IFRS, XBRL Are Not Priorities for Finance Execs

Lora Bentley

Not all that long ago, U.S. and European regulators were working feverishly to see U.S. Generally Acceptable Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) reconciled and converged so that companies listed on U.S. exchanges and exchanges in other countries could apply a single accounting standard and not have to "reinvent the wheel," so to speak, just because they needed to file financial statements in more than one place.


What's more, officials with the Securities and Exchange Commission adopted rules requiring companies to file certain financial records with the agency using eXtensible Business Reporting Language, or XBRL. The move was intended to make company financial information more accessible to investors and to provide more transparency into a corporation's financial condition.


But when the administration changed hands and SEC Chair Mary Schapiro took the helm, neither IFRS nor XBRL were high on the "to do" list. Instead, the agency focused more on enforcement efforts and implementing the regulatory overhaul of the financial sector promised and then passed by Congress.


As a result, any news involving either standard almost seems like an anachronism. Adopting the international standards is just not a priority anymore. And according to a Grant Thorton study released earlier this month, I'm not the only one who thinks so.


In fact, 49 percent of chief financial officers responding to the study said IFRS should only be adopted in the U.S. after IFRS and U.S. GAAP have converged to the point that differences are inconsequential, which won't be for another five to seven years. Only 24 percent said the international standards should be adopted as soon as possible.


In a statement, Grant Thorton CEO Stephen Chipman said:

[T]here is still much work to be done in educating the U.S. financial community on the benefits of IFRS. We have been, and continue to be, staunch supporters of the ongoing movement toward one set of high-quality, globally accepted accounting standards ... Just as international business has benefitted over the last 30-odd years from the increased shared use of English, so too will global companies reap the benefits of one financial reporting language.

The survey also revealed that very few respondents have any use for XBRL. Eighty percent said they do not use XBRL now, and 76 percent said they have no plans to do so in the future.


What a difference two years can make.

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Add Comment      Leave a comment on this blog post
Dec 1, 2010 10:56 AM Daniel Roberts Daniel Roberts  says:

The SEC's XBRL filing program is nothing new - except for the estimated 8,700 filers who are included in what is called the "third tier" of filers, the non-accelerated filers. First let me say that I've heard people suggest that they think the SEC will defer the requirement for the non-accelerated filers. I do not believe that will happen, nor have I heard that from anyone at the SEC or from anyone who might have heard that from the SEC. Non-accelerated filers should plan on filing XBRL with the SEC starting in August 2011.

So what are their options? Basically these fall into 3 buckets:

1. Work with a filing agent who will manage the entire process

2. Full self-filing, including creation of the XBRL

3. Self-file, but have a service provide create the XBRL

The one small problem is that the only people providing any education (all those nice free webinars) all have vested interests - to scare the stuffing out of the filers, so that they will outsource the entire process. This is counter productive.

So lets look quickly at the options.

1. Work with a filing agent. Many filers already work with filing agents for creation and submission of the quarterly and annual filings. The XBRL portion of this is estimated to add (based on the SEC's estimate) between $40,000 - $80,000 to the cost of filing. Anecdotal evidence suggests that this is about right for the larger filers. I do not know what it will be for the smaller filers, though I'm hearing lower numbers.

2. Those companies that currently self-file may wish to purchase a software license for one of the number of tools that exist to create XBRL documents. The cost here should be measured in both the software and the training/learning time of the person who will be creating the XBRL (not to mention their scarce time at filing season). In addition, I'm seeing software providers and filing agents requiring a flat fee of $250/hour or more for XBRL consulting. In addition, the software can be expensive. Still, total cost should be less than the $40,000 - $80,000 estimated by the SEC. I have also heard of situations in which vendors are requiring both purchase of the software license and a pre-payment for a fixed amount of consulting support, on the grounds that even self-filers will result in resource usage justifying that pre-paid support.

3. Self-filer without the resource slack to build internal skills may want to outsource the creation of the XBRL, yet still self-file. Various software vendors are offering this type of service, with various levels of cost.  We are hearing that some vendors are offering this as an option. Again, pricing seems to be well below the SEC's estimates.

The biggest questions for filers are pretty simple: Do we have the resources to fully outsource this, or do we have the resources to train someone internally do this, or do we have the time and energy to do this ourselves?

I would continue to make the same suggestion - book early. By May or June all that will be left will be the expensive options. Non-accelerated filers got a pass on SOX. They won't get the same pass from the SEC on the XBRL mandate. SOX costs were far above any estimates that the SEC provided. XBRL cost estimates are coming in at or even below the SEC's estimated range. 

But a final warning (again): any filer that has not booked the resources by May or June should expect to pay SOX type prices, while getting junior level support. There will be a lot of "instant experts" out there.

Third Tier filers ignore XBRL at their peril.


Daniel Roberts

Innovation, Strategy, Governance,

XBRL and Sustainability

E-mail: Daniel.Roberts01@gmail.com

Jan 26, 2011 1:27 PM Kt Kt  says:

In order to meet the SEC filing needs Xteron has come up with an Online XBRL compliance solution which addresses all the SEC requirements in the most efficient manner. Our product with simple easy to use workflows is a low cost solution without compromising on Quality and is becoming highly popular among the XBRL user community.

For more information please visit www.xteron.com or email support@xteron.com


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