Given all the pressures IT is under, another compliance initiative may seem to be one too many. There is such a mandate: to submit financial reports using XBRL (Extensible Business Reporting Language) tags. How much will the XBRL mandate add to IT's burden? At first, the burden will be small, but it will increase over time -- as will the opportunity to use XBRL for better internal operations, not just for reporting compliance.
The purpose of the XBRL mandate is to make corporate financial information more easily available to stockholders -- and to make sure companies are really reporting the same things, the federal government has mandated the use of XBRL (Extensible Business Reporting Language).
See how XBRL adoption can help save money and how XBRL's benefits will create more work for IT.
The first SEC deadline for public companies with a market cap of US$5 billion or more to submit financial reports in interactive data, aka XBRL format, is set for Dec. 15, 2008. A year later, most Fortune 1500 companies must provide interactive XBRL data, and a year after that, all public companies will be required to submit the annual 10-K and quarterly 10-Q financial reports as interactive data.
After that, companies should expect the SEC to require more financial documents to be published in XBRL format and for other government agencies to begin mandating its use as well, says Diane Mueller, vice president of XBRL Development for JustSystems, an XML tools provider. John Stantial, assistant comptroller at the conglomerate United Technologies Corp. (UTC), expects to see the Department of Labor, the Internal Revenue Service, and the Bureau of Economic Analysis adopt XBRL as a requirement.
So what must IT do to make its company's financial reporting XBRL-compliant?
Initially, XBRL requires just a minimal role for IT
Under the SEC's initial reporting requirements, there is not much case for IT involvement, says Mike Willis, a partner at auditor PricewaterhouseCoopers and the founding chairman of XBRL International, a supply-chain consortium representing more than 600 companies.
Most of the initial XBRL effort is to tag the financial statements with the correct taxonomy, using XBRL markup terms, to describe a particular financial concept or fact in, say, a profit-and-loss statement. That effort is entirely a financial reporting activity, notes David Blaszkowsky, director of the SEC's Office of Interactive Disclosure. The work can be done in-house or outsourced to a financial publisher.