an xbrl starter guide

8/9/2019 An XBRL Starter Guide

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22 Financial Reporting Disclosures March/April

By Haven S. Pope, CPA, CFE, and James P. Davis, CPA, CITP


2/4Financial Reporting Disclosures March/April 23

e are now well into the rst year o the phased-in roll out o the new XBRL nancial reporting requirement. At this point,you have probably heard about XBRL, but may be unsureabout what it is and how it will a ect your organization orclients.

For entities that did not meet the requirements or year-one compli-

ance, this is amiliar territory; the deadline may still seem to be in thedistant uture. Its time to wake up and make a plan, because the dead-line is now rapidly approaching! For calendar year-end companies, thedeadline or phase-two compliance will be the second quarter ling onForm 10-Q, or the quarter ending June 30, 2010.

So, i your company or clients are looking to bene t rom XBRL orwill be required to use it, its time to get started. Read on or an overviewo the steps youll need to take.

XBRL stands or eXtensible Business Reporting Language and is aweb-based code designed or companies to share business and nancialreporting in a standardized ormat independent o an organizations cur-rent technology or so tware. This standardized ormat makes it easierto compare nancial in ormation across various organizations and allowsusers to per orm more efcient data mining.

Instead o nancial in ormation being reported in a static ormat,such as in a printed document, XBRL allows each item o data to betagged. These tags are computer readable and allow the data to be usedinteractively. XBRL can improve an organizations nancial reportingaccuracy, reliability and efciency because the data can be tagged at itssource, while also increasing comparability across organizations due tothe standardization o tags and reporting ormat.

Essentially all public companies and oreign private issuers are requiredto comply with the new XBRL ling requirements. However, the speci cdeadlines or compliance depend on the size o the organization.

The rst phase was applicable or large accelerated lers with a publicoat in excess o $5 billion and applied to their rst quarter ending a ter

June 15, 2009, which would be the second quarter or calendar year-endlers. The second phase is applicable to all remaining large acceleratedlers and applies to their rst quarter ending a ter June 15, 2010. Phase

three applies to all remaining public companies or their rst quarterending a ter June 15, 2011.

For all companies, compliance will be in two phases. In year one, eachcompany will be required to tag each line o their nancial statementsand will block tag the notes to the nancial statements. Block taggingconsists o labeling an entire note (i.e. Accounting Policies) with a singletag, without tagging individual items within the note.

In year two, all numbers, including tables, in the notes and schedulesmust be individually tagged. For the initial ling in years one and two,the XBRL submission can be led up to 30 days ollowing the submissiono the EDGAR ling. All subsequent XBRL lings must be submittedwith the EDGAR ling.w


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24 Financial Reporting Disclosures March/April

Knowledge assessmentXBRL implementation should begin with

a company-wide discussion to assess thecurrent level o XBRL knowledge withinthe organization. Then, the implementa-tion plan can be customized to the needs o

the company. It is important to gain a clearunderstanding o the knowledge base withinthe organization to determine which criticalknowledge gaps exist; there are likely to bemany i only a ew people are amiliar withthe XBRL requirements.

Project teamEstablishing a project team and team

leader may go hand-in-hand with theknowledge assessment process or will ol-low closely a terward. The project teamshould consist o the key individuals whowill be involved in the implementation,such as the controller or nancial reportingmanager, investor relations representative,Securities and Exchange Commission (SEC)counsel and other persons involved in thepreparation o the SEC lings.

Training andinformation gathering

A ter the critical knowledge gaps areidenti ed, it is important to take the time toget everyone up-to-speed on what XBRL is

and the compliance requirements applicableto the organization. This training could beaccomplished by bringing in an outsideexpert or internal sta with su icientknowledge about XBRL and who may have been discovered during the preliminarydiscussions.

There are also various webcasts andcontinuing pro ession education (CPE)sessions o ered on the subject that may be e ective in establishing the appropriate baseline knowledge among the project teamand company management.

XBRL US (www.xbrl.us) is the organiza-tion established to support the implementa-tion o XBRL in the United States. Amongother things, its website o ers a varietyo in ormation about XBRL, compliancerequirements and even a list o so twarevendors and consultants who can assistwith the implementation process. Some o the Big Four accounting rms also o erin ormation and implementation guides ontheir websites.

