5 reasons why investing in XBRL software for FERC is a power move!
In 2005, there were no more than ten regulators worldwide who had adopted XBRL as a standard for reporting. Today, more than 100 regulatory bodies across 60 countries have welcomed XBRL with open arms, thanks to the various benefits it offers. This number only increases by the year.
Following FERC’s announcement regarding the transition to XBRL, utility companies have been scrambling to find an efficient and economical means to comply with the mandate. The conversion of financial data to an XBRL-ready file is relatively easy both on the pocket and on operations. Provided, one chooses to invest in a dedicated software rather than building an in-house tool.
Investing in robust, safe, and easy-to-use software is not a compliance cost. Instead, it is strategic assistance to the process of compliance reporting for your company. Here are five reasons why:
1. Smart tagging of Information
Financial reports are filled with many business rules or formulae, which are essential to the accuracy and validity of the data being reported. Most of these business rules are defined in XBRL taxonomies. To generate a report, each taxonomy rule must be tagged appropriately to a business function.
Tagging requires significant knowledge and understanding of the business and information requirements. Therefore it is handy when an application can have the templates pre-tagged with taxonomy elements so that filers can focus on data and not the tagging. An ideal software will auto-tag based on taxonomy in a format similar to FERC’s template layout.
2. Efficient Management of review time
A typical filing cycle goes through multiple iterations until the report is approved for submission. An ideal software will have the capability to let users maintain versions and let the approving authorities to compare versions and review only the incremental changes instead of reviewing the whole report for every iteration.
3. Complex Data Management
A software facilitates easy management of huge amounts of data. It can simplify the process of entering, editing, assimilating, and reviewing information by presenting it in a layout and format that is commonly used. A software has the capability to tag the formatted content in the source document and maintain the same formatting when uploaded. Thus, management of data is easy and efficient.
4. Auto-update of Taxonomy
Regulators often deliver updates to the XBRL taxonomies basis user polls and requirements. Significantly when being introduced, the FERC may frequently update taxonomy over the next few years. An energy organization will need to update a previously used tag with the newly updated version of the taxonomy and address any new reporting requirements from the regulators. A software can automatically roll the taxonomies forward from period to period and from the previous period’s old taxonomy to the current period’s new taxonomy. This significantly eases the effort required to maintain or update the taxonomy manually, saving substantial costs to a company.
5. Comprehensive Validation
Validation is a vital function to prepare and submit an accurate report. Each regulator, including the FERC, defines a set of validation rules that must be complied with before submission of documents. A software provides an integrated process of validating all the criteria and generates a report for resolving errors, if any. The resolution process will save significant user’s time and effort, allowing for the submission of an error-free report to the regulator.
Financial reporting errors impact the bottom line of an organization. Organizations must ensure that they reduce the company filings’ risks and costs while increasing the reliability, transparency, and accuracy of financial reporting. If it is convincing that a software is the missing piece of your compliance puzzle, Great! Here are some other questions you should consider. Have you determined your approach to picking the appropriate XBRL software solution that can significantly reduce risk and costs for your company? What are some of the other advantages a software can have? Where can I find that one reliable solution that can eliminate by compliance burden?
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