From the December-January 2010 issue of Treasury & Risk magazine

XBRL Tags Pile Up

Companies' initial efforts to apply interactive tags to the financial statements they file electronically with the Securities and Exchange Commission have been fairly successful. But companies face a much bigger challenge this year when they have to start applying tags to the details in the footnotes of their financial statements. By using Extensible Business Reporting Language (XBRL) tags, companies make it easier for investors to compare their financials with those of other companies. The XBRL mandate is being phased in, and the 500 biggest companies, which were required to start tagging with their second-quarter filings last year, must implement detailed tagging for their second-quarter filings this year.

While companies used about 250 tags on average in the first phase of implementing XBRL, that number will balloon with detail tagging, says John Truzzolino, managing director of electronic solutions at R.R. Donnelley & Sons, a Chicago-based printer that provides SEC filing services.

"The challenge is going from 250 to possibly 600 or 1,000 elements, because of the four levels of tags that are required," Truzzolino says. In the second phase, companies must tag each table, each number and each accounting policy referenced within a footnote, as well as tagging each footnote as a whole.

And while there are currently about 17,000 tags in the XBRL taxonomy, experts expect companies will use more customized tags, known as extensions, when they're doing detail tagging. "You tend to write more company-specific information in your footnotes," Truzzolino notes. On average, about 11% of the tags companies have used have been extensions, but R.R. Donnelley's analysis suggests that could get as high as 40% in detail tagging.

The nonprofit consortium XBRL US is monitoring the use of extensions and will add to its taxonomy those used frequently, says Campbell Pryde, the group's chief standards officer.

The main message for companies facing the midyear deadline is to give themselves plenty of time. There's a "real risk" some companies will miss the deadline for their initial detail-tagged quarterly filing, Louis Matherne, director of XBRL services at software provider Clarity, warned at a conference in November. Truzzolino says tagging will work best if footnotes contain structured content, like tables.

Still, the success companies have had with XBRL so far is a good omen. In the first round of XBRL-formatted filings, 75% had at least one EDGAR filer exception, Pryde says, but in the second round, only 10% had exceptions. "It's better than I thought," he says. "There's a lot companies can do wrong that they haven't."


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