for analysts and investors to compare companies…

…and:

Subjective extension tags leave more possibility for error, meaning extra costs for the filer.

So, what now?

Extension tags will remain, but filers should apply them with discretion.

More extensions

more manual labor & higher costs.

Align filings with XBRL best practices.

One Solution:

Source in-house software that o�ers access to precedents and searchable XBRL taxonomy and tags.

XBRL</>

Outsourcing XBRL tagging is the best option.

?What’s the

reality?

Outsourcing has many disadvantages, meaning in-house XBRL tagging is the favorable choice.

XBRL</>

? ? ?Why?

Outsourcing is more expensive.

costlier than filing XBRL documents in-house.2

XBRL</>

2 Gartner. Financial Statement Production Solution Increase Market Penetration. Stamford: 2010. http://www.gartner.com/id=1466426

XBRL</>

And…It shifts accountability from the filer to the outsourcer.This leaves room for errors and doesn’t allow for internal XBRL proficiency to grow.

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Other negative implications include

Security issues

Poor reporting work processes

Higher risk for errors

Longer turnaround times & potential for late filings

? ? ?So what now?

When it comes to in-house vs. outsourcing, the numbers speak for themselves…

In 2012, 50% of large accelerated filers chose to bring the tagging in-house.3

3 LogixData Analysis of XBRL Vendors and Their Market Share for 2012 and 2011. 13 Feb, 2013. http://www.logixdata.com/blog/bid/143011/Analysis-of-XBRL-vendors-and-their-market-share-for-2012-and-2011

….this is a ~25% increase from the year before.4

4 LogixData Analysis of XBRL Vendors and Their Market Share for 2012 and 2011. 13 Feb, 2013. http://www.logixdata.com/blog/bid/143011/Analysis-of-XBRL-vendors-and-their-market-share-for-2012-and-2011

XBRL makes companies too transparent.

?What’s the

reality?

“XBRL in no way requires a company to change how, what, or when to report financial information. It does not provide more data than standard financial statements.”5

5 XBRL US. XBRL US GAAP Taxonomy Preparers Guide. Washington: 2008. http://xbrl.us/Documents/PreparersGuide.pdf

? ? ?Why?

Filers report the same information, but XBRL presents it in a computer readable format to make it more digestible.

? ? ?So what now?

Filers should remember:

XBRL reporting is for the benefit of investors. Using it won’t put you at a competitive disadvantage.

For Example - Radyne Corporation

Company’s trading averages before XBRL adoption:

After XBRL adoption:

20,000 shares/day

135,000shares/day 6

6 PR Newswire. XBRL for the IRO: Benefiting from Interactive Data. PR Newswire Association LLC: 2011.http://promotions.prnewswire.com/rs/prnewswire/images/WP_XBRL_Benefiting_from_Interactive_Data.pdf

SEC penalties for XBRL non-compliance aren’t a concern.</>

?What’s the

reality?

They are.

? ? ?Why?

After this date, penalties for XBRL noncompliance will likely become harsher.

the SEC’s XBRL grace period ends.

October 31, 2014

…of those filings, 5,000 problems were identified.7

Last year, 1,400 XBRL filings were submitted to the SEC…

7 XBRL US. Avoiding Common Errors in XBRL Creation. Washington: 2010. http://xbrl.us/research/documents/avoidingerrorswhitepaper.pdf

? ? ?So what now?

Companies need to focus on reducing errors by making a stronger e�ort to learn XBRL inside and out.

Taking responsibility for XBRL reporting now will mean a decreased risk for harsher SEC penalties after the grace period ends.

Read this: Find out what’s up and coming for XBRL this year. Read our whitepaper XBRL Trends to Expect in 2013

Print this: Or see who comes out on top – in-house or outsourced XBRL solutions - in this XBRL Cup Infographic

Resources

Looking for a quick, easy way to pull information from XBRL filings?

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