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XBRL words to the wise: get a move on!

My colleague Mary Allen observed in her December post that most companies are experiencing rude awakenings when they realize the incredible number of hours needed for XBRL tagging, and she cautioned against relying on a printer’s accounting expertise to get through the project.

As time goes by, her words are looking more and more wise.

With that said, here are a few observations that may help make your experience a little less stressful.

Allow enough time: Whether you’re just starting with block tagging or are in the process of detail tagging, build some cushion into your timeline for unexpected issues. Also, with Phase II filers going to detail tagging and Phase III filers starting block tagging, the printer’s bandwidth may be taxed and turnaround time may be longer than normal. Be sure to discuss your new timetable with key stakeholders such as your disclosure committee, audit committee and investor relations department.

Map to the taxonomy: The 2011 U.S. GAAP taxonomy was recently released, which added 1,800 new tags and deleted 500 old tags. Remapping the 2009 taxonomy to the 2011 taxonomy can be time consuming. This is also an opportunity to revisit some of the custom tags you may have used and change to a standard tag that is now included in the 2011 release. (Note that while March filers were allowed to use the 2009 taxonomy, we believe the SEC will be expecting June filers to use the 2011 taxonomy.)

 

 

Use best practices: No matter which taxonomy you use, it’s critical to really understand what rolls up into the line item components in your financial statements when choosing which tags to use. No printer knows your financials and footnotes like you do. Don’t just rely on the label title, look at the actual definition—it is key. A firm like RoseRyan will understand your financials and make appropriate choices.

Do your own research to identify your own tags independent of what your printer comes up with. It’s time consuming, but getting tags right the first time provides a strong foundation to move forward.

Start detail tagging early: As a rule of thumb, detail tagging will take three to five times the effort that block tagging takes. Start early! Companies are taking a fresh look at how they present certain disclosures and are making changes to streamline the XBRL process. For example, data previously reported in a text format may now be disclosed in a table, and data that was once disclosed in multiple footnotes may be consolidated so it’s only tagged once.

Common errors include using a custom tag when a standard tag will suffice or choosing tags that define your data too broadly or too narrowly. In particular, using custom tags dilutes the value of interactive data, which is to allow investors to quickly find information and accurately compare it to other companies or trends. To avoid too many custom tags, you might take a look at peer companies to see what tags they are using.

Resources constrained? If your head is spinning just thinking about all this, remember that RoseRyan is a phone call away. We have plenty of XBRL experience, and can help with as much, or as little, as you need—check out our XBRL services.

Got XBRL war stories? Submit a comment to this post and share your challenges and tips.

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New study looks at implications of Bay Area entrepreneurship

An exciting new study soon be released will benchmark the entrepreneurship policies of the Bay Area and provide a detailed review of entrepreneurship and its potential implications over the next one to five years. The San Francisco Bay Area Entrepreneurship Policy Benchmarking Overview will look at how the Bay Area compares to cities throughout the world and in the United States.

The project is being spearheaded by the Bay Area Council Economic Institute, a public-private partnership of business, labor, government and higher education that works to support the economic vitality and competitiveness of California and the Bay Area. Sean Randolph, the council’s president, is leading the effort; other participants include representatives from national laboratories, academic institutions, politics and corporations. I was honored to be nominated to the team based on my knowledge of cleantech and RoseRyan’s work with entrepreneurs.

I can’t mention specifics until the report is issued, most likely in the May/June timeframe, but I can tell you that the results will really illuminate the mindset and attitudes of entrepreneurs and what can be done to promote entrepreneurship throughout the region. The areas covered are comprehensive, including financing, legislation, skills, talent and technology.

As you can imagine, culture plays a big role in defining the competitiveness of our region. I can’t wait to share with you some of the key findings when the report is released.

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The good in the evil SOX narrative

I’ve been working in corporate governance, SOX compliance, for almost four years now and the most difficult task for any company has been the development of the SOX narrative.

The narrative is the framework for understanding how your controls fit into the business process.  Depending on your preference, this may take the form of a flowchart or a Word document. In companies new to SOX compliance, there is an eagerness to detail every step that they take in a process. They want to tell you everything that they do; but that isn’t the point of a narrative—that’s a desk procedure.

In my opinion, the narrative is the starting point for understanding your controls, whether they are key or nonkey. Key controls are the gatekeepers, the ones that keep your process in check and on track. For example: within your financial statement close process, a journal entry is supported by documentation and then reviewed and approved. The review and approval, which is by someone other than the preparer, is the key control. The approver is the one who verifies that the JE is properly supported, is a valid entry, is in compliance with company policy, and that the JE is affecting the appropriate accounts.

By documenting how your process works from a high level, the controls, or absence of controls, will stand out for you. You can determine which controls are the gatekeepers and what evidence there is that the control is in place.

Writing the narrative takes time and effort, and may often feel like a tooth extraction. But when it’s done correctly, it will save you time and money because you will be testing a smaller set of controls.

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