NIRI ’09 Session: Understanding IR Strategies Behind XBRL – IROs Evolving Role
As usual, there were a lot of great sessions to choose from at NIRI’s Annual Conference from June 7-10 in Florida. The Q4 team attended as many as we could which meant we didn’t always have the time to do write a blog post that day. What follows is an overview of a session I attended on Tuesday, June 9th entitled “Understanding IR Strategies Behind XBRL – IROs Evolving Role”.
Moderator/Lead Speaker:
Mike Willis, Partner, PricewaterhouseCoopers
Chairman, XBRL International
Panelist(s)/Co-Speaker(s):
Michael Becker, VP, Global Disclosure & Financial Reporting Services
Business Wire
This session was quite comprehensive, so I thought it would be useful to discuss the agenda that was put forth:
WHY IS THIS RELEVANT?
Public companies push out a lot of IR content such as earnings releases, quarterly reports and annual reports. Once disseminated into the public domain, third party information intermediaries distill, transcribe and structure the company reported information into their proprietary taxonomies and sell that structured information to the analyst community. This third party intermediary information is also available through sources such as Yahoo! Finance, Google and MSN Money. From these publicly available sources IROs can directly observe the omissions, errors and other communication problems created by the third party intermediaries such as changing disclosure concepts and/or omitting key company specific unique disclosures. This intermediary distortion in turn can lead to inquiries that don’t make any sense or worse, no inquiries at all – which means the investment community is solely relying upon the data transcribed and rendered by third party sources, thereby diminishing the company’s opportunity to correct any errors.
If you are skeptical of the degree of errors and omissions to your company reports please take a minute right now and go to the public sites and review the data available for your company and compare that information to your company reports. “The data provided by intermediaries is incorrect as often as 30% of the time and incomplete 100% of the time“. The typical omission is the unique company specific disclosure, which is highly relevant to company IROs.
This is unfortunate, as preparing and finalizing material documents is typically a very time consuming and costly process, largely due to manual assembly and review processes that draws upon a lot of internal resources such as the finance, legal and IR department’s time to compile, review and publish – not to mention the costs associated with filing with the regulatory bodies and mailing out hard copies.
WHAT IS REQUIRED?
As some of you may know, in January 2009, the SEC introduced a phased mandate for filing in XBRL starting with the largest companies with a worldwide public float of greater than $5 billion – periods ending on or after June 15, 2009 and then extending to all sizes of companies over the next three years. The rules require companies to provide their financial statements on their corporate websites in an interactive data format using XBRL at the same time their financial statements are submitted to the SEC.
Content Requirements
In the first year of filing in XBRL format, issuers are required to tag each unique disclosure concept in the company primary tables (balance sheet, income statement, cash flows, changes in equity) and “block” tag (e.g. one tag per note) the financial statement footnotes and schedules.
In all subsequent years of XBRL formatted exhibits, issuers are required to tag the financial statement disclosures and also individually tag each significant accounting policy, table within a footnote and each quantitative amount within a footnote. It is this second year requirement that significantly enhances the volume and accuracy of company disclosures available to the analyst community in a very cost effective, accurate and timely manner.
The XBRL Exhibit is required to be filed concurrently except for the initial report in each of the first two years which would be due no later than 30 days subsequently.
For purposes of the company SEC exhibit, the MD&A, executive compensation, or other financial, statistical or narrative disclosure outside the financial statements is not permitted to be tagged.
Corporate Website Posting Requirements
The XBRL filing is to be posted on a company’s corporate website by the end of the calendar day submitted or required to be submitted to the SEC. The XBRL exhibit must remain on the website for at least one year; however, legal liability provisions are phased out over a two-year period with no “required” involvement by the auditor.
The US SEC rules will apply to public companies and foreign private issuers that prepare their financial statements in accordance with U.S. generally accepted accounting principles (U.S. GAAP), and foreign private issuers that prepare their financial statements using International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
WHAT IS IT?
XBRL is a freely available international information standardized format specifically designed for business information. As such, it is specifically designed to provide supply chain standardization to address pervasive process problems. XBRL is applicable to business information, related business rules, formulas and controls to not only to make financial information easier for investors to analyze, but also to assist in automating regulatory filings and business information processing.
As an Internet standard, XBRL can be used to create a common language for disparate proprietary software applications to more seamlessly communicate. This is sort of similar to html but in a more granular manner and specifically for business information.
WHAT’S IN IT FOR THE ISSUER?
There are many implications of using XBRL to improve processes. For example, issuers can implement using the bolt-on approach in which filings and reports are created following the existing process and converted to XBRL once finalized, either in-house or by a third party. There is also the embedded option, which would enable companies to map their disclosures to the XBRL US GAAP Taxonomy directly within their report writer or consolidation application. Pushing standardization further back into the business information supply chain provides structure for automation of downstream processes including the accurate rendering of XBRL-tagged SEC filings that can be accessed via your website with many interactive features.
Embedding XBRL in corporate reporting processes enables:
- Seamless exchange of information between software applications like your website and your analysts’ modeling applications,
- Automation of manual processes = lower costs, improved quality & timeliness like for your summary tables and graphs provided on your website,
- Enhanced transparency, access and control of information contained across a wide range of disparate internal data stores similar to the wide range of internal data stores that you are trying to access to address performance related inquiries,
- Improvements in data quality and access, and
- Better access to more relevant information for better decision-making, enhancing business intelligence and performance management information.
XBRL is more than a trend that IROs must be cognizant of – it will soon be mandatory for all U.S. based issuers and there is a voluntary program currently taking place in Canada to help the Canadian marketplace gain a greater understanding of this information standard. Therefore it is essential that there is a full understanding how communication between the investor community and IROs evolve with the XBRL standard. So stay tuned for additional blogs and presentations on XBRL.
Related posts:
- XBRL continues to expand
- CFO Briefing Provides Practical Tips for XBRL Implementation
- XBRL mandate is coming
- XBRL GAAP Taxonomy getting ready for market acceptance.
- Canadian securities regulators launch XBRL voluntary filing program
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Useful recap of the session; thanks. I’ve heard that analysts will be able to migrate XBRL information into spreadsheets almost instantaneously to it being posted on a company’s website. I’d like to know more about how this is done; I can’t figure out exporting logistics. Do you know or would you be able to recommend a resource?
Hi Ruth – we are glad you found the overview provided from this session useful. The exporting will be handled by the individual analysts in that they download the XBRL file into their reader or into excel (with the necessary plug in). They can choose to be notified of new XBRL filings either by an email alert or via RSS feed.
I hope that helps.
Best regards
Sheryl