Myths about XBRL tagging
Two myths about XBRL tagging:
One, it is simple.
Two, it is complicated. Both are not true.
The first reaction of most CFOs is to treat this as one more exercise to be performed by finance/accounting function and task an in house resource to do the job. Though the incremental cost of such a decision is probably just the cost of the software tool required to prepare financial statements in XBRL format, the total cost can be staggering:
1. You need to buy the right software that meets your purpose. Template tools are very cheap but may not serve your purpose especially if you are a unique business with unique needs. Simpler tools provide some flexibility but can frustrate you if you need to extend taxonomies at a later date. Complex tools are quite expensive and take time to understand/master.
2. You need to train a resource in your finance department in two major areas:
- Skill set in operating the software and taxonomy and ensuring both are up to date (this is the simpler part)
- Competence in GAAP interpretations that are most appropriate, and are not unfair to you when compared with peer practices; yet acceptable to your auditors (this is the tougher part).
More importantly you need to ensure these skills/competences do not rust when the resource is doing something else for the rest of the year. Of course, you need to retain this resource through years. Otherwise you would have to start all over again; each time.
It is not simple indeed.
On the other hand, CFOs who recognize this is best outsourced to a professional vendor who does this year in and year out (in various countries) have two major concerns: security (whether their confidential data would be safe) and control (whether they would have a strong role in shaping the document).
DataTracks has prepared more than 60,000 regulatory filings (10,000 of them in XBRL format) in the last seven years; is ISO 27001:2005 accredited for information security management, and has a far stronger control over data security than a typical audit firm or in house finance department.
DataTracks provides an easy method for CFOs to review the taxonomy decisions taken (with explanations), and executes as many amendments to taxonomy decisions as are desired by CFOs at no extra cost. While much of the basic work is done by DataTracks, the CFO continues to remain in strong control over the taxonomy labels chosen. Several CFOs have told us that their control over the XBRL document has improved (and not deteriorated) after outsourcing the work to DataTracks. There is a reason why more than 50% of the companies in the US outsource the task of preparing XBRL statements to a professional service than do it in house.
It is not complex indeed.
When it comes to XBRL tagging, most companies try preparing the XBRL statements in-house using different types of XBRL tools or software. This would probably be easy and simple if the financial statements are simple in structure and have a predictable set of notes to explain the numbers. A onetime investment in the software and a limited investment of time and money in acquring the know how should help a company manage its obligations to MCA in filing financial statements in XBRL format.
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