Speed Bumps for Early XBRL Filers, Users

FASB
is trying to overcome a mismatch between its new codification of
accounting standards and data-tagged financials. That could present
communications problems for CFOs.

David McCann
- CFO.com | US

June 26, 2009

A solution is said to be coming soon to a thorny technical issue
that had threatened to temporarily render electronic financial reports
tagged in eXtensible Business Reporting Language less useful than had
been hoped.

The source of the problem is the Financial Accounting Standards
Board's new codification of accounting standards, which is set to take
effect July 1. One key advantage of XBRL-prepared electronic reports is
that each data-tagged line item displays references to the accounting
and regulatory rules applicable to that item. That gives users of the
financial statements valuable context for the reported number.

But the current XBRL taxonomy — that is, the set of tags
corresponding to the line items — aligns with the precodification
organization of the FASB literature. That means that as of July 1,
users of data-tagged reports will see references to standards that
don't match up with the new codification. A new taxonomy incorporating
references to the newly codified accounting rules is not expected to be
released until early 2010.

Neither FASB nor the nonprofit entity that is working to establish
XBRL as a financial-reporting format in the United States had announced
whether or when a temporary fix for the problem would be made
available. But Thursday, Mark Bolgiano, chief executive of XBRL US,
told CFO.com that one would be ready in July. The two organizations are
working together, he said, to create an extension to the existing 2009
taxonomy that will display the references correctly.

FASB, though, hedged a bit on the July time frame. A spokesperson
told CFO.com that the accounting standards board is "shooting" to have
the fix ready by the end of the month, but there is no specific
scheduled date.

Even a short delay could affect investors, banks, and other users of
financial statements filed by any of the 500 largest public companies
with fiscal periods ending June 30 — that is to say, most of them. And
to the extent there is any confusion about the accounting underlying
the information in the reports, it could, of course, could cause some
communications problems for finance executives. Earlier this year, the
Securities and Exchange Commission required those 500 companies to file
financials using XBRL for periods ending June 15 of this year and
later. (About 1,800 more companies have to do so starting with quarters
concluding on or after June 15, 2010, with the rest following a year
after that.)

In fact, a late-July or later release of the fix would likely mean
that most of the first wave of XBRL filings — after those by a small
group of voluntary early adopters that included Microsoft and Pepsico —
would contain the incorrect references, according to Neal Hannon,
senior consultant for XBRL strategies at The Gilbane Group, an
information technology consulting firm.

Everybody involved in the production of financial reports, Hannon
said, including software companies and financial printers, will need
some time to understand the solution and make sure it's compatible with
their products before companies can begin to prepare financials
containing references to the codification accounting standards.

Still, Hannon called the forthcoming solution "great news," saying
he had been concerned for months that the necessary programming might
not prove doable, at least in a reasonable time frame. He characterized
XBRL-tagged financial reports without references to the current
underlying accounting literature as unacceptable. "What would be the
point?" he asked.

Even if the fix were delayed, financial-report users would still be
able to locate the accounting standards relating to specific line
items, according to Tom Hoey, FASB's codification project director. The
board's codification Website contains a tool that cross-references the
old organization of generally accepted accounting principles with the
new one. "It's not as though people have to be completely lost," Hoey
said, but added, "they might find it more cumbersome for a short
period."

Indeed, Hannon noted that a user would have to run two programs
simultaneously, switching back and forth between an XBRL software
reader and the cross-reference tool, which he said would be somewhat
unwieldy when performing robust analyses of financial statements.

Meanwhile, there is another speed bump for the early days of XBRL
filings: the SEC's Edgar filing database will not be ready to accept
data-tagged reports using the 2009 taxonomy, containing several FASB
rules and interpretations published this year, until July 22.

Any company with a scheduled filing date before July 22 for a
quarter ending June 15 or later can opt to file its report using the
out-of-date 2008 taxonomy. The SEC, though, is encouraging filers to
use the current set of data tags. To accommodate that request, a
company with a line item affected by new FASB literature will have to
create its own extensions to the core taxonomy. Not only would that
require extra effort by companies, but Hannon lamented that "a bunch of
rogue XBRL elements" not formed the same way from company to company
would inevitably hinder analyses of the effect of FASB's new
pronouncements on financial statements.

But that, he said, would be the "lesser of two evils" compared with
another option for companies: taking advantage of a 30-day grace period
the SEC is allowing for first-time XBRL filings. In that case, a
company would still have to file its periodic report on time but could
file the data-tagged version after July 22. The problem is, doing that
would require filing an amendment to the original report stating that
the data-tagged version has now been filed. "What investor-relations
officer wants to have to explain to dozens of callers about why an
amended report was submitted to the SEC, even if it's very
explainable?" asked Hannon. "It will always be out there that you
amended your report."

more...http://www.cfo.com/article.cfm/13932485