Yesterday, I “attended” a Webinar put on by Publicease regarding XBRL. It was very informative and I came away with one over-riding thought: most Smaller Reporting Companies are woefully behind where they need to be to be XBRL-compliant by later this year. As most of you are probably aware, eXtensible Business Reporting Language (XBRL) is an interactive data reporting standard for financial statement disclosure that will be required by the SEC for all public companies using U.S. GAAP. For Smaller Reporting Companies the financial statements will have to be submitted in XBRL beginning with the company’s first fiscal period ending after June 15, 2011. For calendar year end filers, XBRL will be mandatory for the company’s 10-Q for the quarter ended June 30, 2011. This blog is not the place for an in-depth discussion of XBRL so I have provided a link to the SEC OBRL web portal below. But in a nutshell XBRL is a way of tagging financial data in a company’s financial statements, notes, schedules, etc. to make them easily searchable and so data can easily be extracted for all companies in a specific industry, etc. One important point to recognize is that the SEC will be categorizing companies by SIC codes. So all companies should ensure their SIC code accurately reflects their current business. If you recently acquired a shell or underwent a reverse merger, etc., your company may be operating under the predecessor business’ SIC code, and this should be updated as soon as possible.
The Webinar yesterday did a great job of explaining exactly what goes into XBRL reporting and how much longer the process will take than what current filers are accustom to now. Publicease estimates it will take about 20 hours to tag a company’s financial statements the first time. As a result they are recommending companies go ahead and have their financial statements for the 1-2 reporting periods BEFORE June 15, 2011 XBRL-coded even if they are not filed that way for those periods. This way the process will be easier and smoother for the first reporting period after June 15, 2011. Additionally, and most importantly, the XBRL coding is going to take substantially longer than current edgarizing does. As a result getting documents to your edgar service company the day before or day of a filing simply will not cut it any longer. Publicease is recommending getting completed financial statements to the edgar service 2 weeks before they are due, at least for the first filing. This is going to be a major shift in the timing for when many Smaller Reporting Companies are currently getting their information to their edgar service company. The SEC is granting companies a 30-day extension to supply XBRL financial statements for a company’s first required filing only. Obviously the report with the required financial statements will still need to be filed timely, but the exhibit filing the XBRL-tagged financial statements can be filed in an amended filing up to 30 days later. This is a ONE TIME extension and should not be relied upon.
Bottom line, as soon as possible, talk to your edgar service provider about XBRL to find out the cost and ask if they can code your financial statements for the 1-2 filings before the company’s first required filing. Additionally, and most importantly, start changing your company’s mindset about when financial statements are completed for the year end and each quarter so that financial statement completion is occurring 2+ weeks prior to the filing deadline rather than 2+ days.
For more detailed information see the SEC’s website at: http://xbrl.sec.gov/