Implementation approachPicking one o two approaches to

implementation, either sel -service or ull-service, is probably one o the most criticaldecisions because it will dictate most o theremaining steps in the process.

The sel -service option consists o pur-

chasing a so tware package and per ormingall implementation steps internally. Thecompany should rst consult the vendoro its current accounting and reportingso tware to see i it is capable o generatingXBRL reports, as this may produce someunanticipated savings rom the outset. The

ull-service option consists o outsourcingsome or all o the XBRL implementationresponsibilities to a third-party service pro-vider, while the company mainly reviewsand approves the outputs.

There are bene ts and drawbacks to bothalternatives. The sel -service option mayprovide signi cant monetary savings andallows or more control over the process.However, this option will require more in-depth training on the XBRL requirementsand the so tware applications, and muchmore time will be devoted by internal sta during the up ront implementation pro-cedures and as part o the quarterly lingprocess.

With the ull-service option, companiescan bene t rom relying on the expertise

o the service providers because they havemuch more experience in this arena andthey can signi cantly reduce internal laborcosts by reeing up sta members to doother tasks. There are still internal laborcosts associated with reviewing in ormationat certain milestones during the implemen-tation process and reviewing the XBRLdocuments prior to submission, but thereis a signi cant reduction compared to thesel -service option.

When relying on a third party, though,the company will lose a certain amount o

control over the overall process. For ex-ample, some service providers will requirecompanies to provide their nal document

or ling up to ve business days be ore theirexpected ling date in order to prepare theXBRL submission document. For compa-nies that typically submit their lings closeto the deadline, squeezing ve business daysinto an already compressed timeline maynot be easible, which may orce them torely on the sel -service option or sacri cevaluable preparation and review time.

I internal resources are limited and thtimeline required by the available servicproviders is easible, the ull-service optimay be the desired approach. However, imonetary savings and retaining ull controover the process are signi cant considerations, then the sel -service option may b

ideal. As most organizations have limitedresources, it is possible that the ull-servicapproach will be the most widely used dur-ing the rst ew years o compliance.

Although, the initial implementationprocess (and costs) will likely need to berepeated i a company decides to switch tthe sel -service approach in uture years the work already per ormed by the thirdparty will likely not be trans errable duto so tware compatibility issues.

XBRL taxonomyTaxonomies are electronic classi cation

systems, o ten re erred to as dictionariesused by the XBRL language, which contaithe tags that de ne the nancial and othein ormation (i.e. cash and cash equivalents). Each taxonomy has several thousandtags rom which to choose, as each elemenwithin the nancial statements must havean individual tag.

Customizing the XBRL taxonomy willikely be included in the implementationcosts associated with using a third party

This may also be a service o ered by certain so tware vendors, but could be anadditional charge.

The appropriate tags must be selectedor a companys nancial statements an

notes, or extension tags, can be created ithe appropriate tag does not exist. I an itemis labeled with a speci c tag, the companis saying that the tag properly de nes thein ormation that is being reported by thaitem. For example, i an item is tagged acash and cash equivalents, that item meetthe de nition o cash and cash equivalent

within the taxonomy. There ore, i severacompanies use this same tag on their nancial statements, this is essentially sayinthat this line item is equivalent across alo these companies, thus increasing thcomparability among seemingly diverssets o nancial statements.

Although the rst required XBRL submission will be based on a quarterly lingit is recommended that the taxonomy becustomized based on the requirements

or the annual report, as there may be ad


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ditional elements required or this ling.It is easier to include these additional ele-ments now and simply exclude them romthe quarterly lings.

Mapping and validationOnce the taxonomy is customized to

meet the companys speci c requirements,the next step is to create the mapping tem-plate based on an existing set o nancialstatements. Tags are then mapped to thespeci c nancial statement items. Thistemplate will be the basis or uture XBRL

lings, so the goal is to develop a compre-hensive template that will require onlyminimal modi cations in uture periods.For this reason, it may be bene cial to usethe companys annual report to developthe mapping template, as there may beadditional elements required or this reportthat are easier to incorporate during theimplementation process.

