Are You Ready for XBRL?

If you don’t know what XBRL is and you deal with public companies you are already behind the 8-ball! Well, XBRL stands for eXtensible Business Reporting Language (as my son said, it should have been EBRL but I guess they thought starting with an X would be cool).  Here is a summary of a brief description from www.xbrl.org:

XBRL is a language for the electronic communication of business and financial data which is revolutionizing business reporting around the world. It provides major benefits in the preparation, analysis and communication of business information, as well as cost savings, greater efficiency and improved accuracy and reliability to anyone using financial data. XBRL is being developed by an international non-profit consortium of approximately 450 major companies, organizations and government agencies. It is an open standard, free of license fees.

Why do we care? Every public company has to start using XBRL in its SEC reporting for filings after June 15, 2011. That’s four months from today gang! How is this good? It will require tagging and definitions throughout the financial statements so that analysts and others looking at a company will be more easily able to compare information across companies. Presentation will be easier to follow, and you can compare apples with apples in a meaningful way.

Is this every filing? No. For example, most Securities Exchange Act of 1934 registrations, such as Form 10, are not required to use XBRL. But most Securities Act of 1933 filings will (but not in an IPO as I understand it). Quarterly and annual filings on Form 10-Q and Form 10-K will have to be XBRL’d. What does this mean? Be ready for delays. Most Edgar filing companies are telling you all the XBRL stuff better be done and ready at least a day before the filing is due. And get ready for costs. An extra $4,000-$8,000 a year easy for the Edgar “tagging” service. For small companies such as shells this is a real burden. How about a no-action letter to exempt shells since no one really compares the financials of shell companies? Hmmm….

If you’d like to see the SEC’s website on XBRL, go to http://xbrl.sec.gov/.

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