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Has the SEC's XBRL mandate caused delays in reporting? 3 comments
The Feb. 9, 2011 IR Web Report notes that there are concerns being raised "about the readiness of service providers to meet the needs of the more than 8,000 smaller companies that must begin filing reports in eXtensible Business Reporting Language [XBRL] for the first time this July." It quotes Loretta Cangialosi of the Financial Executives International as “expressing concern that the XBRL filing requirements have led to delays in companies releasing reports to investors and compromised the accuracy of company filings.”
Since I haven't noticed any delays in reporting or that solution providers aren't well prepared to handle the new number of filings, I decided to sample actual reporting dates to see if the XBRL mandate had clearly caused any significant delays in 10-K and 10-Q filings.
Methodology
My sampling techniques were as follows:
Conclusions
Reporting companies, on average, actually shortened their reporting time in the recent XBRL 2011 (for 12/31/2010) reports vs. the non-XBRL 2009 (for 12/31/2008) reports. Based on the random 24 companies sampled, the average time to report shortened by 0.50 days---with 14 companies filing sooner, 8 later and 2 the same---in a range of from 9 days sooner to 6 days later. By just eyeballing the list, the dates seems remarkably consistent. 14 companies had average of 3.43 days sooner, 8 companies had average of 4.50 days later, and 2 were the same.
However, with such a small sampling, this average shortening is not claimed to be too scientific or indicative of future filing practices or results. I suppose it might also be argued that this shortening of reporting time experienced would have been even greater if it had not been for the additional XBRL formatting requirement.
There appears to be no problem with the accuracy of reporting in XBRL or in having the SEC validate and accept such reports. None of the companies in this random sample had to file amended reports.
As the SEC no doubt anticipated, there is now an increasing number of filing services being offered. And, the leading solutions are fully tested and geared up to handle the additional volume of reporting. The IR Web Report did quote both Rivet Software and EDGAR Online as saying they anticipated no problems in meeting the June compliance deadline.
What is not noted in this list of solutions is that there are more companies offering services than there are software solutions. For example, Merrill Corp. uses the Fujitsu solution, and Vintage Filings uses the EDGAR Online solution. When the final list of filings for 2011 is tallied, I suspect that we will find a growing number of independent printers that strike partnership agreements with the software solution providers.
With the prospect of higher transparency, better comparability, machine readability, broader dissemination, and up-to-speed third-party providers tested and ready, it seems unnecessary for the SEC to modify their gradual phase-in. After all, companies first filing in XBRL in 2011 have had over two years to get ready to prepare for the mandate. I would expect that the new 2011 filers would make dry runs for the March quarter to test the process and their readiness to file in June.
Given the SEC’s careful studying and handling of the phase-in process and the quality of the reports received so far, I’m sure they will, if appropriate, respond accordingly to any proposed technical modifications such as those raised by Financial Executives International.
There is no doubt that the conversion to XBRL is a large undertaking for SEC-reporting companies, but solution providers and internal accounting departments have been building the filing infrastructure for the last five years or so.
With the quantity of data being filed by SEC reporting companies, it seems critical to have as early XBRL compliance as possible. As an example of the increase in filing depth that the SEC is receiving, here are the file sizes for Google and Microsoft:
Google 10-K, 12/31/2010: 5,883.5 kb
Google 10-K, 12/31/2008: 1,563.7 kb
Microsoft 10-Q, 12/31/2010: 4,994.9 kb
Microsoft 10-Q, 12/31/2008: 779.2 kb
When we look back a decade from now, we’ll probably all agree that conversion to interactive data was an important and necessary step to have taken.
Date Filed Date Filed Company Report XBRL Solution* Filing 2009** 2011** Biogen Bowne XBRLMark 10-K Feb. 6 Feb. 4 Northrup Bowne XBRLMark 10-K Feb. 10 Feb. 9 Kennametal Bowne XBRLMark 10-Q Feb. 4 Feb. 8 Rockwell Automation Bowne XBRLMark 10-Q Feb. 6 Feb. 3 Jones Group EDGARfilings EDGARizerX 10-K Feb. 17 Feb. 11 Southwest Airlines EDGARfilings EDGARizerX 10-K Feb. 2 Feb. 8 Linear Technology EDGARfilings EDGARizerX 10-Q Feb. 6 Feb. 11 Integraded Device EDGARfilings EDGARizerX 10-Q Feb. 6 Feb. 10 Amazon EDGAR Online Xcelerate 10-K Jan. 30 Jan. 28 Google EDGAR Online Xcelerate 10-K Feb. 13 Feb. 11 Apple EDGAR Online Xcelerate 10-Q Jan. 23 Jan. 19 Microsoft EDGAR Online Xcelerate 10-Q Jan. 22 Jan. 27 Union Pacific Fujitsu Xwand 10-K Feb. 6 Feb. 4 United Technologies Fujitsu Xwand 10-K Feb. 11 Feb. 10 Seagate Tech Fujitsu Xwand 10-Q Feb. 10 Feb. 3 Viacom Fujitsu Xwand 10-Q Feb. 12 Feb. 3 Boeing Rivet Software Crossfire 10-K Feb. 9 Feb. 9 DuPont Rivet Software Crossfire 10-K Feb. 12 Feb. 8 Starbucks Rivet Software Crossfire 10-Q Feb. 4 Feb. 4 Sara Lee Rivet Software Crossfire 10-Q Feb. 4 Feb. 8 Nortwestern WebFilings 10-K Feb. 13 Feb. 11 Steris WebFilings 10-Q Feb. 6 Feb. 9 NJ Resources WebFilings 10-Q Feb. 6 Feb. 3 Precision Castparts WebFilings 10-Q Feb. 6 Feb. 11 *Source: XBRL Cloud **Source: EDGAR Online (on MSN Money web page)
Note: I am long EDGAR Online.
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This post has 3 comments:
As for accuracy, amended filings are not a good measure of this. The FEI's letter says companies are not correcting errors because of the stigma attached to an amended filing. So there may be errors, but companies are letting them slide based on their own judgments of materiality, according to FEI.
I always told my assistants in the finance area that it's no problem to make a mistake. Just make sure to tell me---then we can fix them. As far as I'm concerned, there is no stigma at all in making an amended filing---unless of course they keep making the same mistake.
Based on the Cloud report, there were significant gains in accuracy in the filings for Sept. 2009 vs. the first filings for June 2009. No doubt we will have the same experience with the 3rd Wave. This time, though, established solution providers have greatly refined their "templates" or patches or rules to assure little need for amending their filing.
I only referenced the amended filings because it is a simple way to see if there are major errors in filed reports. And, I trust that if errors were material, companies would have re-filed.
I do enjoy your reports, and you will have a lot to analyze with all the new reporting standards and derivative IR methods.
You touched on something key, after we make it through these first few years, we'll look back and begin to really see the huge benefits from XBRL - both for internal and external reporting for the companies themselves, and for investors and analysts. Time machine anyone?
Megan@Rivet
Rivet's CEO's comments to IR Web Report Article: blog.rivetsoftware.com.../
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