A ter the inancial statements aremapped, the next step is validation, inwhich the XBRL nancial statements arevalidated to ensure no errors exist. De-pending on the so tware being used, parto this process is automated and any errorsare quickly identi ed, such as veri ying thatthe XBRL balance sheet is in balance andthat all items are tagged. Other validationsmust be done manually, such as veri ying

the appropriate tags were selected oreach line item. I this part o the process isoutsourced, the company may only needto validate that all o the appropriate tagswere selected a ter the third party hascompleted the mapping template.

XBRL submissionA ter the mapping template is prepared

and all o the validation checks are com-pleted, the company should be ready whenthe rst submission deadline approaches.To avoid inconsistencies, the XBRL docu-ment typically would be generated a ter orat the same time as the EDGAR ling. TheSEC has provided a 30-day grace period orthe initial ling, though many organizationsin the rst phase did not rely on the graceperiod and submitted the XBRL documentsimultaneously with their EDGAR ling.

A ter the initial ling is success ullysubmitted, the company should discuss

the overall process to determine i theycan gain any efciency in uture periods.The company should also begin preparing

or the upcoming milestones.The rst milestone will be the annual

report iling, which may require somemodi ications to the existing mapping

template. The second milestone will berst ling in year two o compliance, whichwill require detailed tagging in the notes tothe nancial statements. I the company isdoing the work itsel , this will signi cantlyincrease internal labor costs as compared toyear one because the number o requiredtags is much greater and several extensiontags may need to be added.

With the ull-service approach, therewill be an increase in internal labor associ-ated with reviewing and customizing thetaxonomy and reviewing the documentprior to submission. However, the larg-est cost increase will likely be in the eescharged by the service providers to coverthe increase in their labor costs.

Insufcient education or trainingBe sure to invest the time needed to

properly understand the XBRL require-ments and deadlines and how they impactyour organization. There are severalresources available that can provide the in-

ormation required and/or you can partnerwith your external auditor or another thirdparty to help close any knowledge gaps.

Poor planningProperly implementing the XBRL

reporting requirements will take severalmonths o planning and preparation. It isrecommended that you prepare and test

le your XBRL submission document atleast one quarter prior to the deadline oryour organization to ensure that you will be ready on time.

Also, it is important to properly con-sider the alternatives: ull-service versussel -service. Failing to properly account orthe internal labor hours could result in sig-ni cant delays due to lack o resources, anddata quality could also su er. Switchingto a ull-service option at the last minutewill likely result in a signi cant increasein costs, well beyond what may have beenoriginally budgeted.Failing to plan or the long term

Be sure to look beyond initial compli-

ance and consider the long-term implica-tions o decisions made during the implementation process. Look orward to thecompliance requirements or year two and beyond, and consider which option ( ullservice or sel -service) is consistent witthe companys long-term goals or XBR

compliance.

Its clear XBRL is here, and its timeto get on board. These tips should help youget started, and dont orget to visit www.xbrl.us or in-depth in ormation on implementation. With a clear understanding othe purpose and uses or XBRL, propeplanning and a comprehensible, workableplan, you should be on the road to XBRLsuccess.

Note: The opinions expressed are those oauthors and not of the authors employers.

James P. Davis Jr.,CPA, CITP, is a senioraccountant with Colbyand Company, PLC,in Chesapeake. Inaddition to specializingin IT consulting at

Colby, he has manyyears of experience in traditional accounting services for variousindustries. He was voted as aSuper CPA in 2007 and alsosits on the VSCPA Editorial TaskForce. Contact him at

[email protected].

Haven S. Pope, CPA,CFE,is the manager o fnancial reporting atCarMax, Inc. (www.carmax.com), inRichmond. He hasmore than nine years o accounting and auditing

experience, including seven years in public accounting. He was voted asa Super CPA in 2008 and also sitson the VSCPA Editorial Task Force.Contact him at [email protected] visit his profle on LinkedIn atwww.linkedin.com/in/havenpope.

Financial Reporting Disclosures March/April 25

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