Why do companies prefer to use outside vendors rather than prepare iXBRL documents in-house?
There are two myths about conversion of financial documents into iXBRL format.
Myth 1: it is simple.
Myth 2: It is complex.
The first reaction of most companies is to try and prepare the iXBRL statements in house using an accounts preparation software or an accounting software. This is probably easy if your financial statements are simple in structure and have a predictable set of notes to explain the numbers. A one time investment in the software and a limited investment of time and money in acquiring the know how should help a company in managing its obligations to HMRC in filing financial statements accompanying a corporate tax return in iXBRL format.
On the other hand, if your financial statements are not simple; and you have a reasonable number of foot notes that go into the financial statements then you (or your accounting/tax advisor) have a few choices:
1. Buy an expensive XBRL tagging software and invest in training people
2. Use a vendor who specializes in converting your financial statements into iXBRL format for a fee.
Most companies prefer to use an outside vendor (such as DataTracks) for several reasons:
1. It is a “once in a year” exercise; not a frequent task.
2. It is not “core” to your business. Acquiring and retaining expertise in this is a waste of your precious time and money.
3. Outside vendors have far better expertise in associating your financial statements with the right set of elements in the GAAP taxonomy. Your obligations to HMRC are better served by that expertise.
4. You would be surprised at how inexpensive this is against the alternative of investing in:
b. Acquisition of knowledge by your in house resources
c. Retention of those resources over a period of time
d. Opportunity cost of your key resources staying focused on what is essentially not core to your business.
In a recent survey conducted by us (where a lucky participant won an iPad 2), participant opinions tended to vary. A majority of the opinions expressed included:
1. The exercise often requires new staff to be hired, which increases costs.
2. In reality a disproportionate time is diverted to handle iXBRL related work.
3. Qualified accountants are forced to handle this work instead of high yield billable work.
4. Companies are unsure about the accuracy of iXBRL tagging and compliance with HMRC requirements as there is too much dependence on software.
5. One has to invest time in ensuring the software and the taxonomy are kept up to date.
6. The disadvantages could increase when HMRC moves to using the full taxonomy of UK GAAP instead of the limited set being used today.
7. The disadvantages could increase when Companies House mandates submission of financial statements in iXBRL format.
To avoid these disadvantages, companies prefer to use specialist vendors who have expertise in preparing XBRL statements. They look to “managed tagging service providers” such as DataTracks who are:
2. easily accessible all the way until the filing is done
3. capable of exercising professional judgment in associating your financial data to the right set of tags (or elements in the GAAP taxonomy)
4. capable of doing this for a lower cost
A few thousand companies have chosen DataTracks, a iXBRL managed tagging services provider.
1. DataTracks are global experts in preparation of financial statements in XBRL or iXBRL format in various countries including US, UK and India.
2. DataTracks has a track record of having produced at least 60,000 statements in formats required by regulators worldwide (including ASCII, HTML and XBRL formats)
3. DataTracks’ service model is simple.
a. You register as a user in www.datatracks.co.uk
b. You set up entities
c. You upload financial statements of each entity and pay
d. After DataTracks informs you that your output is ready, you download the output.
e. DataTracks provides additional documents in Word or Excel format to help you review the appropriateness of tags.
f. If you or your advisors want to change any tag, you just need to send an email.
g. For no extra cost DataTracks will keep providing you modified versions as many times as you want until your filing is successful.
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