XBRL has been in the forefront of business reporting technology for the last few years. XBRL has the advantage of providing accurate, cost effective and reliable data, at a very quick pace. It accelerates data analysis, data comparison and improves the decision making process. But if the information provided is not accurate, it beats the very purpose.
A recent study by the Columbia Business School on financial filings found that, majority of the investors were not using XBRL adequately, primarily due to the errors in data. It has been said that, the data is not only unreliable but is also a potential shortcoming of execution of SEC’s XBRL filing mandate.
There are many challenges that are faced during the XBRL conversion. Studies have been conducted, discussions have been held on these subjects. Below are some of the key issues highlighted;
- Final review process and validation
This involves two challenges. First, review to ensure that the edits get incorporated; handwritten comments are to be interpreted properly with utmost coordination back and forth in effecting the changes in HTML and XBRL records. Second, shortage of resources to manage these activities. This is a time consuming activity and most often it requires a team of dedicated staff to support this process.
- Accuracy of data
The XBRL data might contain many errors which would make it difficult for any kind of analysis. Filing incorrect information will be monitored strictly by the SEC.
- Gaining expertise in XBRL
The dedicated resources should have a thorough understanding of EDGAR and XBRL process; they need to know the facts mapping criteria (with correct taxonomy selection and extensions, ensuring consistency in tags); expertise in tagging (especially the Detailed Footnote tagging). In order to file error-free output, the internal team’s XBRL competency and commitment level has to be very high. Besides they need to stay on top of the US GAAP financial reporting taxonomy updates that happens every year (like new elements, modified standard, depreciated elements, total labels, modified data type, etc.)
- Pencils Down time associated with outsourced XBRL services
This is one of the biggest challenges with most customers, since changes to the financial reports are made till the last minute. In this case, both the EDGAR and XBRL process would take a certain amount of time to incorporate the changes, thereby missing the deadline.
- Making changes in multiple places
Any changes to the financial report should be incorporated in multiple places to ensure consistency and accuracy. Thus the resources are under pressure in making last minute changes, considering the time constraints, to make sure that the change gets incorporated throughout the HTML and XBRL document.
- Turn-around time
Since the SEC filing deadlines are strict, the final report with the latest changes incorporated, should be done well in advance. There might be resource constraints, not just for implementing the changes, but also for coordinating with other teams/vendors in making sure the filing happens on time. This puts enormous pressure on the company’s reporting team; often, it is considered as a nightmare to outsource work as they lose control over things.
DataTracks has been serving customers in the US and UK for the last 8 years, and has understood the customers’ pain points well enough. In order to address these challenges, DataTracks has recently launched a cloud-based, third generation collaborative XBRL solution. This solution has generated great interest with numerous existing and prospective clients, as it provides a ‘minds-on, hands-off’ approach.
DataTracks US is part of DataTracks Services Limited (www.datatracksglobal.com), leader in preparation of financial statements in XBRL and iXBRL formats for filing with regulators worldwide. DataTracks Global prepares more than 12,000 XBRL statements per annum for filing with regulators such as SEC in United States, HMRC in the United Kingdom and MCA in India. DataTracks delivery centers are ISO 9001:2008 (Quality Management) and ISO 27001:2005 (Information Security) accredited.
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