- Why CFOs Should Concern Themselves with XBRL. And How They Can!

In 2009, the US SEC mandated that companies submit their financials (10Ks and 10Qs) in XBRL format.

Because XBRL as a language is machine readable. Which means that it is easier to automatically validate information as it gets created or submitted in XBRL. It also enables standardization of information, which makes analysis much easier. For users of information, XBRL provides clear advantages.

Why then, do CFOs maintain a polite distance from their XBRL data?
For most CFOs, the numbers, disclosures and aspects like the MD&A are the key focus areas when finalizing their 10K or 10Q documents.

Once that is done, their belief (or hope), is that somehow, whoever is translating this report to XBRL is doing an accurate and faithful job. Since the XBRL data is not something CFOs can read or verify easily, they think that there is little point in worrying about it. XBRL is also seen as something they need to comply with administratively and few CFOs take a holistic view of how it can benefit them.

However, such an assumption may be dangerous, as shown in the case of a glaring error in GE’s XBRL report, where a number that was actually in billions was reported in millions in the XBRL document. And this was due to a simple mistake caused by using the wrong scale. Such a mistake, though seemingly simple, can have huge implications and is one the SEC can hold the finance leadership responsible for.

So does it matter if CFOs don’t concern themselves with XBRL? Yes, it does.

The SEC that was only focused on gathering data for so many years is now concentrating on the quality of data that is being collected. The setting up of the Data Quality Center and the move towards voluntary filing in iXBRL are all indications of this fact. What’s more, a large number of analysts and information companies have now begun to consume XBRL data for company analysis.

Given this, a lack of XBRL knowledge on the filers’ part just doesn’t cut it anymore as a reason to submit incorrect information.
What can CFOs do to be in command of their XBRL filing?

1.    See XBRL as more than just a compliance mandate: 
XBRL has much to offer. If embraced wholeheartedly, XBRL can do wonders for your data management and decision making. Not only is XBRL data useful for regulatory reporting but can also be used for internal analysis, investor relations and peer benchmarking. In fact, companies worldwide have already started working in this direction. Petro China, a Chinese company, has used XBRL to map data from various internal systems and functions to one common model for their internal reporting. With all the data from multiple systems flowing into one model, the company now has a bigger picture of the business making for quicker decision making.

2.    Train your team: 
No one knows your numbers like you do. Relying on an external agency to work on your XBRL report is therefore not without its risks. Moreover, the onus of data sanctity lies squarely on your shoulders. So ensure that you have a solid team in place, review your compliance reporting process and create a checklist that keeps the team on track to submit a quality filing.

3.    Invest in a compliance platform: 
Today, there is a technology solution for everything. If your filing process and the constant back-and-forth with your XBRL service provider seem arduous, switch to a collaborative self-filing solution. With features such as spreadsheet linking, roll forward, smart editing and review-and-comment, a self-filing platform is just what you need in your compliance arsenal.

4.    Transition to inline XBRL: 
Inline XBRL or iXBRL has come as a blessing for CFOs who are wary of the way XBRL looks! Inline XBRL provides a visual, human-readable form to XBRL data. So while your data is still machine readable, inline XBRL ensures that you can check and eyeball your numbers as well.
The SEC is now allowing for voluntary filing in inline XBRL and we recommend that you move to this to avail its many advantages.

IRIS’ disclosure management platform, IRIS CARBON™, is a cloud-based, collaborative filing platform that helps companies and mutual funds meet their enterprise reporting needs. Built with deep XBRL experience – over 7 years with the US SEC and 11 years globally – IRIS CARBON™ simplifies your reporting, while ensuring high quality, increased productivity and efficient collaboration across your organization. What’s more, IRIS CARBON is inline XBRL ready and can provide you with an inline XBRL output at the click of a button.

If you want to know more about how IRIS CARBON™ can help transform your compliance process, please write to me at deepta.rangarajan@irisbusiness.com.