A new survey from Compliance Week suggests that many publicly held companies are barely aware of XBRL, the financial reporting technology the Securities and Exchange Commission is poised to impose on Corporate America later this fall.
The SEC has already published a proposal to mandate XBRL for all companies by 2011, starting with Fortune 500 companies as soon as next spring. The public comment period on that proposed rule is already half over, and SEC Chairman Christopher Cox has repeatedly called for a final rule to be voted on and in place before he leaves office in January.
Despite this, of the 236 publicly held companies surveyed, nearly 80 percent say nobody on their staff is well-versed in XBRL. More than half (59 percent) of respondents say they either have just begun reading up on the technology, or have done no research at all.
XBRL, formally known as eXtensible Business Reporting Language, is a computer language that tags corporate financial data. That, in turn, allows investors to find, study, and compare companies' financial data much more easily than the text-heavy financial statements used today.
The SEC has promoted the technology with retail-like zeal in podcasts, online tools, and a nationwide series of roundtable discussions. XBRL proponents say the technology promises to revolutionize how companies file, and investors use, financial information — assuming everyone takes full advantage of the technology's features. Compliance Week's survey shows that so far, corporations aren't eager to do so.
"XBRL is going to be a significant change for businesses, probably more than most realize," says Matt Kelly, editor of Compliance Week. "The SEC is going to mandate this technology very soon, and right now most companies aren't showing much urgency to start preparing for it. Given that XBRL may pose some steep learning curves and technology changes that take years to digest, it's an ominous sign that so many are so unaware."
The survey, done by Compliance Week subscribers during June 2 to June 8, also reveals that:
Of the 236 companies surveyed, 104 respondents (44 percent) said they had just begun researching XBRL and their companies had done no previous testing. Another 26 respondents (15 percent) said they had no knowledge of XBRL at all.
79 percent said their companies had no XBRL expert on staff at all. Some 19 percent had an expert on the financial reporting team, and 2 percent had an expert in the IT department.
Sixteen respondents (7 percent) participate in the SEC's voluntary filer program. Another 6 percent say they've done some small pilot tests, and 2 percent say they've been testing their own systems comprehensively.
Another 30 percent of respondents say their companies haven't yet tested XBRL, but say they've been following the topic closely.
No single industry seemed to be more prepared for XBRL than any other.
About the XBRL Preparedness Survey
Compliance Week's XBRL survey is based on the results of an online survey conducted of Compliance Week readers during a one-week period from June 2 to June 6, 2008. In total, 241 readers responded. Of those responses, 5 (or 2 percent) were discarded as incomplete, leaving 236 responses. The survey asked readers, among other things:
How prepared are you to implement XBRL?
If you have begun testing, what have you done?
Is there an XBRL expert on your financial reporting team?