Insights from the SEC's XBRL Voluntary Filing Program

By Choi, Victor; Grant, Gerry H. et al. | The CPA Journal, December 2008 | Go to article overview

Insights from the SEC's XBRL Voluntary Filing Program


Choi, Victor, Grant, Gerry H., Luzi, Andrew D., The CPA Journal


In June 2008, the SEC proposed two rules that would mandate XBRL reporting in the near future. One proposal addresses filing requirements for mutual funds; the other, publicly traded companies. The proposal for publicly traded companies would require large accelerated filers with a market capitalization over $5 billion to submit their financial statements and related schedules in XBRL format for fiscal years ending on or after December 15, 2008. The 2008 filing requirement would impact approximately 500 domestic and foreign companies. The remaining accelerated filers, companies with a market capitalization between $700 million and $5 billion, must comply with the XBRL filing requirements beginning December 15, 2009, with all registrants complying in 2010. The SEC emphasized its push for XBRL by investing $54 million in its aging Internet database in 2006 to start preparing for interactive financial reporting. In a September 25, 2006, press release, SEC Chairman Christopher Cox announced that most of the funds would be used to modernize the SEC' s EDGAR database, but $6 million was earmarked to improve XBRL taxonomies and develop XBRL interactive tools.

Early Adoption

In an effort to make financial statements machine-readable, to increase the accuracy and quality of financial data, and to reduce the cost of financial reporting, the SEC began its Voluntary Filing Program (VFP) for XBRL in 2005. The SEC also created a pilot program for a group of test companies. Under the VFP, companies could participate at will. Companies that participated in the pilot test program, however, were required to provide a set of four XBRL filings within a one-year period, and the documents had to reflect the same financial information that appeared in the company's official EDGAR filings. In return, the companies that participated in the test program received accelerated reviews by the SEC on their financial documents.

According to www.xbrl.us, the VFP has three main purposes: testing the costs and benefits of using XBRL, providing a forum for interested public companies to imple- ment and test XBRL filings, and giving financial analysts the opportunity to use XBRL. The VFP is an ongoing program and is still open to new participants; more than 70 companies, formally or informally, currently participate in the program.

Insights from these early adopters of XBRL can provide valuable guidance to other companies. In an attempt to bring this information to the professional community, the authors interviewed five individuals at companies that are participating in the SECs VFP. Two of the participants interviewed are financial reporting managers, two are controllers, and the fifth is the investor relations man- ager of the company. All participants were knowledgeable about their compa- ny's involvement with the XBRL VFP.

All companies surveyed reported that the XBRL project was initiated due to a perceived mandate for XBRL in the near future and a need to be ready prior to the mandate. Although implementation processes differed among the companies surveyed, some common themes surfaced:

* Controllers and CFOs were commonly the decision makers, with investor relations staff playing a role in the project because they handle questions regarding the progress of the company's XBRL financial reporting. Only one company did not have a formal approval process, because the project was considered experimental.

* All of the companies created a small team of three to four people to implement XBRL.

* The role of the XBRL project manager generally went to a middle- or upperlevel accounting position, such as the controller or financial reporting manager.

* All team leaders lacked even a general knowledge of XBRL at the beginning of the project and relied on self-study to learn the XBRL process. Two companies reported spending 80 to 100 hours learning how to convert financial statements into XBRL documents.

* Even though the teams lacked XBRL knowledge, the companies found that experienced XBRL consultants were not needed. …

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