From the March 2009 issue of Treasury & Risk magazine

XBRL: It's the Law

It didn't take long for the new administration to flex its muscles on accounting practices. The Securities and Exchange Commission (SEC) issued an XBRL enforcement timetable, on schedule on Jan. 30, but delayed action on a timeline for the proposed switch from Generally Accepted Accounting Principles (GAAP) to International Financial Reporting Standards (IFRS). Promising to "take a deep breath and look at this entire area again," new SEC Chairwoman Mary Schapiro, extended the comment period on its proposed IFRS roadmap to April 20 from Feb. 19.

"Using sophisticated technology to bring clarity to financial reporting is right in line with what this administration is looking for," says Michelle Savage, communications vice president of nonprofit XBRL US.

The 206-page document, Interactive Data to Improve Financial Reporting, on the use of eXtensible Business Reporting Language (XBRL) varies little from proposed rules and clarifies issues raised at open meetings. Notably, the SEC ruled that companies can start XBRL filing with shorter, less complex 10-Qs, rather than 10-Ks. Also, voluntary filers can start or stop the process at will, providing time to evaluate and regroup if necessary.

As expected, the largest companies using GAAP, with a public float above $5 billion (about 500 companies), are required to start using XBRL beginning with their first quarterly reports for fiscal periods ending on or after June 15, 2009. The deadline for other domestic and large foreign accelerated filers using GAAP is one year later. Other GAAP users, including small companies, and foreign private issuers using IFRS have until Jan. 15, 2011.

The cost of implementing XBRL, the SEC projects, is $40,000 to $89,000 for the first submission; from $21,000 to $37,000 for subsequent submissions, depending on how XBRL is implemented--through software in-house or by a service provider, such as Edgar Online. "It's an expensive proposition, but it's a fraction of the cost of Sarbanes-Oxley compliance," says Philip Moyer, CEO of Edgar Online, which has the largest XBRL database and provides XBRL services.

The next step is risk management. "The real beauty of XBRL is beyond the mandate," says Lily Bi, director of technical practices for the Institute of Internal Auditors. It "can be used at various stages in an organization's business report supply chain, and to manage risk at an earlier stage."

As for IFRS, it's unclear when--or even if--companies will need to make the changes. Schapiro says she "will not necessarily feel bound by the existing roadmap."

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