The promise — or threat, depending on your perspective — of a mandate to file financial statements in a new “interactive data” format has been looming for so long that most CFOs have long since tuned it out. Only about half claimed to be familiar with XBRL in a September survey by Grant Thornton, and a whopping 90 percent reported no plans to use it. While outgoing SEC chairman Cox has been one of its biggest champions, the process of making the language mandatory for financial reports has taken a tortuously slow path, culminating in a rule that hung suspended in proposal state for more than six months last year.
Assuming the SEC finalizes the rule as written before Cox leaves the building, though, companies with market caps of $5 billion and above (as of the end of last year’s second quarter) would have to immediately start tagging their 2008 year-end financials with XBRL code and be able to handle the trickier task of coding footnotes in detail for 2009 10-Ks. Other large companies would start the process for 2009 financials, and smaller companies (with market caps of $75 million or less) will follow for 2010 reports.
Considering the myriad concerns expressed in the 50-plus comment letters the proposal generated, the quick turnaround might seem a scary proposition. However, many firms facing the imminent deadline have already started the process and are likely to be well prepared, says David Blaszkowsky, director of interactive data at the SEC. (It helps that they will have an additional 30 days to submit the data-tagged versions after filing their traditional 10-Ks and 10-Qs.)
International Paper is one of those companies. After one day of training and a practice filing, chief accounting officer Fred Bleier expects three of his staff members (a manager of financial reporting, a manager of financial systems, and a staff accounting person) to be able to easily handle XBRL coding going forward. “We don’t see this as being hugely difficult for a company to do,” Bleier says. He and his colleagues spent a leisurely four months meeting with vendors, and finally decided that buying software and tagging in-house would be more cost-effective than the easy alternative of outsourcing the whole project to a financial filing company. The project “is not a significant cost one way or another,” says Bleier, but he sees savings in the second year, when software license fees will decline, versus outsourcing fees that would go up to accommodate the additional time needed to code footnotes in detail.
Even a move to IFRS is unlikely to derail the XBRL initiative. Blaszkowsky says that although none of the countries that have adopted XBRL have also adopted IFRS, tags for the international standards have existed since 2004 and have been updated every year since. “Companies could tag their prime financials in IFRS today,” he says. The SEC platform couldn’t currently accept them, but Blaszkowsky expects that it will take little effort to upgrade the system with the appropriate data codes.